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 September 30, 2007
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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
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Commission file number 0-24751
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 Identification No.)
Incorporation or Organization)
5 Bissell Street Lakeville Connecticut 06039
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(Address of principal executive offices) (Zip Code)
Registrants 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 [_]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. (See definition of "accelerated
filer and large accelerated Filer" in Rule 12b-2 of the Exchange Act). (Check
one):
Large Accelerated Filer [_] Accelerated Filer [_] Non-Accelerated Filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [_] No [X]
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 November 13, 2007, there were 1,685,021 shares outstanding.
SALISBURY BANCORP, INC. AND SUBSIDIARY
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements: 3
Condensed Consolidated Balance Sheets - September 30, 2007
(unaudited) and December 31, 2006 4
Condensed Consolidated Statements of Income - nine and three
months ended September 30, 2007 and 2006 (unaudited) 5
Condensed Consolidated Statements of Cash Flows -
nine months ended September 30, 2007 and 2006 (unaudited) 6
Notes to Condensed Consolidated Financial Statements (unaudited) 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 19
Item 4. Controls and Procedures 19
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 1A. Risk Factors 20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits 20
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)
September 30, 2007 and December 31, 2006
----------------------------------------
September 30, December 31,
2007 2006
---- ----
(unaudited)
ASSETS
Cash and due from banks $ 6,922 $ 8,988
Interest bearing demand deposits with other banks 149 569
Money market mutual funds 1,322 1,200
Federal funds sold 547 1,000
------------ ------------
Cash and cash equivalents 8,940 11,757
Investments in available-for-sale securities (at fair value) 153,234 156,493
Investments in held-to-maturity securities (fair values of $72 as of
September 30, 2007 and $75 as of December 31, 2006) 72 75
Federal Home Loan Bank stock, at cost 5,159 4,664
Loans held-for-sale 115 304
Loans, less allowance for loan losses of $2,455 as of September 30, 2007
and $2,474 as of December 31, 2006 262,195 252,464
Investment in real estate 75 75
Premises and equipment 6,875 6,135
Goodwill 9,825 9,509
Core deposit intangible 1,370 1,493
Accrued interest receivable 2,586 2,484
Cash surrender value of life insurance policies 3,646 3,555
Other assets 2,394 1,331
------------ ------------
Total assets $ 456,486 $ 450,339
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing
Interest-bearing $ 65,669 $ 70,502
Total deposits 247,419 243,084
------------ ------------
Due to broker 313,088 313,586
Federal Home Loan Bank advances 0 1,580
Other liabilities 95,143 87,093
Total liabilities 4,215 3,731
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Shareholders' equity: 412,446 405,990
------------ ------------
Common stock, par value $.10 per share; authorized 3,000,000 shares; issued
and outstanding, 1,685,021 shares at September 30,2007 and 1,683,341
shares at December 31, 2006 169 168
Paid-in capital 13,130 13,100
Retained earnings 35,038 33,603
Accumulated other comprehensive loss (4,297) (2,522)
------------ ------------
Total shareholders' equity 44,040 44,349
------------ ------------
Total liabilities and shareholders' equity $ 456,486 $ 450,339
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
4
SALISBURY BANCORP, INC. AND SUBSIDIARY
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(amounts in thousands, except per share data)
September 30, 2007 and 2006
(unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
2007 2006 2007 2006
------- ------- ------- -------
Interest and dividend income: $13,273 $11,471 $ 4,537 $ 3,999
Interest and fees on loans
Interest on debt securities: 4,094 3,967 1,337 1,405
Taxable 1,745 1,652 634 595
Tax-exempt 241 211 82 81
Dividends on equity securities 46 60 12 31
------- ------- ------- -------
Other interest
Total interest and dividend income 19,399 17,361 6,602 6,111
------- ------- ------- -------
Interest expense:
Interest on deposits 6,109 4,843 2,087 1,886
Interest on Federal Home Loan Bank advances 3,126 2,609 1,080 868
------- ------- ------- -------
Total interest expense 9,235 7,452 3,167 2,754
------- ------- ------- -------
Net interest and dividend income 10,164 9,909 3,435 3,357
------- ------- ------- -------
Provision for loan losses 0 0 0 0
------- ------- ------- -------
Net interest and dividend income after provision for
loan losses 10,164 9,909 3,435 3,357
------- ------- ------- -------
Noninterest income:
Trust department income 1,508 1,410 475 476
Loan commissions 22 80 9 35
Service charges on deposit accounts 544 527 183 168
Gain on sales of available-for-sale securities, net 222 294 42 233
Gain on sales of loans held-for-sale 246 290 79 60
Other income 757 638 272 241
------- ------- ------- -------
Total noninterest income 3,299 3,239 1,060 1,213
------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits 5,763 5,262 1,931 1,852
Occupancy expense 586 538 206 186
Equipment expense 584 586 214 205
Data processing 939 869 301 259
Insurance 121 95 47 32
Printing and stationery 216 183 72 54
Professional fees 500 303 161 123
Legal expense 167 94 41 31
Amortization of core deposit intangible 123 123 41 41
Other expense 1,026 877 387 318
------- ------- ------- -------
Total noninterest expense 10,025 8,930 3,401 3,101
------- ------- ------- -------
Income before income taxes 3,438 4,218 1,094 1,469
Income taxes 638 905 177 309
------- ------- ------- -------
Net income $ 2,800 $ 3,313 $ 917 $ 1,160
======= ======= ======= =======
Earnings per common share $ 1.66 $ 1.97 $ .54 $ .69
------- ------- ------- -------
Dividends per common share $ .81 $ .78 $ .27 $ .26
------- ------- ------- -------
The accompanying notes are an integral part of these consolidated financial statements.
5
SALISBURY BANCORP INC. AND SUBSIDIARY
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(amounts in thousands)
Nine months ended September 30, 2007 and 2006
(unaudited)
2007 2006
-------- --------
Cash flows from operating activities:
Net income $ 2,800 $ 3,313
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of securities, net 70 60
Gain on sales of available-for-sale securities, net (222) (294)
Provision for loan losses 0 0
Change in loans held-for-sale 189 (150)
Change in deferred loan costs, net (101) 0
Net decrease in mortgage servicing rights 89 46
Depreciation and amortization 403 406
Amortization of core deposit intangible 123 123
Accretion of fair value adjustment on deposits & borrowings (98) (102)
Amortization of fair value adjustment on loans 59 88
Decrease in interest receivable (112) (52)
Deferred tax benefit (1,085) (195)
Decrease in taxes receivable 317 256
Decrease (increase) in prepaid expenses 978 (476)
Increase in cash surrender value of insurance policies (91) (90)
Increase in income tax payable 254 0
Decrease (increase) in other assets 87 (74)
Increase (decrease) in accrued expenses 95 (475)
Increase in interest payable (60) 111
Decrease in other liabilities (130) (35)
Issuance of shares for Directors' fees 30 32
Decrease in unearned income on loans 4 (102)
Cash and cash equivalents acquired from New York Community Bank
net of expenses paid of $115 181 0
-------- --------
Net cash provided by operating activities 3,780 2,390
-------- --------
Cash flows from investing activities
(Purchase) redemption of Federal Home Loan Bank stock (495) 860
Purchases of available-for-sale securities (52,271) (61,650)
Proceeds from sales of available-for-sale securities 51,371 44,268
Proceeds from maturities of available-for-sale securities 0 6,797
Proceeds from maturities of held-to-maturity securities 3 71
Loan originations and principal collections, net (6,013) (15,207)
Purchase of loans (3,733) 0
Recoveries of loans previously charged-off 53 43
Capital expenditures (1,318) (159)
-------- --------
Net cash used in investing activities (12,403) (24,977)
-------- --------
The accompanying notes are an integral part of these consolidated financial statements.
6
SALISBURY BANCORP INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Nine months ended September 30, 2007 and 2006
(unaudited)
(continued)
2007 2006
--------- ---------
Cash flows from financing activities:
Net decrease in demand deposits, NOW and savings accounts (2,312) (6,957)
Net increase in time deposits 1,319 27,598
Federal Home Loan Bank advances 21,000 10,000
Principal payments on advances from Federal Home Loan Bank (16,404) (10,227)
Net change in short term advances from Federal Home Loan Bank 3,551 1,631
Dividends paid (1,348) (1,296)
--------- ---------
Net cash provided by financing activities 5,806 20,749
--------- ---------
Net decrease in cash and cash equivalents (2,817) (1,838)
Cash and cash equivalents at beginning of period 11,757 10,204
--------- ---------
Cash and cash equivalents at end of period $ 8,940 $ 8,366
========= =========
Supplemental disclosures:
Interest paid $ 9,393 $ 7,500
Income taxes paid 1,152 844
New York Community Bank Acquisition:
Cash and cash equivalents acquired $ 296,060
Deposits assumed 496,060
---------
Net assets acquired (200,000)
Acquisition costs 115,207
---------
Goodwill $ 315,207
The accompanying notes are an integral part of these consolidated financial statements.
7
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 nine months ended September 30,
2007 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2007. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's 2006 Annual Report on Form 10-K.
The year-end condensed balance sheet data derived from audited financial
statements 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 sources of
other comprehensive income are the net unrealized holding gain (loss) on
securities and the minimum pension liability adjustment.
Comprehensive Income
Nine months ended Three months ended
September 30, September 30,
2007 2006 2007 2006
------- ------- ------- -------
(amounts in thousands) (amounts in thousands)
Net income $ 2,800 $ 3,313 $ 917 $ 1,160
Net change in unrealized holding (losses) or
gains on securities and minimum pension
liability adjustment, net of tax during period (1,775) 1,365 967 3,112
------- ------- ------- -------
Comprehensive income $ 1,025 $ 4,678 $ 1,884 $ 4,272
======= ======= ======= =======
NOTE 3 - IMPACT OF NEW ACCOUNTING STANDARDS
-------------------------------------------
In February 2006, the Financial Accounting Standards Board (FASB) issued SFAS
No. 155, "Accounting for Certain Hybrid Instruments" (SFAS 155), which permits,
but does not require, fair value accounting for any hybrid financial instrument
that contains an embedded derivative that would otherwise require bifurcation in
accordance with SFAS 133. The statement also subjects beneficial interests
issued by securitization vehicles to the requirements of SFAS No. 133. The
statement is effective as of January 1, 2007. The adoption of SFAS 155 is not
expected to have a material impact on the Company's financial condition and
results of operations.
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of
Financial Assets- an amendment of FASB Statement No. 140 ("SFAS No. 156"). SFAS
156 requires any entity to recognize a servicing asset or servicing liability
each time it undertakes an obligation to service a financial asset by entering
into a servicing contract in specific situations. Additionally, the servicing
asset or servicing liability shall be initially measured at fair value; however,
an entity may elect the "amortization method" or "fair value method" for
subsequent balance sheet reporting periods. SFAS 156 is effective as of an
entity's first fiscal year beginning after September 15, 2006. The Company does
not expect this statement to have a material impact on its financial condition,
results of operations or cash flows.
8
In June 2006 the FASB issued Interpretation No. 48, "Accounting for Uncertainty
in Income Taxes - an interpretation of FASB Statement 109" (FIN 48). FIN 48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken, or expected to be
taken, in a tax return and provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition. FIN 48 is effective for fiscal years beginning after December 15,
2006. The adoption of FIN 48 did not have a material impact on the Company's
financial statements.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157). SFAS 157 defines fair value, establishes a framework for measuring fair
value under generally accepted accounting principles (GAAP) and enhances
disclosures about fair value measurements. SFAS 157 retains the exchange price
notion and clarifies that the exchange price is the price that would be received
for an asset or paid to transfer a liability (an exit price) in an orderly
transaction between market participants on the measurement date. SFAS 157 is
effective for the Company's consolidated financial statements for the year
beginning on January 1, 2008, with earlier adoption permitted. The Company does
not expect the adoption of this statement to have a material impact on its
financial condition and results of operations.
In September 2006, the FASB issued SFAS No. 158, "Employer's Accounting for
Defined Benefit Pension and other Postretirement Plans - an amendment of FASB
Statements No. 87, 88, 106 and 132 (R)" ("SFAS 158"). SFAS 158 requires 1) the
recognition of an asset or liability for the over-funded or under-funded status
of a defined benefit plan, 2) the recognition of actuarial gains and losses and
prior service costs and credits in other comprehensive income, 3) measurement of
plan assets and benefit obligations as of the employer's balance sheet date,
rather than at interim measurement dates as currently allowed, and 4) disclosure
of additional information concerning actuarial gains and losses and prior
service costs and credits recognized in other comprehensive income. This
statement is effective for financial statements with fiscal years ending after
December 15, 2006. The Company does not believe the adoption of this Statement
will have a material impact on the Company's financial position or result of
operations.
In September 2006, the FASB ratified the consensus reached by the Emerging
Issues Task force ("EITF") on Issue No. 06-4 "Accounting for Deferred
Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Arrangements," (EITF Issue 06-4). EITF 06-4 requires companies with an
endorsement split-dollar life insurance arrangement to recognize a liability for
future postretirement benefits. The effective date is for fiscal years beginning
after December 15, 2007, with earlier application permitted. Companies should
recognize the effects of applying this issue through either (a) a change in
accounting principle through a cumulative effect adjustment to retained earnings
or (b) a change in accounting principle through retrospective application to all
periods. The Company is currently evaluating and has not yet determined the
impact the new EITF is expected to have on its financial position, results of
operations or cash flow.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities including an amendment of FASB
Statement No. 115" (SFAS 159). SFAS 159 permits entities to choose to measure
many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. The objective is to improve
financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This Statement also establishes presentation and disclosure
requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities.
The new standard is effective at the beginning of the Company's fiscal year
beginning January 1, 2008, and early application may be elected in certain
circumstances. The Company is currently evaluating the impact the new standard
is expected to have on its financial position.
9
NOTE 4 - DEFINED BENEFIT PENSION PLAN
-------------------------------------
The following summarizes the net periodic benefit cost for the nine months and
three months ended September 30:
Nine Months Ended Three Months Ended
September 30, September 30,
2007 2006 2007 2006
---------------------- ----------------------
Components of net periodic benefit cost:
Service cost $ 328,305 $ 322,526 $ 109,435 $ 79,661
Interest cost 256,517 238,733 85,506 75,237
Expected return on plan assets (276,707) (221,699) (92,236) (78,866)
Amortization of:
Prior service cost 670 670 223 223
Actuarial loss 51,177 66,896 17,059 18,633
--------- --------- --------- ---------
Net periodic benefit cost $ 359,962 $ 407,126 $ 119,987 $ 94,888
========= ========= ========= =========
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* Graded table* Graded table* Graded table*
Expected return on plan assets 7.50% 7.25% 7.50% 7.25%
*5% at age 20 grading down to 3% at age 60 and beyond (roughly 3.25% on
average).
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 that is the holding company for Salisbury Bank and Trust Company
(the "Bank"). The Company's sole subsidiary is the Bank, which includes a Trust
and Investment Services Division, and operates eight (8) full service offices
located in the towns of Canaan, Lakeville, Salisbury and Sharon, Connecticut,
Sheffield and South Egremont, Massachusetts and Dover Plains, New York. 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 for providing personalized financial products and services to better
serve customers in the tri-state area. This discussion should be read in
conjunction with Salisbury Bancorp, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 2006.
RESULTS OF OPERATIONS
---------------------
Overview
--------
The Company's net income for the nine months ended September 30, 2007 was
$2,800,000. This compares to earnings of $3,313,000 for the same period in 2006.
Earnings per share for the nine months ended September 30, 2007 totaled $1.66
per share, which compared to earnings per share of $1.97 for the corresponding
period in 2006. The decrease in earnings is primarily attributable to an
increase in interest expense and additional staff to support new marketing
strategies, our growth and expansion into New York State. The Company's assets
at September 30, 2007 totaled $456,486,000 compared to total assets of
$450,339,000 at December 31, 2006. Deposits at September 30, 2007 totaled
$313,088,000 as compared to total deposits of $313,586,000 at December 31, 2006.
The Bank and the Company are "well capitalized". The Company's total risk based
capital ratio was 15.23%; the Tier 1 capital
10
ratio was 14.27% and the leverage ratio was 8.37%. The Board of Directors
declared a third quarter cash dividend of $.27 per common share, which was paid
on October 31, 2007 to shareholders of record as of September 28, 2007. This
compared to a cash dividend of $.26 per common share that was paid for the third
quarter of 2006. Year-to-date dividends total $.81 per common share outstanding
for this year. This compares to total year-to-date dividends of $.78 per common
share one year ago.
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 credit losses in the loan portfolio. Many factors influence
the amount of estimated 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."
NINE MONTHS ENDED SEPTEMBER 30, 2007
AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2006
Net Interest and Dividend Income
The Company's earnings are primarily dependent upon net interest and dividend
income, and to a lesser extent non-interest income. 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 and
investment services division, service charges and other fees related to deposit
and loan accounts and income from gains in securities transactions. 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)
Nine Months Ended September 30, 2007 2006
------- -------
Total Interest and Dividend Income
(financial statements) $19,399 $17,361
Tax Equivalent Adjustment 898 851
------- -------
Total Interest and Dividend Income
(on an FTE basis) 20,297 18,212
Total Interest Expense 9,235 7,452
------- -------
Net Interest and Dividend Income-FTE $11,062 $10,760
======= =======
Total interest and dividend income on a FTE basis for the nine months ended
September 30, 2007, when compared to the same period in 2006, increased
$2,085,000 or 11.45%. The increase was primarily attributable to generally
higher interest rates during the first nine months of 2007.
Interest expense on deposits for the first nine months of 2007 totaled
$6,109,000, an increase of $1,266,000 or 26.14%, which compared to $4,843,000
for the same period in 2006. This increase reflects generally higher interest
rates during the first nine months of 2007 and an increase in interest bearing
deposits. During the nine-month period ended September 30, 2007, interest
expense on Federal Home Loan Bank advances increased $517,000 or 19.82% to
$3,126,000. This increase in interest expense is primarily attributable to the
increased balance of Federal Home Loan Bank advances throughout the first nine
months of 2007. Total interest expense for the nine months ended September 30,
2007 was $9,235,000, an increase of $1,783,000 or 23.93% when compared to the
same period in 2006.
11
Overall, net interest and dividend income (on an FTE basis) increased $302,000
or 2.81% to $11,062,000 for the nine months ended September 30, 2007 when
compared to the same period in 2006.
Noninterest Income
------------------
Noninterest income totaled $3,299,000 for the nine months ended September 30,
2007. This is an increase of $60,000 or 1.85% compared to noninterest income of
$3,239,000 for the nine months ended September 30, 2006. Gains on sales of
available-for-sale securities, net totaled $222,000 for the first nine months of
2007 which compares to $294,000 for the corresponding period in 2006. This
decrease is primarily the result of the movement of market rates during the
quarter. Continuing growth of the trust and investment services division
resulted in an increase in trust income of $98,000 or 6.95% to $1,508,000 for
the first nine months of 2007, which compares to $1,410,000 for the same period
in 2006. This increase is primarily attributable to an increase in assets under
management. Other income increased by $119,000 when comparing the first nine
months of 2007 to the same period in 2006. This category of income primarily
consists of fees associated with transaction accounts, fees related to the
origination and servicing of mortgage loans and gains related to the sale of
mortgage loans.
Noninterest Expense
-------------------
Noninterest expense increased 12.26% for the first nine months of 2007 as
compared to the same period in 2006. Although there are some increases in
noninterest expenses that are attributable to normal volumes of business, much
of the overall increases in the noninterest expenses listed in the table below
reflect expenses associated with the Bank's entry into New York State through
the establishment of a branch office in Dover Plains, New York, which opened its
doors for business on August 1, 2007. The components of noninterest expense and
the changes in the period were as follows (amounts in thousands):
2007 2006 Change% Change
-------------------------------------------------------------------------------
Salaries and employee benefits $ 5,763 $ 5,262 $ 501 9.52
Occupancy expense 586 538 48 8.92
Equipment expense 584 586 (2) (.34)
Data processing 939 869 70 8.06
Insurance 121 95 26 27.37
Printing and stationery 216 183 33 18.03
Professional fees 500 303 197 65.02
Legal expense 167 94 73 77.66
Amortization of core deposit intangible 123 123 0 0
Other expense 1,026 877 149 16.99
------- ------- ------- -------
Total noninterest expense $10,025 $ 8,930 $ 1,095 12.62
======= ======= ======= =======
Income Taxes
------------
The income tax provision for the first nine months of 2007 totaled $638,000 in
comparison to $905,000 for the same nine-month period in 2006. Pretax income in
2007 was $3,438,000 and included tax-exempt income totaling $1,745,000. Pretax
income in 2006 was $4,218,000 and included tax-exempt income totaling
$1,652,000. The decrease in the income tax provision is primarily attributable
to a decrease in taxable income.
Net Income
----------
Overall, net income totaled $2,800,000 for the nine months ended September 30,
2007 and represents earnings of $1.66 per average share outstanding. This
compares to net income of $3,313,000 or $1.97 per average share outstanding for
the same period in 2006.
12
THREE MONTHS ENDED SEPTEMBER 30, 2007
AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2006
Net Interest and Dividend 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 September 30 2007 2006
------ ------
Total Interest and Dividend Income
(financial statements) $6,602 $6,111
Tax Equivalent Adjustment 327 307
------ ------
Total Interest and Dividend Income (on an FTE basis) 6,929 6,418
Total Interest Expense 3,167 2,754
------ ------
Net Interest and Dividend Income-FTE $3,762 $3,664
====== ======
Total interest and dividend income on an FTE basis for the three months ended
September 30, 2007 increased $511,000 or 7.96% compared to the same period in
2006. The increase was primarily attributable to an economic environment with
generally higher interest rates. Interest expense on deposits increased $201,000
or 10.66% for the quarter to $2,087,000 compared to $1,886,000 for the same
quarter in 2006. This increase is primarily the result of an economic
environment of higher interest rates coupled with an increase in interest
bearing deposits. The Bank's volume of Federal Home Loan Bank advances has
increased during the three month period ended September 30, 2007 when compared
to the corresponding period in 2006. Interest expense on these advances have
increased $212,000 or 24.42% and totaled $1,080,000 for the three months ended
September 30, 2007 compared to $868,000 for the corresponding period in 2006.
Total interest expense for the three months ending September 30, 2007 was
$3,167,000 compared to total interest expense for the same period in 2006 of
$2,754,000, an increase of $413,000 or 15.00%. This increase is a reflection of
an economic environment of higher interest rates and the result of increased
advances from the Federal Home Loan Bank. Overall, net interest and dividend
income (on a FTE basis) increased $98,000 or 2.67% to $3,762,000 for the
three-month period ended September 30, 2007 when compared to the corresponding
period in 2006.
Noninterest Income
------------------
Noninterest income totaled $1,060,000 for the three months ended September 30,
2007 as compared to $1,213,000 for the three months ended September 30, 2006.
This decrease of $153,000 or 12.61% is primarily attributable to fewer
opportunities to generate income from gains in securities and loan transactions.
Income from the trust and investment services division remained stable for the
third quarter of 2007 compared to the same period in 2006. Gains on sales of
available-for-sale securities, net totaled $42,000 for the third quarter of
2007. This compares to gains on sales of available-for-sale securities of
$233,000 for the corresponding period in 2006. This decrease is primarily the
result of the movement of market rates during the quarter. Other non-interest
income is primarily related to fees associated with transaction accounts and
fees related to the origination and servicing of mortgage loans and gains
related to the sale of mortgage loans. The volume of these transactions are
driven primarily by consumer demand, which results in variances from quarter to
quarter.
Noninterest Expense
-------------------
Non interest expense totaled $3,401,000 for the three month period ended
September 30, 2007 as compared to $3,101,000 for the same quarter in 2006, an
increase of $300,000 or 9.67%. Although there are some increases in noninterest
expenses that are attributable to normal volumes of business, as mentioned
previously, increases in the noninterest expenses listed in the table below are
primarily attributable to additional staffing, and expenses related to the
establishment of a new branch in New York State, which commenced operations on
August 1, 2007. The components of non-interest expense and the changes in the
quarter were as follows (amounts in thousands):
13
2007 2006 Change% Change
----------------------------------------------------------------------------
Salaries and employee benefits $1,931 $1,852 $ 79 4.27
Occupancy expense 206 186 20 10.75
Equipment expense 214 205 9 4.39
Data processing 301 259 42 16.22
Insurance 47 32 15 46.88
Printing and stationery 72 54 18 33.33
Professional fees 161 123 38 30.89
Legal expense 41 31 10 32.26
Amortization of core deposit intangible 41 41 0 0
Other expense 387 318 69 21.70
------ ------ ------ ------
Total non-interest expense $3,401 $3,101 $ 300 9.67
====== ====== ====== ======
Income Taxes
------------
The income tax provision for the three-month period ended September 30, 2007
totaled $177,000 in comparison to $309,000 for the same three-month period in
2006. The decrease in the income tax provision is attributable to a decrease in
taxable income.
Net Income
----------
Overall, net income totaled $917,000 for the three months ended September 30,
2007 and represents earnings of $.54 per average share outstanding. This
compares to net income of $1,160,000 for the same quarter in 2006, a decrease of
$243,000 or 20.95% and compares to earnings per average share outstanding of
$.69 for the same quarter in 2006.
FINANCIAL CONDITION
-------------------
Total assets at September 30, 2007 were $456,486,000, compared to $450,339,000
at December 31, 2006, an increase of 1.36%. The increase is primarily the result
of an increase in earning assets during the period.
Investment Securities
---------------------
The make up of the investment 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. The portfolio
does not include securities collateralized by pools of sub-prime mortgages.
During the nine months ended September 30, 2007, the investment portfolio,
including Federal Home Loan Bank stock, decreased $2,767,000 or 1.72% to
$158,465,000 from $161,232,000 at December 31, 2006.
Securities are classified in the portfolio as either securities
available-for-sale or securities held-to-maturity. Almost all securities in the
portfolio 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 September 30, 2007, the unrealized loss net of tax
was $2,999,000. This compares to an unrealized loss net of tax of $1,190,000 at
December 31, 2006. The unrealized losses in these securities are attributable to
changes in market interest rates. Management deems the securities that are
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.
The decrease in the portfolio is also a reflection of securities being sold and
called during the period with the proceeds being used to fund loan demand and
seasonal cash flow of transaction accounts.
Lending
-------
Total loans outstanding of $264,381,000 at September 30, 2007 compares to total
loans outstanding of $254,773,000 at December 31, 2006. This increase of
$9,608,000 or 3.77% includes a January 2007 maturity of $12,000,000 in Term
Federal Funds. Excluding this maturity, there is an increase in loans of
$21,608,000 or 8.90%. Competition for loans remains aggressive in the Bank's
market area, however, new business development coupled with an increase in loan
demand resulted in the increase.
14
The following table represents the composition of the loan portfolio comparing
September 30, 2007 to December 31, 2006:
September 30, 2007 December 31, 2006
------------------ -----------------
(amounts in thousands)
Commercial, financial and agricultural $ 18,722 $ 16,465
Real estate-construction and land
development 29,273 21,169
Real estate-residential 155,239 145,395
Real estate-commercial 51,617 50,859
Consumer 8,441 8,816
Term federal funds 0 12,000
Other 1,089 69
------------ ------------
264,381 254,773
Deferred costs, net 270 168
Unearned income (1) (3)
Allowance for loan losses (2,455) (2,474)
------------ ------------
Net Loans $ 262,195 $ 252,464
============ ============
Provisions and Allowance for Loan Losses
----------------------------------------
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 or reserve for
loan and lease losses through charges to earnings. No provisions for loan losses
for the first nine-month period of 2007 or the comparable period in 2006 were
warranted.
The Bank evaluates the adequacy of the allowance no less frequently than on a
quarterly 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 September 30, 2007. Such evaluations are based on assessments of credit
quality and "risk rating" of loans by senior management, which is reviewed by
the Bank's Loan Committee on a regular basis. Loans are initially risk rated
when originated. If there is deterioration in the credit, the risk rating is
adjusted accordingly.
The allowance also includes a component resulting from the application of the
measurement criteria of Statements of Financial Accounting Standards No. 114,
Accounting by Creditors for Impairment of a Loan ("SFAS 114"). Impaired loans
receive individual evaluation of the allowance necessary on a monthly basis.
Loans to be considered for impairment are defined in the Bank's Loan Policy as
commercial loans with balances outstanding of $100,000 or more and residential
real estate mortgages with balances of $300,000 or more. Such loans are
considered impaired when it is probable that the Bank will not be able to
collect all principal and interest due according to the terms of the note.
Any such commercial loan and/or residential mortgage will be considered impaired
under any of the following circumstances:
1. Non-accrual status;
2. Loans over 90 days delinquent;
3. Troubled debt restructures consummated after December 31,
1994;
4. Loans classified as "doubtful", meaning that they have
weaknesses, which make collection or liquidation in full,
based on currently existing facts, conditions, and values,
highly questionable and improbable.
The individual allowance for any impaired loan is based upon the present value
of expected future cash flows discounted at the loan's effective interest rate
or the fair value of the collateral if the loan is collateral dependent.
Specifically identifiable and quantifiable losses are immediately charged off
against the allowance.
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.
15
Credit card loans are 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 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.
Nonperforming loans, which include all loans that are on a nonaccrual status
along with loans that are 90 days or more past due and still accruing, are
closely monitored by management. At September 30, 2007, nonperforming loans
totaled $1,103,000 or 0.42% of total loans outstanding of $264,381,000. The
allowance for loan losses totaled $2,455,000 representing 222.57% of
nonperforming loans. Nonperforming loans totaled $964,000 or 0.38% of total
loans outstanding of $254,773,000 at December 31, 2006. The allowance for loan
losses totaled $2,474,000 at December 31, 2006 and represented 256.64% of
nonperforming loans. A total of $72,000 of loans were charged off by the Bank
during the nine months ended September 30, 2007. These charged-off loans
consisted primarily of consumer loans. This compares to loans charged off during
the nine-month period ended September 30, 2006 that totaled $89,000. A total of
$53,000 of previously charged-off loans was recovered during the nine month
period ended September 30, 2007. Recoveries for the same period in 2006 totaled
$43,000. 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 September 30, 2007 and December 31, 2006:
September 30, 2007 December 31, 2006
------------------ -----------------
(amounts in thousands)
Demand $ 65,669 $ 70,502
NOW 23,207 21,461
Money Market 54,297 57,015
Savings 48,234 44,246
Time 121,681 120,362
------------ ------------
Total Deposits $ 313,088 $ 313,586
============ ============
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 September 30, 2007, the Company had $95,143,000 in
outstanding advances from the Federal Home Loan Bank compared to $87,093,000 at
December 31, 2006. Management expects that it will continue this strategy of
supplementing deposit growth with advances from the Federal Home Loan Bank.
Off-Balance Sheet Arrangements
In the normal course of business, the Company enters into certain relationships
characterized as lending related off-balance sheet arrangements. These lending
commitments have various terms and are designed to accommodate the financial
needs of consumers, businesses and other entities. Many of these loan
commitments have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of these commitments are expected to expire
without being funded, the total commitment amounts do not necessarily represent
future liquidity requirements.
Loan commitments have credit risk essentially the same as that involved in
extending loans to customers. They are subject to normal credit approval
procedures and policies. Collateral is obtained based on management's assessment
16
of the customer's credit. The accompanying table summarizes the Company's off
balance sheet lending-related financial instruments by remaining maturity at
September 30, 2007:
(amounts in thousands)
By remaining maturity Less than 1 year 1-3 years 4-5 years After 5 years Total
--------------------------------------------------------------------------------------------------------------
Off balance sheet lending-related
Financial Instruments
Residential real estate related $ 6,196 $ 402 $ $ 24,870 $ 31,468
Commercial related 3,649 696 3,529 7,493 15,367
Consumer related 9,559 9,559
Standby letters of credit 13 13
--------------------------------------------------------------------------------------------------------------
Total $ 9,845 $ 1,111 $ 3,529 $ 41,922 $ 56,407
--------------------------------------------------------------------------------------------------------------
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. 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 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 September 30, 2007, the
Company maintains a liability sensitive (negative gap) position. This would
suggest that during a period of declining interest rates, the Company would be
in a better position to increase net interest income. To the contrary, during a
period of rising interest rates, a negative gap would result in a decrease in
interest income. The level of interest rate risk at September 30, 2007 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
fluctuations 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 September 30, 2007, the Company
had approximately $55,365,000 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 September 30, 2007, the Company had $44,040,000 in shareholders' equity, a
decrease of 0.70% when compared to December 31, 2006 shareholders' equity
totaling $44,349,000. Several components contributed to the change since
December 31, 2006. Earnings for the nine-month period ended September 30, 2007
totaled $2,800,000. Securities in the investment portfolio that are classified
as available-for-sale are adjusted to fair value monthly and the unrealized
17
losses or gains are not included in earnings, but are reported as a net amount
(less expected tax) as a separate component of capital until realized. Market
fluctuations of fair value of the securities portfolio for the period ending
September 30, 2007 resulted in other comprehensive loss net of tax totaling
$2,999,000. The application of SFAS No. 158, as defined in Note 3, resulted in
comprehensive income net of tax of $1,298,000 for the nine month period ended
September 30, 2007.
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 $1,440,000. The
Company issued 840 new shares of common stock under the terms of the Director
Stock Retainer Plan that resulted in an increase in capital of $30,000. 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 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 September 30, 2007, the Company had a total risk
based capital ratio of 15.23% compared to 15.53% at December 31, 2006.
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.
Impact of Inflation and Changing Prices
---------------------------------------
The Company's consolidated financial statements are prepared in conformity with
generally accepted accounting principles that 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 a material factor 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;
18
(b) changes in the legislative and regulatory environment that negatively
impacts 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.
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 periods. 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 as of September 30, 2007 has
not significantly changed from year-end 2006.
Item 4. Controls and Procedures.
The Company's Chief Executive Officer and Chief Financial Officer concluded
that, based upon an evaluation as of September 30, 2007, 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 quarter ended September 30, 2007 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.
19
Part II - OTHER INFORMATION
Item 1. - Legal Proceedings. Not applicable
Item 1A. Risk Factors. 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
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: November 13, 2007 by: /s/ John F. Perotti
----------------- --------------------
John F. Perotti
Chief Executive Officer
Date: November 13, 2007 by: /s/ John F. Foley
----------------- ------------------
John F. Foley
Chief Financial Officer
20