Lakeville-based Salisbury Bank continued to see loan growth in the third quarter as the bank saw its earnings increase year-over-year by 25 percent.

Salisbury Bank’s third quarter net income available to common shareholders was $4.3 million, or $0.75 per basic common share, $3.4 million, or $0.60 per basic common share, for the third quarter of 2021. Net income in the second quarter of 2022 had been $3.8 million, or $0.67 per basic common share.

“As we approach the end of the year, we are cautiously optimistic that the business environment will remain favorable despite rising interest rates, persistent inflation and volatile financial markets,” Richard J. Cantele Jr., Salisbury’s president and CEO, said in the bank’s third quarter earnings statement. “We are focused on prudently extending credit and enhancing the Bank’s profitability while continuing to provide outstanding customer service.”

The bank’s gross loans totaled $1.2 billion, up $41.4 million, or 3.6 percent, from the second quarter, and $120.2 million, or 11.2 percent, from the third quarter of 2021. Excluding PPP loans, the bank saw loans increase by $43.8 million, or 3.8 percent, from the second quarter and $160.4 million, or 15.6 percent, from the third quarter of 2021.

Cantele said in the statement that the credit quality of the bank’s loan portfolio had improved during the third quarter.

Salisbury’s total impaired and potential problem loans decreased $2.7 million in the quarter to $11.2 million or 0.94 percent of gross loans, compared to $32.8 million, or 3.04 percent of gross loans, on Dec. 31 and $45.7 million, or 4.27 percent of gross loans, in the third quarter of 2021. The bank attributed the improvement to management’s decision to upgrade the internal risk rating on certain hospitality-related loans that had been downgraded due to concerns over COVID-19.

“These businesses have demonstrated a return to pre-pandemic levels of activity and liquidity, warranting the improvement in risk rating,” the bank said.

The bank had third quarter deposits of $1.3 billion, down $11 million, or 0.8 percent, from Dec. 31 and up $35.6 million, or 2.8 percent, from the third quarter of 2021.

Salisbury’s total assets were $1.51 billion at the end of the third quarter, down slightly from the end of 2021, when total assets were about 1.53 billion.

Salisbury said in the earnings statement that it could have a future financial exposure related to a trust account that was terminated in 2020. The bank said it discovered in July that $1 million that had been distributed from the trust should have been retained in the account. Salisbury said it has engaged legal counsel and is evaluating its potential financial exposure.

“At this time, management believes that Salisbury’s exposure is not yet known or knowable and could potentially range from zero to approximately $1.0 million depending upon the facts and circumstances and the scope of Salisbury’s insurance coverage,” the bank said.