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 March 31, 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 of incorporation) (I.R.S. Employer
Identification No.)
24 North Main Street, Berlin, Maryland 21811
(Address of principal executive offices
(410) 641-1700
(Issuers telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
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 issuers 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 May 7, 1997.
Transitional Small Business Disclosure Format (check one) YES
NO X
- -1-
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 Managements 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
- -2-
Calvin B. Taylor Bankshares, Inc. and
Subsidiary
Part I - Financial Information
Consolidated Statements of Condition
(unaudited)
March 31,
December
31,
1997
1996
Assets
Cash and due from banks
$
11,007,194
$
9,802,923
Federal funds sold
15,755,609
14,000,000
Interest-bearing deposits
1,229,000
1,423,000
Investment securities available for sale
2,247,660
2,360,400
Investment securities held to maturity
(approximate fair value of $52,086,907
and $62,789,427)
52,041,234
62,610,242
Loans, less allowance for credit losses
of $2,042,025 and $2,040,475
152,157,127
149,059,660
Premises and equipment
3,936,690
3,500,851
Accrued interest income
1,439,832
1,626,619
Intangible assets
39,764
66,812
Deferred income taxes
197,894
154,323
Other assets
77,929
36,135
$
240,129,933
$
244,640,965
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing
$
31,541,927
$
31,837,470
Interest-bearing
166,596,347
172,460,336
198,138,274
204,297,806
Accrued interest payable
406,417
428,451
Accrued income taxes
639,651
81,197
Obligation under capital lease
126,611
126,611
Other liabilities
5,083
7,827
199,316,036
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
22,556,836
21,372,763
40,656,836
39,472,763
Net unrealized gain on securities
available for sale
157,061
226,310
40,813,897
39,699,073
$
240,129,933
$
244,640,965
- -3-
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Statements of Income (unaudited)
For the three months
ended
March 31,
1997
1996
Interest and dividend revenue
Loans, including fees
$
3,162,369
$
2,936,094
U.S. Treasury securities
659,099
597,284
State and municipal securities
147,360
103,542
Federal funds sold
205,274
364,745
Deposits with banks
17,961
27,211
Equity securities
3,234
3,168
Total interest and
dividend revenue
4,195,297
4,032,044
Interest expense
Deposit interest
1,451,139
1,513,065
Other
- -
3,798
Total interest expense
1,451,139
1,516,863
Net interest income
2,744,158
2,515,181
Provision for credit losses
- -
- -
Net interest income
after
provision for credit
losses
2,744,158
2,515,181
Other operating revenue
Service charges on deposit
accounts
140,993
128,627
Miscellaneous revenue
41,527
36,899
Total other operating
revenue
182,520
165,526
Other expenses
Salaries and employee benefits
625,721
605,793
Occupancy
99,207
102,348
Furniture and equipment
153,059
156,593
Other operating
228,128
213,714
Total other expenses
1,106,115
1,078,448
Income before income taxes
1,820,563
1,602,259
Income taxes
636,490
590,429
Net income
$
1,184,073
$
1,011,830
Earnings per common share
$
1.46
$
1.25
-4-
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows (unaudited)
Three Months Ended
March 31,
March 31,
1997
1996
Cash flows from operating activities
Interest received
$
4,269,012
$
3,948,666
Other revenue received
166,363
181,857
Cash paid for operating expenses
(1,023,787)
(1,026,037)
Interest paid
(1,473,173)
(1,521,431)
Taxes paid
(81,197)
(594,597)
1,857,218
988,458
Cash flows from investing activities
Cash paid for premises, equipment, intangibles,
and construction in progress
(516,339)
(49,703)
Net loans to customers
(3,097,467)
(3,667,329)
Redemption of matured securities
10,682,000
9,325,000
Investment in securities
0
(4,169,061)
Redemption of certificates, net of purchases
194,000
293,000
7,262,194
1,731,907
Cash flows from financing activities
Net change in customer deposits
(6,159,532)
(9,811,817)
Payment on capital lease
0
(66,923)
Dividends paid
- -
- -
(6,159,532)
(9,878,740)
Net increase (decrease) in cash
2,959,880
(7,158,375)
Cash and equivalents at beginning of period
23,802,923
42,028,482
Cash and equivalents at end of period
$
26,762,803
$
34,870,107
Reconciliation of net income to net cash provided
from operating activities
Net income
$
1,185,993
$
1,011,830
Adjustments
Depreciation and amortization
85,072
82,036
Loss on sale of securities
- -
- -
Deferred tax provision
- -
- -
Provision for loan losses
- -
- -
Security discount accretion, net of premium
amortization
(113,072)
(73,440)
Decrease (increase) in accrued interest
receivable and other assets
165,549
(23,688)
Increase (decrease) in accrued interest
payable and other liabilities
533,676
(8,280)
$
1,857,218
$
988,458
-5-
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 recurring
accruals) considered necessary for a fair presentation have been
included. Operating results of the quarters ended March 31, 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.
- -6-
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 stockholder 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
Companys 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 the second quarter of the year as the
businesses start repaying loans, and the Bank receives seasonal deposits
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 form banks,
interest bearing deposits in other banks, federal funds sold, and
investment securities) compared to average deposits were 42.71% for the
first quarter of 1997 compared to a rate of 46.19% for the first quarter
of 1996.
At March 31, 1997, the Banks interest rate sensitivity, as
measured by gap analysis, showed the Bank was asset-sensitive with a
one-year cumulative gap, as a percentage of interest-earning assets, of
14.88%. 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 Bank has classified its demand
mortgage and commercial loans as immediately repriceable. Unlike loans
tied to prime, these rates do not necessarily change as prime changes
since the decision to call the loans and change the rates rests with
management.
The leverage ratios of the Bank, based on average assets for the
quarters ended March 31, 1997 and 1996 were 17.63% and 17.06%,
respectively. Both are substantially in excess of regulatory minimum
requirements.
Results and Plan of Operation
Net income for the three months ended March 31, 1997, was
$1,185,993, or $1.46 per share, compared to $1,011,830, or $1.25 per
share, for the first quarter of 1996. The primary reason net income
increased is from an increase in net interest income as a result of
increased loan volume.
- -7-
Results and Plan of Operation (continued)
The Bank reviewed its loan portfolio and determined the allowance,
at 1.32% of gross loans, was adequate at March 31, 1997. At December
31, 1996, the allowance was 1.35% of gross loans. At March 31, 1997,
there were no nonaccruing loans and only .18% of the portfolio was
delinquent ninety days or more.
The Bank employed ninety one full time equivalent employees during
the first quarter of 1997. The Bank hires seasonal employees during the
summer. The Company employs 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 deposit.
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 automated teller machines that may be
used by Bank customers throughout Maryland and other regions. The Bank
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.
- -8-
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
No matters were submitted to stockholders during the first
quarter of 1997.
Item 5 Other information
Not applicable.
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits
2. Proxy Statements/Prospectus dated
December 26, 1995 is incorporated by reference.
b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter
ended March 31, 1997.
- -9-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Calvin B. Taylor Bankshares,
Inc.
Date: _________________ By: /s/ Reese F. Cropper,
Jr.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,007,194
<SECURITIES> 71,273,503
<RECEIVABLES> 150,115,102
<ALLOWANCES> 2,042,025
<INVENTORY> 0
<CURRENT-ASSETS> 1,757,339
<PP&E> 3,936,690
<DEPRECIATION> 82,436
<TOTAL-ASSETS> 240,131,853
<CURRENT-LIABILITIES> 198,506,036
<BONDS> 0
0
0
<COMMON> 810,000
<OTHER-SE> 40,815,817
<TOTAL-LIABILITY-AND-EQUITY> 240,131,853
<SALES> 4,195,297
<TOTAL-REVENUES> 4,377,817
<CGS> 1,451,139
<TOTAL-COSTS> 2,557,254
<OTHER-EXPENSES> 1,106,115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0,451,139
<INCOME-PRETAX> 1,820,563
<INCOME-TAX> 634,570
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,185,993
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.46
</TABLE>
