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 March 31, 2000
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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 1-14854
Salisbury Bancorp, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Connecticut 06-1514263
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
5 Bissell Street Lakeville Connecticut 06039
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (860) 435-9801
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(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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 2000. 1,493,445
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SALISBURY BANCORP, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets --March 31, 2000 and December 31, 1999 4
(unaudited)
Consolidated Statements of Income --three months ended March 31, 2000 and 1999 5
(unaudited)
Consolidated Statements of Cash Flows --three months ended March 31, 2000 and 1999 6
(unaudited)
Notes to Consolidated Financial Statements 8
Item 2. Management"s Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities
16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
2
3
Part I--FINANCIAL INFORMATION
Item 1. Financial Statements
4
SALISBURY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per share data)
(unaudited)
MARCH 31 DECEMBER 31
2000 1999
---- ----
ASSETS Cash & due from banks:
Non-Interest Bearing $ 6,418 $ 6,478
Interest Bearing 272 268
Federal funds sold 2,855 0
Money Market Mutual Funds 512 970
--------- ---------
Cash and cash equivalents 10,057 7,716
Investment Securities:
Held to maturity securities at amortized cost 486 489
Available-for-sale securities at market value 82,224 75,153
Federal Home Loan Bank stock, at cost 2,930 2,102
Loans:
Commercial, financial and agricultural 8,621 9,025
Real estate-construction and land development 2,844 3,382
Real estate-residential 86,270 86,680
Real estate-commercial 15,381 15,324
Consumer 10,106 10,698
Other 756 364
Allowance for loan losses (1,147) (1,160)
Unearned income 0 0
--------- ---------
Net loans 122,831 124,313
Bank premises & equipment 2,197 2,249
Other real estate owned 75 75
Accrued interest receivable 1,508 1,576
Other assets 1,697 1,712
--------- ---------
Total Assets $ 224,005 $ 215,385
========= =========
LIABILITIES
Deposits:
Demand $ 28,754 $ 28,318
Savings & NOW 30,537 32,735
Money Market 39,675 36,954
Time 54,861 56,351
--------- ---------
Total Deposits 153,827 154,358
Federal Home Loan Bank advances 48,381 39,712
Other liabilities 1,580 1,420
--------- ---------
Total Liabilities 203,788 195,490
--------- ---------
Shareholders" equity:
Common stock, par value $.10 per share;
Authorized 3,000,000 shares
Issued and outstanding shares: 1,495,570 at March 31, 2000 150 150
and 1,504,171 at December 31, 1999
Additional paid-in capital 3,634 3,781
Retained earnings 18,317 17,799
Accumulated other comprehensive income(loss) (1,884) (1,835)
--------- ---------
Total Shareholders" Equity 20,217 19,895
--------- ---------
Total Liabilities and Shareholders" Equity $ 224,005 $ 215,385
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
5
6
SALISBURY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
March 31, 2000 and 1999
(unaudited)
Three Months Ended
March 31
--------
2000 1999
---- ----
Interest and dividend income:
Interest and fees on loans $2,442 $2,337
Interest and dividends on securities:
Taxable 1,238 940
Tax-exempt 163 125
Dividends on equity securities 36 22
Other interest 101 63
------ ------
Total interest and dividend income 3,980 3,487
------ ------
Interest expense:
Interest on deposits 1,223 1,194
Interest on Federal Home Loan Bank advances 716 438
------ ------
Total interest expense 1,939 1,632
------ ------
Net interest and dividend income 2,041 1,855
Provision for loan losses 30 30
------ ------
Net interest and dividend income after provision
for loan losses 2,011 1,825
------ ------
Other income:
Trust department income 243 300
Service charges on deposit accounts 83 79
Other income 114 98
------ ------
Total other income 440 477
------ ------
Other expense:
Salaries and employee benefits 788 677
Occupancy expense 63 71
Equipment expense 109 118
Data processing 47 76
Legal 8 36
Other expense 318 337
------ ------
Total other expense 1,333 1,315
------ ------
Income before income taxes 1,118 987
Income taxes 405 350
------ ------
Net income $ 713 $ 637
====== ======
Earnings per common share outstanding $ .48 $ .42
====== ======
Earnings per common share outstanding,
assuming dilution $ .48 $ .42
====== ======
The accompanying notes are an integral part of these consolidated
financial statements.
7
SALISBURY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Three months ended March 31, 2000 and 1999
(unaudited)
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 713 $ 637
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 30 30
Depreciation and amortization 68 38
(Accretion) amortization of securities, net (61) (37)
Deferred tax expense (benefit) 74 0
Increase (decrease)in interest receivable 68 83
Increase in interest payable 59 108
(Increase) decrease in prepaid expenses (31) (12)
Increase in accrued expenses 96 93
(Increase) decrease in other assets (3) 161
Increase (decrease)in other liabilities (6) 53
Increase (decrease) in taxes payable 328 0
--------- ---------
Net cash provided by operating activities 1,335 1,154
-------- --------
Cash flows from investing activities:
Purchase of Federal Home Loan Bank stock (828) 0
Purchase of available-for-sale securities (20,433) (8,336)
Proceeds from sales of available-for-sale securities 850 4,795
Proceeds from maturities of available-for-sale securities 12,500 15,348
Proceeds from held-to-maturity securities 3 2
Net (increase) decrease in loans 1,441 (1,406)
Capital expenditures (17) (26)
Recoveries of loans previously charged-off 10 5
Net cash (used in) provided by investing activities (6,474) 10,382
--------- ---------
The accompanying notes are an integral part of these consolidated
financial statements.
8
SALISBURY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Three months ended March 31, 2000 and 1999
(unaudited)
(continued)
2000 1999
---- ----
Cash flows from financing activities:
Net increase (decrease) in demand deposits, NOW and
savings accounts 959 (349)
Net increase (decrease) in time deposits (1,490) (348)
Advances from Federal Home Loan Bank 19,000 0
Principal payments on advances from Federal Home Loan Bank (10,331) (10,379)
Dividends paid (511) (420)
Net repurchase of common stock (147) (996)
-------- --------
Net cash provided by (used in) financing activities 7,480 (12,492)
-------- --------
Net increase (decrease) in cash and cash equivalents 2,341 (956)
Cash and cash equivalents at beginning of period 7,716 12,134
--------
Cash and cash equivalents at end of period $ 10,057 $ 11,178
======== ========
Supplemental disclosures:
Interest paid $ 1,998 $ 1,524
Income taxes paid 11 190
The accompanying notes are an integral part of these consolidated
financial statements.
9
10
SALISBURY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed interim financial statements are unaudited and
include the accounts of Salisbury Bancorp, Inc. ("the Company"), those of
Salisbury Bank and Trust Company (the "Bank"), its wholly-owned subsidiary and
the Bank"s subsidiary, S.B.T. Realty, Inc. The consolidated financial statements
have been prepared in accordance with generally accepted accounting principals
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
generally accepted accounting principals 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 three months ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company"s 1999 Annual Report on Form 10-K.
NOTE 2 -COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provision of Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130). SFAS 130 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 loss (gain) on securities.
Comprehensive Income
Three months ended
March 31,
2000 1999
---- ----
Net income $713 $637
Net unrealized (losses) gains
on securities during period ( 49) (322)
------ -----
Comprehensive income $664 $315
==== ====
11
NOTE 3 - 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:
(Dollars in thousands, except per share data)
(unaudited)
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------ ------
Three months ended March 31, 2000
Basic EPS
Net income and income available to common stockholders $ 713 1,501 $ .48
Effect of dilutive securities, options 0
----- ------
Diluted EPS
Income available to common stockholders and assumed
conversions $ 713 1,501 $ .48
===== ===== =========
Three months ended March 31, 1999
Basic EPS
Net income and income available to common stockholders $ 637 1,510 $ .42
Effect of dilutive securities, options 16
----- ------
Diluted EPS
Income available to common stockholders and assumed
conversions $ 637 1,526 $ .42
===== ===== =========
12
Part I - FINANCIAL INFORMATION
Item 2. Management"s Discussion and Analysis of Financial
Condition and Results of Operations
13
Overview:
Salisbury Bancorp, Inc. (the "Company"), a Connecticut corporation, is the
holding company for Salisbury Bank and Trust Company, (the "Bank") which is
headquartered in Lakeville, Connecticut. The Company's sole subsidiary is the
Bank, which has a full service Trust Department and offers commercial banking
products and services through three full service offices in the towns of
Lakeville, Salisbury and Sharon, Connecticut.
The following is Management's discussion of the financial condition and results
of operations on a consolidated basis of Salisbury Bancorp, Inc. which includes
the accounts of Salisbury Bank and Trust Company. Management's discussion should
be read in conjunction with Salisbury Bancorp, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1999.
During the first quarter of 2000, the Company reported net income of $713,000 or
$.48 per diluted share. This represents an increase of 11.93% when comparing
first quarter 1999 earnings of $637,000 or $.42 per diluted share. The increase
in earnings is the result of growth in interest income. Earning assets increased
as total assets increased 9.22% to $224,005,000 at March 31, 2000 compared to $
205,091,000 at March 31, 1999. Of this $18,914,000 growth, $8,620,000 occurred
during the first calendar quarter of 2000. However, the growth reflects the
increased utilization of borrowings from the Federal Home Loan Bank and
corresponding growth of the securities investment portfolio. During the first
quarter of 2000, both the volume of net loans and deposits decreased slightly.
Despite the slight contraction of the loan portfolio and deposits, Management is
generally pleased with the continuing progress made by the Company during the
first quarter of 2000 as improvements in earnings and asset quality have
resulted in an increase in both earnings per share and dividends per share.
Continued prudent management is essential to maintaining the quality and
sustainability of the Company's earnings. In order to provide a strong
foundation for building shareholder value and serving our 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 its customers.
The Company's risk-based ratios, which include the risk-weighted assets and
capital of Salisbury Bank and Trust Company were 20.58% for Tier 1 capital and
21.71% for Total capital at March 31, 2000. The Leverage ratio was 9.61%. These
ratios substantially exceeded the regulatory minimums for "well capitalized"
bank holding companies
As a result of the Company's financial performance, the Board of Directors
declared a quarterly cash dividend of $.13 per common share. This compares to a
$.12 per share cash dividend from a year ago, an increase of 8.33%.
THREE MONTHS ENDED MARCH 31,2000
AS COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Results of Operations
Net Interest Income
The Company's earnings are primarily dependent upon net interest income and
noninterest income from its community banking operations with net interest
income being the largest component of the Company's revenue. Net interest and
dividend income is the difference between interest and dividends earned on the
loan and investment portfolio and interest paid on deposits and advances from
the Federal Home Loan Bank. Noninterest income is primarily derived from the
Trust Department and from service charges and other fees related to deposit and
loan accounts. For the following discussion, interest 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 income tax rate of 34% for all periods presented.
14
(amounts in thousands)
Three months ended March 31 2000 1999
---------------------------
Interest Income $ 3,980 $ 3,487
(financial statements)
Tax Equivalent Adjustment 84 64
Total interest income (on an FTE basis) 4,064 3,551
Interest Expense (1,939) (1,632)
------- -------
Net Interest Income-FTE $ 2,125 $ 1,919
======= =======
Competition in the Company's market area continues to be aggressive, especially
in the area of home financing demands. However, the residential loan portfolio
increased $6,089,000 or 7.59% when comparing March 31,2000 to March 31,1999.
This increase coupled with a rising rate environment has resulted in an increase
in interest and fees on loans of $105,000 or 4.49%. Interest and fees on loans
for the three months ended March 31, 2000 amounted to $2,442,000 as compared
with $2,337,000 for the comparable period in 1999. However, primarily as a
result of the increases in interest rates, the size of the Bank's loan portfolio
decreased slightly during the first calendar quarter of 2000; from $124,313,000
at December 31, 1999 to $122,831,000 at March 31, 2000. The primary increase in
interest income is a reflection of the increase in the securities portfolio from
December 31,1999 to March 31, 2000 of $7,896,000 or 10.16%. Interest and
dividends on securities amounted to $1,622,000 for the three month period ended
March 31, 2000 as compared with $1,214,000 for the same period in 1999. This
increase of $408,000 or 33.61% is primarily the result of the increase in the
size of the securities portfolio.
During the first quarter of 2000, interest expense on deposits amounted to
$1,223,000 as compared with $1,194,000 for the same period in 1999. This
increase of 2.43% or $29,000 represented a small component of the increase in
total interest expense. Interest on Federal Home Loan Bank advances represented
the most significant increase in such expenses in comparing the results of the
first calendar quarters of 2000 and 1999. Interest on Federal Home Loan Bank
advances increased $278,000 or 63.47% for the first quarter of 2000, reflecting
the Bank's increased utilization of advances from the Federal Home Loan Bank as
a component of its funding strategy. Such advances increased from $30,741,000 at
March 31, 1999 to $39,712,000 at December 31, 1999, to $48,381,000 at March 31,
2000. Total interest expense increased 18.81% and amounted to $1,939,000 for the
first quarter of 2000 as compared with $1,632,000 for the first calendar quarter
1999.
As a result, net interest and dividend income amounted to $2,125,000 for the
three months ended March 31, 2000 as compared with $1,919,000 for the same
period in 1999. This increase of $206,000 represents a 10.73% increase of net
interest income on a fully taxable equivalent basis.
Noninterest Income
Noninterest income totaled $440,000 for the quarter ended March 31, 2000. This
compares to $477,000 for the comparable quarter in 1999. A decrease in Trust
Department income of $57,000 accounts for most of the decrease. The department
continues to grow; however the timing of estate settlement fees taken into
income is somewhat difficult to predict. There were more in the first quarter of
1999 than in the first quarter of 2000. Service charges and other income have
increased to $197,000 which represents an increase of 11.30%. This is primarily
the result of an increase of transactions from deposit accounts.
15
Noninterest Expense
Noninterest expense amounted to $1,333,000 for the first quarter of 2000. This
is an $18,000 increase or 1.37% over the $1,315,000 reported for the same period
of 1999. Salaries and employee benefits increased $111,000 or 16.40%. This is
primarily due to salary increases and increased cost in employee benefits.
Occupancy expense decreased $8,000 to $63,000 during the first quarter of 2000
compared to the corresponding period in 1999. This reduction is a reflection of
a mild winter compared to the previous year. Equipment expense decreased $9,000
to $109,000. Preparations for Y2K during 1999 included some upgrading and
preventative attention to equipment that would have been part of the Company's
first quarter maintenance program. On a combined basis, the aggregate of data
processing, legal, and all other expenses decreased 16.93% to $373,000 for the
first quarter of 2000 compared to $449,000 for the first quarter of 1999. This
is a reflection of management's continuing efforts to control operating
expenses.
Income Taxes
The first quarter 2000 income tax provision was $405,000 compared to $ 350,000
for the same quarter of 1999. This increase reflects an increase in taxable
income.
Financial Condition
Total assets at March 31, 2000 were $224,005,000, an increase of $8,620,000 from
$215,385,000 at December 31, 1999. This is the result of an increase in
investments that was funded by an increase in Federal Home Loan Bank advances
during the first quarter of the year. When comparing total assets at March 31,
2000 to total assets at March 31, 1999, there is an increase of $ 18,914,000.
This growth was funded by both an increase in deposits as well as an increase in
advances from the Federal Home Loan Bank. This growth in assets has enhanced the
earnings opportunities for the Company.
Loans
Competition for loans, especially residential mortgage loans, remains very
aggressive in the market area of the Company. Loan demand during the first
quarter of 2000 was not strong and as a result, total loans outstanding
decreased $1,495,000 or 1.19% since December 31,1999. Recently the Company
expanded its menu of mortgage products as efforts continue to develop new
lending business.
Provisions and Allowance for Loan Losses
The Company's allowance for loan losses represents amounts available to absorb
potential losses in the existing portfolio. Management continually assesses the
adequacy of the allowance in response to current and anticipated economic
conditions, specific problem loans, historical net charge offs and the overall
risk profile of the loan portfolio. A $30,000 provision to the allowance for
possible loan losses was made during the first quarter of 2000, the same as the
first quarter of 1999. Nonaccrual loans were $316,000 at March 31,2000 compared
to $473,000 at December 31,1999 a decrease of 49.50% Approximately 58% of
nonaccrual loans are secured by 1-4 family residential properties. Loans 90 days
past due and still accruing have increased to $116,000 at the end of the first
quarter compared to $ 10,000 at year end 1999. Management believes this to be an
isolated situation and does not represent any trend towards increased
delinquency of loans. Restructured loans remained unchanged at $12,000.
A total of $53,000 in loans was charged off by the Company during the first
quarter of 2000 as compared to $37,000 charged off during the corresponding
period in 1999. These charge-offs consisted primarily of loans to consumers. A
total of $10,000 of previously charged off loans was recovered during the
quarter ended March 31, 2000 compared to $5000 in 1999.
16
At March 31, 2000, the allowance for loan losses was $1,147,000 representing
.90% of gross loans as compared to $1,160,000 or .90% of gross loans at
December 31,1999. Determining the proper level of allowance requires management
to make estimates using assumptions and information which is often subjective
and changing. In management's judgement, the allowance for loan losses is
adequate.
Securities
As of March 31, 2000, the securities portfolio totaled $85,640,000. This
represents an increase of $7,896,000 or 10.16% from December 31, 1999 when the
portfolio totaled $77,744,000. Presently, $486,000 of the portfolio is
classified as held-to- maturity with the balance of the securities portfolio
being classified as available-for-sale. The net unrealized loss on securities
available-for-sale, net of tax effect totaled $(1,884,000) at March 31,2000
compared to $(1,835,000) at December 31,1999. This decrease is attributable to
continuing movement in interest rates and activity in the securities markets.
Deposits
Total deposits, which constitute the principal funding source of the Company's
assets have remained consistent during the first quarter of 2000 when compared
to year end 1999. The slight decrease is believed to reflect the seasonal cash
flows of the Company's deposit customers.
Borrowings
As reported previously, the Company uses arbitrage to generate additional
interest income. Funds are borrowed from the Federal Home Loan Bank and then
invested at a rate of return higher than the borrowing cost. At March 31, 2000,
total borrowings had increased $ 8,669,000 since December 31, 1999. Management
expects that it will continue to employ this type of arbitrage designed to
provide funds to grow interest earning assets.
Capital
At March 31, 2000, the Company had $20,217,000 in shareholder equity compared to
$19,895,000 at December 31,1999, which represents an increase of $322,000
or1.62%. The change in capital accounts resulted from first quarter earnings of
$713,000, an increase of $49,000 in the adjustment for net unrealized holding
losses on securities, a quarterly dividend declared of $195,000 and a decrease
in equity of $147,000 resulting from the stock buy back program. Since November
1998, when the Company announced a stock repurchase program to acquire up to
approximately 10% of its outstanding common stock, the Company has repurchased
63,229 shares, which represents approximately 4%.
The various capital ratios of the Company at March 31, 2000 and 1999 were:
(unaudited)
March 31, 2000 March 31, 1999
-------------- --------------
Total Risk-Based Capital 21.71% 21.56%
Tier 1 Risk-Based Capital 20.58% 20.27%
Leverage ratio 9.61% 9.86%
The capital ratios of the Company and Bank are adequate to continue to meet the
foreseeable capital needs of the institution. Prudent and effective utilization
of capital resources is likely to result in continued growth of the Company's
base earning assets and result in additional repurchases of common stock
designed to improve returns on equity and per share earnings performance.
17
Liquidity
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 implements and monitors compliance with
these policies regarding the Bank's asset liability management practices with
regard to interest rate risk, liquidity and capital. Interest rate risk is
defined as the sensitivity of the Company's income to short and long term
changes in interest rates. One of the primary financial objectives of the
Company is to manage its interest rate risk and control the sensitivity of the
Company's earnings to changes in interest rates in order to prudently improve
net interest income and interest rate margins and manage the maturities and
interest rate sensitivities of assets and liabilities. One method of monitoring
interest rate risk is a gap analysis which identifies the differences between
the amount of assets and the amount of liabilities which mature or reprice
during specific time frames and the potential effect on earnings of such
maturities or repricing opportunities. Model simulation is used to evaluate the
impact on earnings of potential changes in interest rates. "Rate shock" is also
used to measure earnings volatility due to immediate increase or decrease in
market rates up to 200 basis points. At March 31,2000 the Company's interest
rate position was slightly asset sensitive which would tend to result in
increased earnings should interest rates rise.
Forward Looking Statements
Certain statements contained in this quarterly report, including those contained
in Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere, are forward looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 and are thus prospective.
Such forward looking statements are subject to risks, uncertainties and other
factores which could cause actual results to differ materially from future
results expressed or implied by such statements. Such factors include, but are
not limited to changes in interest rates, regulation, competition and the local
and regional economy.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The main components of market risk for the Company are equity price risk,
interest risk and liquidity risk. The Company's stock is traded on the American
Stock Exchange and as a result the market price of its common stock may change
with market movements. 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 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. The Company's interest
rate risk and liquidity position has not significantly changed from year end
1999.
18
Part II - OTHER INFORMATION
Item 1. - Legal Proceedings-Not applicable
Item 2. - Changes in 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 and Reports on Form 8-K
A. Exhibits: Exhibit 27-Financial Data Schedule
B. Reports on Form 8-K
The Company filed a Form 8-K on March 1, 2000 to report that the
Company's Board of Directors declared a quarterly cash dividend of $.13
per share to be paid on April 28, 2000 to shareholders of record as of
March 31, 2000.
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: May 11, 2000 by: /s/ John F. Perotti
------------------------
John F. Perotti
President/Chief Executive Officer
Date: May 11, 2000 by: /s/ John F. Foley
---------------------
John F. Foley
Chief Financial Officer
20