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