-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HAPehCwiK92NWbnmiWHusY0edH6y/Gd6N2pb9zdo+eudxCUTLM9Kn2RIrwGB5870 8hGmYeEcr6+cxX5Fiu9cBw== 0000914317-05-002625.txt : 20050812 0000914317-05-002625.hdr.sgml : 20050812 20050812130955 ACCESSION NUMBER: 0000914317-05-002625 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050812 DATE AS OF CHANGE: 20050812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SALISBURY BANCORP INC CENTRAL INDEX KEY: 0001060219 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 061514263 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24751 FILM NUMBER: 051020287 BUSINESS ADDRESS: STREET 1: 5 BISSELL ST CITY: LAKEVILLE STATE: CT ZIP: 06039-1868 BUSINESS PHONE: 8604359801 MAIL ADDRESS: STREET 1: 5 BISSELL ST CITY: LAKEVILLE STATE: CT ZIP: 06039-1868 10-Q 1 form10q-70269_salisbury.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2005 ------------------------------ OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission file number 0-24751 ------- Salisbury Bancorp, Inc. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Connecticut 06-1514263 - ------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 5 Bissell Street Lakeville Connecticut 06039 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrants Telephone Number, Including Area Code (860) 435-9801 ---------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark whether the registrant is an accelerated filer. Yes |X| No |_| APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: as of July 30, 2005, there were 1,683,341 shares outstanding. -----------------------------
SALISBURY BANCORP, INC. AND SUBSIDIARY TABLE OF CONTENTS Part I. FINANCIAL INFORMATION Page Item 1. Financial Statements: 3 Condensed Consolidated Balance Sheets - June 30, 2005 (unaudited) and December 31, 2004 4 Condensed Consolidated Statements of Income - three and six months ended June 30, 2005 and 2004 (unaudited) 5 Condensed Consolidated Statements of Cash Flows - six months ended June 30, 2005 and 2004 (unaudited) 6 Notes to Condensed Consolidated Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 19 Item 4. Controls and Procedures 19 Part II. OTHER INFORMATION Item 1. Legal Proceedings 19 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19 Item 3. Defaults Upon Senior Securities 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 5. Other Information 19 Item 6. Exhibits 19 Signatures 20
2 Part I - FINANCIAL INFORMATION Item 1. Financial Statements 3 SALISBURY BANCORP, INC. AND SUBSIDIARY -------------------------------------- CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (amounts in thousands, except per share data) June 30, 2005 and December 31, 2004 -----------------------------------
June 30, December 31, 2005 2004 ---- ---- ASSETS (unaudited) - ------ Cash and due from banks $ 8,038 $ 7,284 Interest bearing demand deposits with other banks 931 1,181 Money market mutual funds 1,026 942 Federal funds sold 0 2,271 --------- --------- Cash and cash equivalents 9,995 11,678 Investments in available-for-sale securities (at fair value) 154,220 178,655 Investments in held-to-maturity securities (fair values of $209,000 as of June 30, 2005 and $220,000 as of December 31, 2004) 207 218 Federal Home Loan Bank stock, at cost 5,413 5,413 Loans held-for-sale 398 375 Loans, less allowance for loan losses of $2,673,000 as of June 30, 2005 and $2,512,000 as of December 31, 2004 206,209 201,978 Investment in real estate 75 75 Premises and equipment 6,399 5,934 Goodwill 9,509 9,509 Core deposit intangible 1,740 1,822 Accrued interest receivable 2,297 2,257 Cash surrender value of life insurance policies 3,355 3,294 Due from broker 813 0 Other assets 2,618 1,893 --------- --------- Total assets $ 403,248 $ 423,101 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Deposits: Noninterest-bearing $ 65,068 $ 65,017 Interest-bearing 222,424 233,825 --------- --------- Total deposits 287,492 298,842 Federal Home Loan Bank advances 69,922 79,213 Due to broker 0 1,083 Other liabilities 3,225 3,263 --------- --------- Total liabilities 360,639 382,401 --------- --------- Stockholders' equity: Common stock, par value $.10 per share; authorized 3,000,000 shares; issued and outstanding, 1,683,341 shares at June 30, 2005 and 1,682,401 shares at December 31, 2004 168 168 Paid-in capital 13,068 13,032 Retained earnings 30,018 28,223 Accumulated other comprehensive loss (645) (723) --------- --------- Total stockholders' equity 42,609 40,700 --------- --------- Total liabilities and stockholders' equity $ 403,248 $ 423,101 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 SALISBURY BANCORP, INC. AND SUBSIDIARY -------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands, except per share data) June 30, 2005 and 2004 (unaudited)
Six Months Ended Three Months Ended June 30, June 30, 2005 2004 2005 2004 ---- ---- ---- ---- Interest and dividend income: Interest and fees on loans $ 6,449 $ 4,324 $ 3,239 $ 2,161 Interest and dividends on securities: Taxable 2,239 2,119 1,137 1,097 Tax-exempt 1,282 1,063 626 531 Dividends on equity securities 101 46 53 20 Other interest 32 18 14 6 ------- ------- ------- ------- Total interest and dividend income 10,103 7,570 5,069 3,815 ------- ------- ------- ------- Interest expense: Interest on deposits 1,887 1,216 979 597 Interest on Federal Home Loan Bank advances 1,502 1,326 765 676 ------- ------- ------- ------- Total interest expense 3,389 2,542 1,744 1,273 ------- ------- ------- ------- Net interest and dividend income 6,714 5,028 3,325 2,542 Provision for loan losses 180 120 90 60 ------- ------- ------- ------- Net interest and dividend income after provision for loan losses 6,534 4,908 3,235 2,482 ------- ------- ------- ------- Noninterest income: Trust department income 777 707 389 353 Service charges on deposit accounts 303 306 159 161 Gains on sales of available-for-sale securities, net 837 642 351 286 Gains on sales of loans held-for-sale 136 149 45 99 Other income 562 410 282 223 ------- ------- ------- ------- Total noninterest income 2,615 2,214 1,226 1,122 ------- ------- ------- ------- Noninterest expense: Salaries and employee benefits 3,510 2,522 1,702 1,260 Occupancy expense 349 163 163 73 Equipment expense 374 281 187 150 Trust department expense 217 179 121 129 Data processing 393 300 196 149 Insuranc 5 58 35 29 Printing and stationery 148 113 89 68 Professional fees 134 115 60 61 Legal expense 68 62 42 37 Amortization of core deposit intangible 82 34 41 17 Other expense 641 510 329 287 ------- ------- ------- ------- Total noninterest expense 5,991 4,337 2,965 2,260 ------- ------- ------- ------- Income before income taxes 3,158 2,785 1,496 1,344 Income taxes 521 617 188 248 ------- ------- ------- ------- Net income $ 2,637 $ 2,168 $ 1,308 $ 1,096 ======= ======= ======= ======= Earnings per common share $ 1.57 $ 1.52 $ .78 $ .77 ======= ======= ======= ======= Dividends per share $ .50 $ .48 $ .25 $ .24 ======= ======= ======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 SALISBURY BANCORP, INC. AND SUBSIDIARY -------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (amounts in thousands) Six months ended June 30, 2005 and 2004 (unaudited)
2005 2004 ---- ---- Cash flows from operating activities: Net income $ 2,637 $ 2,168 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of securities, net 152 162 Gain on sales of available-for-sale securities, net (837) (642) Provision for loan losses 180 120 Change in loans held-for-sale (23) (95) Depreciation and amortization 245 133 Amortization of core deposit intangible 82 34 Amortization of fair value adjustments, net 30 0 (Increase) decrease in interest receivable (44) 47 Deferred tax benefit (27) (5) Increase in prepaid expenses (899) (173) Decrease (increase) in other assets 231 (170) (Increase) decrease in taxes receivable (125) 77 Decrease in accrued expenses (137) (229) Increase in interest payable 1 3 Increase in other liabilities 60 14 -------- -------- Net cash provided by operating activities 1,526 1,444 -------- -------- Cash flows from investing activities: Purchase of Federal Home Loan Bank stock 0 (351) Purchases of available-for-sale securities (49,235) (64,474) Proceeds from sales of available-for-sale securities 46,170 33,877 Proceeds from maturities of available-for-sale securities 26,419 15,512 Proceeds from maturities of held-to-maturity securities 11 6 Loan originations and principal collections, net (4,523) (3,818) Recoveries of loans previously charged-off 14 9 Capital expenditures (710) (370) Net cash provided by (used in) investing activities 18,146 (19,609) -------- -------- Cash flows from financing activities: Net (decrease) increase in demand deposits, NOW and savings accounts (5,780) 3,024 Net decrease in time deposits (5,557) (1,707) Proceeds from Federal Home Loan Bank advances 11,560 15,000 Principal payments on advances from Federal Home Loan Bank (20,786) (441) Dividends paid (828) (637) Proceeds from issuance of common stock 36 24 -------- -------- Net cash (used in) provided by financing activities (21,355) 15,263 -------- -------- Net decrease in cash and cash equivalents (1,683) (2,902) Cash and cash equivalents at beginning of year 11,678 12,129 -------- -------- Cash and cash equivalents at end of period $ 9,995 $ 9,227 ======== ======== Supplemental disclosures: Interest paid $ 3,388 $ 2,539 Income taxes paid 673 545
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 SALISBURY BANCORP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 - BASIS OF PRESENTATION - ------------------------------ The accompanying condensed consolidated interim financial statements are unaudited and include the accounts of Salisbury Bancorp, Inc. (the "Company"), its wholly owned subsidiary Salisbury Bank and Trust Company (the "Bank"), and the Bank's subsidiaries, S.B.T. Realty, Inc. and SBT Mortgage Service Corporation (the "PIC") formed in April 2004. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to SEC Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. All significant intercompany accounts and transactions have been eliminated in the consolidation. These financial statements reflect, in the opinion of Management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the Company's financial position and the results of its operations and its cash flows for the periods presented. Operating results for the six months ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's 2004 Annual Report on Form 10-K. On September 10, 2004 Canaan National Bancorp, Inc. merged with and into the Company. The merger was accounted for using the purchase method of accounting. Accordingly, the assets acquired and liabilities assumed have been recorded by the Company at their fair values at the consummation date. Financial statement amounts for Canaan National Bancorp, Inc. are included in the Company's consolidated financial statements beginning on the acquisition date. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. NOTE 2 - COMPREHENSIVE INCOME - ----------------------------- Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," establishes standards for disclosure of comprehensive income which includes net income and any changes in equity from non-owner sources that are not recorded in the income statement (such as changes in the net unrealized gains (losses) on securities). The purpose of reporting comprehensive income is to report a measure of all changes in equity that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners. The Company's one source of other comprehensive income is the net unrealized holding gain (loss) on securities. Comprehensive Income (Loss)
Six months ended Three months ended June 30, June 30, 2005 2004 2005 2004 ---- ---- ---- ---- (amounts in thousands) (amounts in thousands) Net income $ 2,637 $ 2,168 $ 1,308 $ 1,096 Net change in unrealized holding losses or gains on securities during period 78 (3,128) 1,373 (3,936) --------- --------- --------- --------- Comprehensive income (loss) $ 2,715 $ (960) $ 2,681 $ (2,840) ========= ========= ========= =========
NOTE 3 - IMPACT OF NEW ACCOUNTING STANDARDS - ------------------------------------------- In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), in an effort to expand upon and strengthen existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. In December 2003, the FASB revised Interpretation No. 46, also referred to as Interpretation 46 (R) ("FIN 46(R)"). The objective of this interpretation is not to restrict the use of variable interest entities but to improve financial reporting by companies involved with variable interest entities. Until now, one company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. This interpretation changes that by requiring a variable interest entity to be consolidated by a company only if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the 7 entity's residual returns or both. The Company is required to apply FIN 46, as revised, to all entities subject to it no later than the end of the first reporting period ending after March 15, 2004. However, prior to the required application of FIN 46, as revised, the Company shall apply FIN 46 or FIN 46 (R) to those entities that are considered to be special-purpose entities as of the end of the first fiscal year or interim period ending after December 15, 2003. The adoption of this interpretation did not have an impact on the Company's consolidated financial statements. In December 2003, the FASB issued SFAS No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits - an amendment of SFAS No. 87, SFAS No. 88 and SFAS No. 106" ("SFAS No. 132 (revised 2003)"). This Statement revises employers' disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." This Statement retains the disclosure requirements contained in SFAS No. 132, "Employers' Disclosures About Pensions and Other Postretirement Benefits," which it replaces. It requires additional disclosures to those in the original Statement 132 about assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. This Statement is effective for financial statements with fiscal years ending after December 15, 2003 and interim periods beginning after December 15, 2003. Adoption of this Statement did not have a material impact on the Company's consolidated financial statements. In December 2003, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position 03-3 ("SOP 03-3") "Accounting for Certain Loans or Debt Securities Acquired in a Transfer." SOP 03-3 requires loans acquired through a transfer, such as a business combination, where there are differences in expected cash flows and contractual cash flows due in part to credit quality be recognized at their fair value. The excess of contractual cash flows over expected cash flows is not to be recognized as an adjustment of yield, loss accrual, or valuation allowance. Valuation allowances cannot be created nor "carried over" in the initial accounting for loans acquired in a transfer on loans subject to SFAS 114, "Accounting by Creditors for Impairment of a Loan." This SOP is effective for loans acquired in fiscal years beginning after December 15, 2004, with early adoption encouraged. The Company does not believe the adoption of SOP 03-3 will have a material impact on the Company's financial position or results of operations. In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payments" ("SFAS 123R"). This Statement revises FASB Statement No. 123, "Accounting for Stock Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. SFAS 123R requires that the cost resulting from all share-based payment transactions be recognized in the consolidated financial statements. It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee share ownership plans. This Statement was effective for the Company as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. However, since the issuance of SFAS 123R, the SEC has delayed the effective date. The new effective date is January 1, 2006. The Company does not believe the adoption of this Statement will have a material impact on the Company's financial position or results of operations. 8 NOTE 4 - DEFINED BENEFIT PENSION PLAN - ------------------------------------- The following summarizes the net periodic benefit cost for the three months and six months ended June 30:
Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 --------------------------------- --------------------------------- Components of net periodic benefit cost: Service cost $ 149,743 $ 49,848 $ 233,285 $ 99,695 Interest cost 84,483 40,810 145,413 81,621 Expected return on plan assets (83,578) (38,660) (133,806) (77,320) Amortization of: Prior service costs 223 223 446 446 Transition obligation 693 2,168 1,386 4,336 Actuarial loss 15,256 7,004 32,668 14,008 -------------- -------------- -------------- -------------- Net periodic benefit cost $ 166,820 $ 61,393 $ 279,392 $ 122,786 ============== ============== ============== ============== The following actuarial weighted average assumptions were used in calculating net periodic benefit cost: Discount rate 6.00% 6.00% 6.00% 6.00% Average wage increase Graded table%* 6.00% Graded table%* 6.00% Return on plan assets 7.25% 7.25% 7.25% 7.25%
* 5% at Age 20 grading down to 3% at Age 60 and beyond (effective to approximately 3.25% on average). 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Business - -------- The following provides Management's comments on the financial condition and results of operations of Salisbury Bancorp, Inc. (the "Company"), a Connecticut corporation which is the holding company for Salisbury Bank and Trust Company (the "Bank"). The Company's sole subsidiary is the Bank, which has six (6) full service offices including a Trust Department located in the towns of North Canaan, Lakeville, Salisbury and Sharon, Connecticut and Sheffield and South Egremont, Massachusetts. The Company and Bank were formed in 1998 and 1848, respectively. In order to provide a strong foundation for building shareholder value and servicing customers, the Company remains committed to investing in the technological and human resources necessary to developing new personalized financial products and services to meet the needs of customers. This discussion should be read in conjunction with Salisbury Bancorp, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2004. RESULTS OF OPERATIONS - --------------------- Overview - -------- The Company's net income for the six months ended June 30, 2005 was $2,637,000, an increase of $469,000 or 21.63% over the same period ended June 30, 2004. Earnings per share also increased 3.29% and amounted to $1.57 per share as compared to $1.52 earnings per share for the same period one year ago. The improvement in net income is primarily the result of an increase in earning assets as a result of the merger with Canaan National Bancorp, Inc. on September 10, 2004. The Company's assets at June 30, 2005 totaled $403,248,000 compared to total assets of $423,101,000 at December 31, 2004. The decrease is primarily attributable to a reduction in the securities portfolio. During the first six months of 2005 total loans outstanding increased $4,392,000 or 2.15% to $208,882,000. This compares to total loans outstanding of $204,490,000 at December 31, 2004. The Bank continues to monitor the quality of the loan portfolio to ensure that loan quality will not be sacrificed for growth or otherwise compromise the Company's objectives. Nonperforming loans totaled $2,021,000 at June 30, 2005 as compared to nonperforming loans totaling $2,267,000 at December 31, 2004. This represents a decrease of $246,000 or 10.85%. Deposits at June 30, 2005 totaled $287,492,000 as compared to total deposits of $298,842,000 at December 31, 2004. Although at June 30 total deposits on the balance sheet reflected a decrease of $11,350,000 when compared to December 31, 2004, average deposits for the six months ended June 30, 2005 totaled $296,273,000. The decrease at quarter end is primarily attributable to seasonal cash flows. As a result of the Company's second quarter financial performance, the Board of Directors declared a second quarter cash dividend of $.25 per common share, which was paid on July 29, 2005 to shareholders of record as of June 30, 2005. This is the same as the cash dividend of $.25 per common share that was paid for the first quarter of 2005. Year-to-date dividends total $.50 per common share for this year. This compares to total year-to-date dividends of $.48 per common share one year ago. The Company's risk based capital ratios at June 30, 2005, which include the risk weighted assets and capital of the Bank, were 13.89% for tier 1 capital and 15.14% for total risk based capital. The Company's leverage ratio was 7.58% at June 30, 2005 which compares to 7.53% for the corresponding period in 2004. Critical Accounting Estimates - ----------------------------- In preparing the Company's financial statements, management selects and applies numerous accounting policies. In applying these policies, management must make estimates and assumptions. The accounting policy that is most susceptible to critical estimates and assumptions is the allowance for loan losses. The determination of an appropriate provision is based on an estimation of the probable amount of future credit losses in the loan portfolio. Many factors influence the amount of future loan losses, relating to both the specific characteristics of the loan portfolio and general economic conditions nationally and locally. While management carefully considers these factors in determining the amount of the allowance for loan losses, future adjustments may be necessary due to changed conditions, which could have an adverse impact on reported earnings in the future. See "Provisions and Allowance for Loan Losses." 10 SIX MONTHS ENDED JUNE 30, 2005 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2004 Net Interest Income - ------------------- The Company's earnings are primarily dependent upon net interest and dividend income, and to a lesser extent its non-interest income from its community banking operations. Net interest and dividend income is the difference between interest and dividends earned on the loan and securities portfolio and interest paid on deposits and advances from the Federal Home Loan Bank. Non-interest income is primarily derived from the Trust Department, service charges and other fees related to deposit and loan accounts and from gains taken on the sale of available-for-sale securities. For the following discussion, net interest and dividend income is presented on a fully taxable-equivalent ("FTE") basis. FTE interest income restates reported interest income on tax exempt securities as if such interest were taxed at the Company's federal tax rate of 34% for all periods presented. (amounts in thousands) Six months ended June 30 2005 2004 ---- ---- Total Interest and Dividend Income $10,103 $ 7,570 (financial statements) Tax Equivalent Adjustment 660 548 ------- ------- Total Interest and Dividend Income (on an FTE basis) 10,763 8,118 Total Interest Expense 3,389 2,542 ------- ------- Net Interest and Dividend Income-FTE $ 7,374 $ 5,576 ======= ======= Total interest and dividend income on an FTE basis for the six months ended June 30, 2005, when compared to the same period in 2004, increased $2,645,000 or approximately 32.58%. The increase was primarily attributable to an increase in earning assets as well as an economic environment experiencing an increase in interest rates. Interest expense on deposits for the first six months of 2005 totaled $1,887,000, an increase of 55.18% compared to the same period in 2004. This increase is primarily the result of the additional deposit accounts resulting from the merger with Canaan National Bancorp, Inc. in September of 2004 as well as an economic environment of generally higher interest rates. Although Federal Home Loan Bank advances have decreased during the six month period ended June 30, 2005, interest expense on these advances increased 13.27% to $1,502,000. This increase in interest expense is attributable to an economic environment of increasing interest rates coupled with generally higher rates on Federal Home Loan Bank advances that were acquired in connection with the previously mentioned merger. Total interest expense for the six months ending June 30, 2005 was $3,389,000, an increase of $847,000 or 33.32% when compared to the same period in 2004. Overall, net interest and dividend income (on an FTE basis) increased $1,798,000 or 32.25% to $7,374,000 for the period ended June 30, 2005 when compared to the same period in 2004. Noninterest Income - ------------------ Noninterest income totaled $2,615,000 for the six months ended June 30, 2005. This is an increase of $401,000 or 18.11% compared to noninterest income of $2,214,000 for the six months ended June 30, 2004. Continuing growth of the Trust Department has resulted in an increase in trust income of $70,000 or 9.90% to $777,000 for the first six months of 2005, compared to $707,000 for the same period in 2004. This increase was partially offset by an increase in Trust Department expense, which increased $38,000 or 21.23%. Gains on sales of available-for-sale securities increased 30.37% to $837,000 for the first six months of 2005 compared to the corresponding period in 2004. 11 Noninterest Expense - ------------------- Noninterest expense increased 38.14% for the first six months of 2005 as compared to the same period in 2004. The increases in the noninterest expenses listed in the table below are all primarily attributable to the merger with Canaan National Bancorp, Inc. with the exception of the Trust Department expense, which reflects additional costs associated with the continuing growth of new accounts in the department. The components of noninterest expense and the changes in the period were as follows (amounts in thousands): 2005 2004 Change% Change - ------------------------------------------------------------------------------- Salaries and employee benefits $3,510 $2,522 $ 988 39.2 Occupancy expense 349 163 186 114.1 Equipment expense 374 281 93 33.1 Trust department expense 217 179 38 21.2 Data processing 393 300 93 31.0 Insurance 75 58 17 29.3 Printing and stationery 148 113 35 31.0 Professional fees 134 115 19 16.5 Legal expense 68 62 6 9.7 Amortization of core deposit intangible 82 34 48 141.2 Other expense 641 510 131 25.7 ------ ------ ------ Total noninterest expense $5,991 $4,337 $1,654 38.1 ====== ====== ====== Income Taxes - ------------ The income tax provision for the first six months of 2005 totaled $521,000 in comparison to $617,000 for the same six month period in 2004. Although income before taxes increased, there was a decrease in taxable income. In addition, the Company formed a passive investment company in April of 2004. A passive investment company's structure is such that income earned results in a reduction of tax liability for the Company. Net Income - ---------- Overall, net income totaled $2,637,000 for the six months ended June 30, 2005 and represents earnings of $1.57 per share. This compares to net income of $2,168,000 for the same period in 2004, an increase of 21.63% and compares to earnings per share of $1.52 for the corresponding period in 2004. The improvement in net income is primarily the result of an increase in earning assets resulting from the merger with Canaan National Bancorp, Inc. 12 THREE MONTHS ENDED JUNE 30, 2005 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2004 Net Interest Income - ------------------- For the following discussion, net interest and dividend income is presented on a fully taxable-equivalent ("FTE") basis. FTE interest income restates reported interest income on tax exempt loans and securities as if such interest were taxed at the Company's federal tax rate of 34% for all periods presented. (amounts in thousands) Three months ended June 30 2005 2004 ------ ------ Total Interest and Dividend Income $5,069 $3,815 (financial statements) Tax Equivalent Adjustment 322 274 ------ ------ Total Interest and Dividend Income (on an FTE basis) 5,391 4,089 Total Interest Expense 1,744 1,273 ------ ------ Net Interest and Dividend Income-FTE $3,647 $2,816 ====== ====== Total interest and dividend income on an FTE basis for the three months ended June 30, 2005 increased $1,302,000 or approximately 31.84% compared to the same period in 2004. The increase was primarily attributable to an increase in earning assets as well as an economic environment with generally higher interest rates. Interest expense on deposits increased $382,000 or 63.99% for the quarter to $979,000 compared to $597,000 for the same quarter in 2004. This increase is primarily the result of the increased deposit base and an economic environment of increasing interest rates. Federal Home Loan Bank advances have decreased for the three month period ended June 30, 2005 when compared to the corresponding period in 2004. Interest expense on these advances however, increased $89,000 or 13.17% and totaled $765,000 for the three months ended June 30, 2005 compared to the corresponding period in 2004. Total interest expense for the three months ending June 30, 2005 was $1,744,000 compared to total interest expense for the same period in 2004 of $1,273,000, an increase of $471,000 or 37.00%. This increase is a reflection an economic environment of rising interest rates and the result of generally higher interest rates on Federal Home Loan Bank advances that were acquired in connection with the merger of Canaan National Bancorp, Inc. with the Company. Overall, net interest and dividend income (on an FTE basis) increased $831,000 or 29.51% to $3,647,000 for the three month period ended June 30, 2005 when compared to the corresponding period in 2004. Noninterest Income - ------------------ Noninterest income totaled $1,226,000 for the three months ended June 30, 2005 as compared to $1,122,000 for the three months ended June 30, 2004 an increase of $104,000 or 9.27%. Continuing growth of the Trust Department has resulted in an increase in income of $36,000 or 10.20% to $389,000 for the second quarter of 2005 compared to the same period in 2004. Gains on sales of available-for-sale securities totaled $351,000 for the second quarter of 2005 as compared to $286,000 for the corresponding period in 2004. This increase is primarily attributable to management's efforts to maximize the spreads in the portfolio. During the quarter there were opportunities in the market that resulted in taking gains on sales while increasing the yields in the portfolio at the same time. 13 Noninterest Expense - ------------------- Noninterest expense totaled $2,965,000 for the three month period ended June 30, 2005 as compared to $2,260,000 for the same period in 2004, an increase of $705,000 or 31.20%. The increases listed in the table below are all primarily attributable to the merger with Canaan National Bancorp, Inc. The components of noninterest expense and the changes in the period were as follows (amounts in thousands): 2005 2004 Chan % Change - -------------------------------------------------------------------------------- Salaries and employee benefits $1,702 $1,260 $ 442 35.1 Occupancy expense 163 73 90 123.3 Equipment expense 187 150 37 24.7 Trust department expense 121 129 (8) (6.2) Data processing 196 149 47 31.5 Insurance 35 29 6 20.7 Printing and stationery 89 68 21 30.9 Professional fees 60 61 (1) (1.6) Legal expense 42 37 5 13.5 Amortization of core deposit intangible 41 17 24 141.1 Other expense 329 287 42 14.6 ------ ------ ------ Total noninterest expense $2,965 $2,260 $ 705 31.2 ====== ====== ====== Income Taxes - ------------ The income tax provision for the three month period ended June 30, 2005 totaled $188,000 in comparison to $248,000 for the same three month period in 2004. Although income before taxes increased, there was a decrease in taxable income. Net Income - ---------- Overall, net income totaled $1,308,000 for the three months ended June 30, 2005 and represents earnings of $.78 per share. This compares to net income of $1,096,000 for the same period in 2004, an increase of $212,000 or 19.34% and compares to earnings per share of $.77 for the corresponding period in 2004. The improvement in net income is primarily the result of an increase in earning assets and reduced income taxes, and is partially offset by the current economic condition of compressing interest spreads. FINANCIAL CONDITION - ------------------- Total assets at June 30, 2005 were $403,248,000, compared to $423,101,000 at December 31, 2004, a decrease of 4.69%. The decrease is primarily the result of sales and calls of available-for-sale securities in the portfolio during the period ended June 30, 2005. Securities - ---------- During the six months ended June 30, 2005, the securities portfolio, including Federal Home Loan Bank stock, decreased $24,446,000 or 13.26% to $159,840,000 from $184,286,000 at December 31, 2004. The decrease is primarily a reflection of portfolio securities being sold and called during the period with the proceeds being used to fund loan growth and reduce total advances outstanding at the Federal Home Loan Bank of Boston. The make up of the securities portfolio is diversified among U.S. Government sponsored agencies, mortgage-backed securities and securities issued by states of the United States and political subdivisions of the states. Securities are classified in the portfolio as either securities available-for-sale or securities held-to-maturity. Almost all securities are classified as available-for-sale. The securities reported as available-for-sale are stated at fair value in the financial statements of the Company. Unrealized holding gains and losses on available-for-sale securities (accumulated other comprehensive income/loss) are not included in earnings, but are reported as a net amount (less expected tax) in a separate component of capital until realized. At June 30, 2005, the unrealized loss net of tax was $645,000. This compares to an unrealized loss net of tax of $723,000 at December 31, 2004. The unrealized losses in these securities are attributable to changes in market interest rates. Management deems the securities that are 14 currently in an unrealized loss position as not other than temporarily impaired. The securities reported as securities held-to-maturity are stated at amortized cost. Lending - ------- New business development during the first half of 2005 coupled with a small increase in loan demand resulted in an increase in total loans outstanding to $208,882,000 at June 30, 2005. This compares to total loans outstanding of $204,490,000 at December 31, 2004. This is an increase of $4,392,000 or 2.15%. Competition for loans remains aggressive in the Bank's market area, especially in the residential mortgage loan market. The following table represents the composition of the loan portfolio comparing June 30, 2005 to December 31, 2004: June 30, 2005 December 31, 2004 ------------- ----------------- (amounts in thousands) Commercial, financial and agricultural $ 14,683 $ 15,127 Real Estate-construction and land development 14,391 14,290 Real Estate-residential 133,166 130,414 Real Estate-commercial 37,770 35,487 Consumer 8,513 9,122 Other 372 69 --------- --------- 208,895 204,509 Unearned income (13) (19) Allowance for loan losses (2,673) (2,512) --------- --------- Net Loans $ 206,209 $ 201,978 ========= ========= Provisions and Allowance for Loan Losses - ---------------------------------------- Total net loans at June 30, 2005 increased 2.09% to $206,209,000 when compared to total net loans of $201,978,000 at December 31, 2004. At June 30, 2005 approximately 89% of the Bank's loan portfolio was related to real estate products. The concentration remained consistent as approximately 88% of the portfolio was related to real estate at December 31, 2004. There were no material changes in the composition of the loan portfolio during this period. Credit risk is inherent in the business of extending loans. The Bank monitors the quality of the portfolio to ensure that loan quality will not be sacrificed for growth or otherwise compromise the Bank's objectives. Because of this risk associated with extending loans, the Bank maintains an allowance for loan losses through charges to earnings. The loan loss provision for the six-month period ended June 30, 2005 was $180,000 compared to $120,000 in the comparable period of 2004. The Bank evaluates the adequacy of the allowance on a monthly basis. No material changes have been made in the estimation methods or assumptions that the Bank uses in making this determination during the period ended June 30, 2005. Such evaluations are based on assessments of credit quality and "risk rating" of loans by senior management, which are submitted to the Bank's Board of Directors for approval. Loans are initially risk rated when originated. If there is deterioration in the credit, the risk rating is adjusted accordingly. A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment records, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent. 15 Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures. In addition, a risk of loss factor is applied in evaluating categories of loans generally as part of the periodic analysis of the Allowance for Loan Losses. This analysis reviews the allocations of the different categories of loans within the portfolio and it considers historical loan losses and delinquency figures as well as any recent delinquency trends. The credit card delinquency and loss history is separately evaluated and given a special loan loss factor because management recognizes the higher risk involved in such loans. Concentrations of credit and local economic factors are also evaluated on a periodic basis. Historical average net losses by loan type are examined as well as trends by type. The Bank's loan mix over the same period of time is also analyzed. A loan loss allocation is made for each type of loan multiplied by the loan mix percentage for each loan type to produce a weighted average factor. There have been no reallocations within the allowance during the six months ended June 30, 2005. At June 30, 2005, the allowance for loan losses totaled $2,673,000, representing 132.26% of nonperforming loans, which totaled $2,021,000, and 1.28% of total loans of $208,882,000. This compares to an allowance for loan losses of $2,512,000, representing 110.81% of nonperforming loans, which totaled $2,267,000, and 1.23% of total loans of $204,490,000 at December 31, 2004. A total of $33,000 of loans were charged off by the Bank during the six months ended June 30, 2005. These charged-off loans consisted primarily of consumer loans. This compares to loans charged off during the six month period ended June 30, 2004 which totaled $24,000. A total of $14,000 of previously charged-off loans was recovered during the six month period ended June 30, 2005. Recoveries for the same period in 2004 totaled $9,000. While management estimates loan losses using the best available information, no assurances can be given that future additions to the allowance will not be necessary based on changes in economic and real estate market conditions, further information obtained regarding problem loans, identification of additional problem loans or other factors. Additionally, future additions to the allowance may be necessary to maintain adequate coverage ratios. Deposits - -------- The Company offers a variety of deposit accounts with a range of interest rates and terms. The following table illustrates the composition of the Company's deposits at June 30, 2005 and December 31, 2004: June 30, 2005 December 31, 2004 ------------- ----------------- (amounts in thousands) Demand $ 65,068 $ 65,017 NOW 25,040 29,569 Money Market 53,344 49,206 Savings 58,148 63,588 Time 85,892 91,462 -------- -------- Total Deposits $287,492 $298,842 ======== ======== Deposits constitute the principal funding source of the Company's assets. Borrowings - ---------- The Company utilizes advances from the Federal Home Loan Bank as part of its operating strategy to supplement deposit growth and fund its asset growth, a strategy that is designed to increase interest income. These advances are made pursuant to various credit programs, each of which has its own interest rate and range of maturities. At June 30, 2005, the Company had $69,922,000 in outstanding advances from the Federal Home Loan Bank compared to $79,213,000 at December 31, 2004. Management expects that it will continue this strategy of supplementing deposit growth with advances from the Federal Home Loan Bank. Interest Rate Risk - ------------------ Interest rate risk is the most significant market risk affecting the Company. Interest rate risk is defined as an exposure to a movement in interest rates that could have an adverse effect on net interest income. Net interest income is sensitive to interest rate risk to the degree that interest bearing liabilities mature or reprice on a different basis than earning assets. 16 In an attempt to manage its exposure to changes in interest rates, the Bank's assets and liabilities are managed in accordance with policies established and reviewed by the Bank's Board of Directors. The Bank's Asset/Liability Management Committee monitors asset and deposit levels, developments and trends in interest rates, liquidity and capital. One of the primary financial objectives is to manage interest rate risk and control the sensitivity of earnings to changes in interest rates in order to prudently improve net interest income and manage the maturities and interest rate sensitivities of assets and liabilities. To quantify the extent of these risks, both in its current position and in actions it might take in the future, interest rate risk is monitored using gap analysis which identifies the differences between assets and liabilities which mature or reprice during specific time frames and model simulation which is used to "rate shock" the Company's assets and liability balances to measure how much of the Company's net interest income is "at risk" from sudden rate changes. An interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. At June 30, 2005, the Company was slightly asset sensitive (positive gap). This would suggest that during a period of rising interest rates, the Company would be in a better position to invest in higher yielding assets resulting in growth in interest income. To the contrary, during a period of falling interest rates, a positive gap would result in a decrease in interest income. The level of interest rate risk at June 30, 2005 is within the limits approved by the Board of Directors. Liquidity - --------- Liquidity is the ability to raise funds on a timely basis at an acceptable cost in order to meet cash needs. Adequate liquidity is necessary to handle fluctuation in deposit levels, to provide for customers' credit needs, and to take advantage of investment opportunities as they are presented. The Company manages liquidity primarily with readily marketable investment securities, deposits and loan repayments. The Company's subsidiary, the Bank, is a member of the Federal Home Loan Bank of Boston. This enhances the liquidity position by providing a source of available borrowings. At June 30, 2005 the Company had approximately $49,552,000 in loan commitments outstanding. Management believes that the current level of liquidity is ample to meet the Company's needs for both the present and foreseeable future. Capital - ------- At June 30, 2005, the Company had $42,609,000 in stockholders' equity, an increase of 4.69 % when compared to December 31, 2004 stockholders' equity totaling $40,700,000. Earnings for the six-month period ended June 30, 2005 totaled $2,637,000. Market conditions resulted in a decrease in accumulated other comprehensive loss to $645,000 from $723,000 at December 31, 2004. A review and analysis of securities has determined that there has been no credit deterioration and that the unrealized loss on securities available-for-sale is due to the current interest rate environment and management deems the securities to be not other than temporarily impaired. The Company has declared two quarterly dividends resulting in a decrease in capital of $841,000. The Company issued 940 new shares of common stock under the terms of the Director Stock Retainer Plan that resulted in an increase in capital of $36,000. Under current regulatory definitions, the Company and the Bank are considered to be "well capitalized" for capital adequacy purposes. As a result, the Bank pays the lowest federal deposit insurance deposit premiums possible. One primary measure of capital adequacy for regulatory purposes is based on the ratio of risk-based capital to risk-weighted assets. This method of measuring capital adequacy helps to establish capital requirements that are more sensitive to the differences in risk associated with various assets. It takes into account off-balance sheet exposure in assessing capital adequacy and it minimizes disincentives to holding liquid, low-risk assets. At June 30, 2005, the Company had a risk-based capital ratio of 15.14% compared to 12.13% at December 31, 2004. Maintaining strong capital is essential to bank safety and soundness. However, the effective management of capital resources requires generating attractive returns on equity to build value for shareholders while maintaining appropriate levels of capital to fund growth, meet regulatory requirements and be consistent with prudent industry practices. Management believes that the capital levels of the Company and Bank are adequate to continue to meet the foreseeable capital needs of the institutions. 17 Impact of Inflation and Changing Prices - --------------------------------------- The Company's consolidated financial statements are prepared in conformity with generally accepted accounting principles which require the measurement of financial condition and operating results in terms of historical dollars without considering changes in the relative purchasing power of money, over time, due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of the Company are monetary and as a result, interest rates have a greater impact on the Company's performance than do the effects of general levels of inflation, although interest rates do not necessarily move in the same direction or with the same magnitude as the prices of goods and services. Although not an influence in recent years, inflation could impact earnings in future periods. Forward Looking Statements - -------------------------- This Form 10-Q and future filings made by the Company with the Securities and Exchange Commission, as well as other filings, reports and press releases made or issued by the Company and the Bank, and oral statements made by executive officers of the Company and the Bank, may include forward-looking statements relating to such matters as: (a) assumptions concerning future economic and business conditions and their effect on the economy in general and on the markets in which the Company and the Bank do business; and (b) expectations for revenues and earnings for the Company and Bank. Such forward-looking statements are based on assumptions rather than historical or current facts and, therefore, are inherently uncertain and subject to risk. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Act of 1995. The Company notes that a variety of factors could cause the actual results or experience to differ materially from the anticipated results or other expectations described or implied by such forward-looking statements. The risks and uncertainties that may effect the operation, performance, development and results of the Company's and Bank's business include the following: (a) the risk of adverse changes in business conditions in the banking industry generally and in the specific markets in which the Bank operates; (b) changes in the legislative and regulatory environment that negatively impact the Company and Bank through increased operating expenses; (c) increased competition from other financial and non-financial institutions; (d) the impact of technological advances; and (e) other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. Such developments could have an adverse impact on the Company's and the Bank's financial position and results of operations. 18 Item 3. Quantitative and Qualitative Disclosures About Market Risk. The main components of market risk for the Company are interest rate risk and liquidity risk. The Company manages interest rate risk and liquidity risk through an ALCO Committee comprised of outside Directors and senior management. The committee monitors compliance with the Bank's Asset/Liability Policy which provides guidelines to analyze and manage the interest rate sensitivity gap, which is the difference between the amount of assets and the amounts of liabilities which mature or reprice during specific time frames. Model simulation is used to measure earnings volatility under both rising and falling rate scenarios. Please refer to Interest Rate Risk and Liquidity under Item 2. The Company's interest rate risk and liquidity position has not significantly changed from year end 2004. Item 4. Controls and Procedures. The Company's Chief Executive Officer and Chief Financial Officer concluded that, based upon an evaluation as of June 30, 2005, the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. During the six month period ended June 30, 2005 there were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Part II - OTHER INFORMATION Item 1. - Legal Proceedings. Not applicable Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds. Not applicable Item 3. - Defaults Upon Senior Securities. Not applicable Item 4. - Submission of Matters to a Vote of Security Holders. Not applicable Item 5. - Other Information. Not applicable Item 6. - Exhibits 11 Computation of Earnings per Share. 31.1 - Rule 13a-14(a)/15d-14(a) Certification. 31.2 - Rule 13a-14(a)/15d-14(a) Certification. 32 - Section 1350 Certifications. 19 SALISBURY BANCORP, INC. 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 thereunto duly authorized. Salisbury Bancorp, Inc. Date: August 12, 2005 by: /s/ John F. Perotti ----------------- -------------------- John F. Perotti Chief Executive Officer Date: August 12, 2005 by: /s/ John F. Foley --------------- ----------------- John F. Foley Chief Financial Officer 20 EX-11 2 ex11.txt EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE The Company has computed and presented earnings per share ("EPS") in accordance with Statement of Financial Accounting Standards No. 128. Reconciliation of the numerators and the denominators of the basic and diluted per share computation for net income are as follows:
(amounts in thousands, except per share data) (unaudited) Income Shares Per-Share (Numerator) (Denominator) Amount --------- ----------- ------ Six months ended June 30, 2005 Basic EPS Net income and income available to common stockholders $2,637 1,683 $1.57 ------ ------ ----- Effect of dilutive securities, options 0 ------ ------ Diluted EPS Income available to common stockholders and assumed conversions $2,637 1,683 $1.57 ====== ====== Six months ended June 30, 2004 Basic EPS Net income and income available to common stockholders $2,168 1,424 $1.52 Effect of dilutive securities, options 0 ------ ------ Diluted EPS Income available to common stockholders and assumed conversions $2,168 1,424 $1.52 ====== ====== (amounts in thousands, except per share data) (unaudited) Income Shares Per-Share (Numerator) (Denominator) Amount --------- ----------- ------ Three months ended June 30, 2005 Basic EPS Net income and income available to common stockholders $1,308 1,683 $ .78 Effect of dilutive securities, options 0 ------ ------ Diluted EPS Income available to common stockholders and assumed conversions $1,308 1,683 $ .78 ====== ====== Three months ended June 30, 2004 Basic EPS Net income and income available to common stockholders $1,096 1,424 $ .77 Effect of dilutive securities, options 0 ------ ------ Diluted EPS Income available to common stockholders and assumed conversions $1,096 1,424 $ .77 ====== ======
21 EX-31.1 3 ex31-1.txt Exhibit 31.1 ------------ RULE 13a-14(a)/15d-14(a) CERTIFICATION -------------------------------------- I, John F. Perotti, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Salisbury Bancorp, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent function): a) all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 12, 2005 By: /s/ John F. Perotti ------------------- Chief Executive Officer 22 EX-31.2 4 ex31-2.txt Exhibit 31.2 ------------ RULE 13a-14(a)/15d-14(a) CERTIFICATION -------------------------------------- I, John F. Foley, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Salisbury Bancorp, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report to our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent function): a) all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 12, 2005 By: /s/ John F. Foley ----------------- Chief Financial Officer 23 EX-32 5 ex32.txt EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Salisbury Bancorp, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John F. Perotti, Chief Executive Officer of the Company, and I, John F. Foley, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ John F. Perotti /s/ John F. Foley - ---------------------- ---------------------------- John F. Perotti John F. Foley Chief Executive Officer Chief Financial Officer 24 -----END PRIVACY-ENHANCED MESSAGE-----