SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
__________________ TO _________________
Commission File Number: 0001003986
CALVIN B. TAYLOR BANKSHARES, INC.
(Exact name of issuer as specified in its charter)
Maryland 52-1948274
State or other jurisdiction of incorporation or organization
(I.R.S. Employer Identification
No.)
24 North Main Street, Berlin, Maryland 21811
(Address of principal executive offices and zip code)
(410) 641-1700
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the
Exchange Act during the past 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 ________
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the
latest practicable date.
The registrant has 810,000 shares of common stock ($1.00 par) outstanding as
of July 18, 1997.
Transitional Small business Disclosure Format (check one) Yes______ NO X
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Calvin B. Taylor Bankshares, Inc. and Subsidiary
Form 10-QSB
Index
Part I - Financial Information
Page
Item 1 Financial Statements
Consolidated Statements of Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operation 7-8
Part II - Other Information
Item 1 Legal Proceedings 9
Item 2 Changes in Securities 9
Item 3 Defaults Upon Senior Securities 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 9
Item 6 Exhibits and Reports on Form 8-K 9
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Part I - Financial Information
Consolidated Statements of Condition
(unaudited)
June 30, 1997 December 31, 1996
Assets
Cash and due from banks $15,739,565 $ 9,802,923
Federal funds sold 21,772,315 14,000,000
Interest-bearing deposits 1,229,00 1,423,000
Investment securities available
for sale 2,305,150 2,360,400
Investment securities
held to maturity
(approximate fair value of
$50,944,145
and $62,789,427) 50,853,359 62,610,242
Loans, less allowance
for credit lossesof
$2,072,399 and $2,040,475 151,635,818 149,059,660
Premises and equipment 3,900,349 3,500,851
Accrued interest income 1,685,885 1,626,619
Intangible assets 37,127 66,812
Deferred income taxes 176,062 154,323
Other assets 93,249 36,135
Total $ 249,427,879 $ 244,640,965
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing $ 36,229,856 $ 31,837,470
Interest-bearing 171,501,934 172,460,336
207,731,790 204,297,806
Accrued interest payable 417,767 428,451
Accrued income taxes 49,941 81,197
Obligation under
capital lease 61,720 126,611
Other liabilities 11,429 7,827
208,272,647 204,941,892
Stockholders' equity
Common stock, par value
$1 per share
authorized 2,000,000 shares,
issued and
outstanding 810,000 shares 810,000 810,000
Capital surplus 17,290,000 17,290,000
Retained earnings 22,863,475 21,372,763
40,963,475 39,472,763
Net unrealized gain
on securities available
for sale 191,757 226,310
41,155,232 39,699,073
$ 249,427,879 $ 244,640,965
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Statements of Income (unaudited)
For the three months ended For the six months ended
June 30, June 30,
1997 1996 1997 1996
Interest and dividend revenue
Loans, including fees
$ 3,251,793 $ 3,086,602 $ 6,414,162 $ 6,022,696
U.S. Treasury securities 605,752 458,720 1,264,851 1,056,004
State and municipal securities 123,315 141,086 270,675 244,628
Federal funds sold 250,217 271,792 455,491 636,537
Deposits with banks 16,429 25,528 34,390 52,739
Equity securities 3,322 3,234 6,556 6,402
Total interest and dividend
revenue 4,250,828 3,986,962 8,446,125 8,019,006
Interest expense
Deposit interest 1,438,367 1,481,600 2,889,506 2,994,665
Other 1,829 - 1,829 3,798
Total interest expense 1,440,196 1,481,600 2,891,335 2,998,463
Net interest income 2,810,632 2,505,362 5,554,790 5,020,543
Provision for credit losses 25,000 25,000 25,000 25,000
Net interest income after
provision for credit losses 2,785,632 2,480,362 5,529,790 4,995,543
Other operating revenue
Service charges on
deposit accounts 156,371 146,912 297,364 275,539
Miscellaneous revenue 95,568 83,244 137,095 120,143
Total other operating revenue 251,939 230,156 434,459 395,682
Other expenses
Salaries and employee benefits 774,824 696,808 1,400,545 1,302,601
Occupancy 114,094 89,067 213,301 191,415
Furniture and equipment 61,734 53,761 214,793 210,354
Other operating 279,430 227,491 507,558 441,205
Total other expenses 1,230,082 1,067,127 2,336,197 2,145,575
Income before income taxes 1,807,489 1,643,391 3,628,052 3,245,650
Income taxes 692,772 567,451 1,327,342 1,157,880
Net income $ 1,114,717 $ 1,075,940 $ 2,300,710 $ 2,087,770
Earnings per
common share $ 1.38 $ 1.33 $ 2.84 $ 2.58
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Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended
June 30, June 30,
1997 1996
Cash flows from operating activities
Interest received $ 8,201,905 $ 7,818,346
Other revenue received 397,887 425,763
Cash paid for operating expenses (2,162,450) (2,011,754)
Interest paid (2,902,019) (3,015,331)
Taxes paid (1,358,598) (1,779,407)
2,176,725 1,437,617
Cash flows from investing activities
Cash paid for premises, equipment, intangibles,
and construction in progress (560,498) (378,083)
Net loans to customers (2,601,158) (10,029,335)
Redemption of matured securities 18,342,000 21,670,000
Investment in securitie (6,401,205) (18,183,498)
Redemption of certificates, net of
purchases 194,000 293,000
8,973,139 (6,627,916)
Cash flows from financing activities
Net change in customer deposits 3,433,984 (2,232,150)
Payment on capital lease (64,891) (66,923)
Dividends paid (810,000) (810,000)
2,559,093 (3,109,073)
Net increase (decrease) in cash 13,708,957 (8,299,372)
Cash and equivalents
at beginning of period 23,802,923 42,028,482
Cash and equivalents at end of period $ 37,511,880 $ 33,729,110
Reconciliation of net income to
net cash provided
from operating activities
Net income $ 2,300,710 $ 2,087,770
Adjustments
Depreciation and amortization 170,145 164,620
Loss on sale of securities - -
Deferred tax provision - -
Provision for loan losses 25,000 25,000
Security discount accretion,
net of premium amortization (184,954) (77,752)
Decrease (increase) in accrued interest
receivable and other assets (95,838) (154,522)
Increase (decrease) in accrued interest
payable and other liabilities (38,338) (607,499)
$ 2,176,725 $ 1,437,617
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Notes to Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for the
interim financial information and with the instructions to Form 10-QSB and
Regulation S-X of the Securities and Exchange Commission. Accordingly, they
do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurri
uarters and six months ended June 30, 1997 and 1996 are not necessarily
indicative of the results that may be expected for the years ending December
31, 1997 and 1996. For further information, refer to the financial
statements and footnotes thereto for the Registrant's fiscal period ended
December 31, 1996.
2. New Accounting Principles
During the first quarter of 1997, the Company adopted Financial Accounting
Standards Board Statement No. 125 "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." Under this principle,
financial assets are recognized based on the assets the Company controls and
removed from the balance sheet when control is
surrendered. Liabilities are recorded when incurred.
3. Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from banks and overnight investments in federal funds
sold.
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Part I Financial Information
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion of the financial condition and results of
operations of the Registrant (the Company) should be read in conjunction
with the Company's financial statements and related notes and other
statistical information included elsewhere herein.
General
The Company was incorporated in Maryland on October 31, 1995. The Company was
organized to become a bank holding company and to own and control all of the
capital stock of a Maryland state bank with the name Calvin B. Taylor
Banking Company (the "Bank"). Final
regulatory and stockholder approval, to exchange the outstanding shares of the
Bank for shares of the Company, was received in February, 1996.
The Bank was established in 1890 and incorporated in 1907. The Company
currently
engages in no business other than owning and managing the Bank. It is
seeking regulatory approval to charter a second bank in the state of Delaware.
Financial Condition, Liquidity and Sources of Capital
The major sources of liquidity of the Company arise from loan repayments,
short-term investments, including federal funds sold, and an increase in
core deposits. During the first quarter of the year, the Company's
liquidity declines as businesses in the trade area of the Bank borrow funds
to buy stock for the Summer tourist season. The Bank typically experiences
a decline in deposits since these businesses are using their deposits to
meet their cash flow needs. Generally, this situation reverses during
osits from tourists and Summer residents. Throughout the second and third
quarters the Bank maintains its high liquidity level. Funds from seasonal
deposits are invested in short-term U.S. Treasury Bills and Federal Funds.
Average liquid assets (cash and amounts due from banks, interest bearing
deposits in other banks, federal funds sold, and investment securities)
compared to average deposits were 41.30% for the second quarter of 1997
compared to 42.71% for the first quarter of 1997 and 43.11% for the s
At June 30, 1997, the Bank's interest rate sensitivity, as measured by gap
analysis, showed the Company was asset-sensitive with a one-year cumulative
gap, as a percentage of interest-earning assets, of 14.58%. Generally
asset-sensitivity indicates that assets reprice quicker than liabilities and
in a rising rate environment net interest income typically increases.
Conversely, if interest rates decrease, net interest income would decline.
The Company has classified its demand mortgage and commercial loans
e changes since the decision to call the loans and change the rates rests
with the Company.
The leverage ratios of the Bank, based on average assets for the quarters
ended June 30, 1997 and 1996 were 17.30% and 16.95%, respectively. Both are
substantially in excess of
regulatory minimum requirements.
Results and Plan of Operation
Net income for the three months ended June 30, 1997, was $1,114,717,
or $1.38 per share, compared to $1,075,940, or $1.33 per share, for the
three months ended June 30, 1996 which contributed to the year to date
increase in net income of $212,940 from $2,087,770 or $2.58 per share in
1996 to $2,300,710 or $2.84 in 1997. The primary reason net income
increased is from an increase in net interest income as funds have shifted
from lower yielding investments to loans.
The Bank reviewed its loan portfolio and determined the allowance, at 1.35%
of gross loans, was adequate at June 30, 1997. At December 31, 1996, the
allowance was 1.35% of gross loans. At June 30, 1997, no loans were
nonaccruing, and only .21% of the portfolio was delinquent ninety days or more.
The Bank employed one hundred full time equivalent employees during the
second quarter of 1997. The Bank expects to maintain this level through the
Summer and then reduce its staff in the Fall by several part time positions.
Part time employees are utilized during the Summer to handle the increased
work associated with the increase in seasonal tourist deposits. The Company
has no employees outside those hired by the Bank.
The Bank conducts a general commercial banking business in its service area,
of Worcester County emphasizing the banking needs of individuals and small-
to medium-sized businesses and professional concerns. The Bank offers a
full range of deposit services that are typically available in most banks
and savings and loan associations, including checking accounts, NOW
accounts, savings accounts and other time deposits of various types ranging
from daily money market accounts to longer-term certificates of dep
The Bank also offers a full range of short- to medium-term commercial and
personal loans. The Bank also originates demand mortgage loans and real
estate construction and acquisition loans. Loans originated to date are
anticipated to be held in the Bank's portfolio. Other bank services include
cash management services, safe deposit boxes, travelers checks, direct
deposit of payroll and social security checks, and automatic drafts for
various accounts. The Bank is associated with the MAC network of autom
offers MasterCard and VISA credit card services through a correspondent bank
as an agent for the Bank.
During the second quarter of 1996, the Company purchased land in Delaware.
During the first quarter of 1997, the Company exercised an option on a
second Delaware location. The Company plans to start a Delaware bank which
it expects to open in late 1997 or early 1998.
Plans for this expansion are in the preliminary stages. The Company cannot
assure its success in entering Delaware. If unsuccessful, the Company will
sell all land held in Delaware. The Company also has an option to purchase
property in Pocomoke, Maryland.
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Part II Other Information
Item 1 Legal Proceedings
Not applicable
Item 2 Changes in Securities
Not applicable
Item 3 Defaults Upon Senior Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
The annual meeting of the stockholders was held on May 7, 1997. The only
matters submitted to a vote were the items listed in the proxy statement.
Stockholders voted on all matters as recommended by the Board of Directors
in the proxy materials.
Item 5 Other information
Not applicable.
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits
2. Proxy Statement dated December 26, 1996 is incorporated by reference.
b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended June 30, 1997.
- -9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned,thereunto duly authorized.
Calvin B. Taylor Bankshares, Inc.
Date: _________________ By: /s/ Reese F. Cropper, Jr.
Reese F. Cropper, Jr.
President and CEO
Date: _________________ By: /s/ William H. Mitchell
William H. Mitchell
Chief Financial Officer
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<PERIOD-END> JUN-30-1997
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<SECURITIES> 53,249,295
<RECEIVABLES> 21,772,315
<ALLOWANCES> 2,072,399
<INVENTORY> 153,708,217
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<CURRENT-LIABILITIES> 207,731,790
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<COMMON> 810,000
<OTHER-SE> 540,857
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<CGS> 1,440,196
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