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 September 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 October 31, 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
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Calvin B. Taylor Bankshares, Inc. and Subsidiary
Part I - Financial Information
Consolidated Statements of Condition
(unaudited)
Calvin B. Taylor Bankshares, Inc. and Subsidiary
September 30, December 31,
1997 1996
Assets
Cash and due from banks $ 10,829,957 $ 9,802,923
Federal funds sold 22,280,403 14,000,000
Interest-bearing deposits 1,229,000 1,423,000
Investment securities available for sale 2,406,176 2,360,400
Investment securities held to maturity
(approximate fair value of $67,160,054
and $62,789,427) 66,969,689 62,610,242
Loans, less allowance for credit losses
of $2,058,567 and $2,040,475 146,624,077 149,059,660
Premises and equipment 4,175,505 3,500,851
Accrued interest income 1,495,209 1,626,619
Intangible assets 34,491 66,812
Deferred income taxes 151,079 154,323
Other assets 103,071 36,135
$ 256,298,657$244,640,965
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing $ 36,152,266 $ 31,837,470
Interest-bearing 176,981,133 172,460,336
213,133,399 204,297,806
Accrued interest payable 429,609 428,451
Accrued income taxes 99,764 81,197
Obligation under capital lease 61,720 126,611
Other liabilities 4,874 7,827
213,729,366 204,941,892
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 24,215,568 21,372,763
42,315,568 39,472,763
Net unrealized gain on securities
available for sale
253,723 226,310
42,569,291 39,699,073
$ 256,298,657 $ 244,640,965
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Statements of Income (unaudited)
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Statements of Income (unaudited)
For the three months For the nine months
ended ended
September 30, September 30,
1997 1996 1997 1996
Interest and dividend revenue
Loans, including fees $ 3,193,087 $ 3,129,303 $ 9,607,249 $9,151,999
U.S. Treasury securities 740,258 738,112 2,005,109 1,794,116
State and municipal securities 115,465 151,648 386,140 396,276
Federal funds sold 454,173 398,911 909,664 1,035,448
Deposits with banks 17,345 21,505 51,735 74,244
Equity securities 3,322 3,234 9,878 9,636
Total interest and
dividend revenue 4,523,650 4,442,713 12,969,775 12,461,719
Interest expense
Deposit interest 1,534,663 1,554,252 4,424,169 4,548,917
Other - - 1,829 3,798
Total interest expense 1,534,663 1,554,252 4,425,998 4,552,715
Net interest income 2,988,987 2,888,461 8,543,777 7,909,004
Provision for credit losses - 25,000 25,000 50,000
Net interest income after
provision for credit losses 2,988,987 2,863,461 8,518,777 7,859,004
Other operating revenue
Service charges
on deposit accounts 155,407 136,643 452,771 412,182
Miscellaneous revenue 73,630 72,575 210,725 192,718
Total other operating revenue 229,037 209,218 663,496 604,900
Other expenses
Salaries and employee benefits 638,798 598,455 2,039,343 1,901,056
Occupancy 156,851 138,703 370,152 330,118
Furniture and equipment 6 279,563 265,370
Other operating 301,488 316,902 809,046 758,107
Total other expenses 1,161,907 1,109,076 3,498,104 3,254,651
Income before income taxes 2,056,117 1,963,603 5,684,169 5,209,253
Income taxes 704,023 701,788 2,031,365 1,859,668
Net income $ 1,352,094 1,261,815 3,652,804 3,349,585
Earnings per common share $ 1.67 1.56 4.51 4.14
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Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended
September 30, September 30,
1997 1996
Cash flows from operating activities
Interest received $ 12,803,403 $ 12,245,519
Other revenue received 613,425 604,900
Cash paid for operating expenses (3,243,010) (3,003,802)
Interest paid (4,424,840) (4,564,631)
Taxes paid (2,026,802) (2,390,158)
3,722,176 2,891,828
Cash flows from investing activities
Cash paid for premises, equipment,
intangibles, and construction
in progress (917,244) (440,974)
Net customer loans repaid (advanced 2,410,583 (9,344,780)
Redemption of matured securities 27,672,000 36,615,000
Investment in securities (31,734,780) (49,909,702)
Redemption of certificates,
net of purchases 194,000 491,000
(2,375,441) (22,589,456)
Cash flows from financing activities
Net change in customer deposits 8,835,593 15,731,222
Payment on capital lease (64,891) (66,923)
Dividends paid (810,000) (810,000)
7,960,702 14,854,299
Net increase (decrease) in cash 9,307,437 (4,843,329)
Cash and equivalents at
beginning of period 23,802,923 42,028,482
Cash and equivalents at end of period 33,110,360 37,185,153
Reconciliation of net income
to net cash provided
from operating activities
Net income $ 3,652,804 $ 3,349,585
Adjustments
Depreciation and amortization 256,307 247,361
Loss on sale of securities - -
Deferred tax provision (14,004) -
Provision for loan losses 25,000 50,000
Security discount accretion,
net of premium amortization (297,782) (245,921)
Decrease (increase) in accrued
interest receivable and other assets 83,079 29,721
Increase (decrease) in accrued interest
payable and other liabilities 16,772 (538,918)
$ 3,722,176 $ 2,891,828
-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 and nine months ended September 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.
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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 aMaryland 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 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 from banks, interest bearing deposits in other banks, federal
funds sold, and investment securities) compared to average deposits were
39.76% for the third quarter of 1997 compared to 41.30% for the second
quarter of 1997 and 48.29% for the third quarter of 1996. Management
considers the liquidity level is adequate. At September 30, 1997, the
Company'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 16.89%. 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 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 the Company.
The leverage ratios of the Bank, based on average assets for the quarters
ended September 30, 1997 and 1996 were 16.45% and 16.09%, respectively. Both
are substantially in excess of regulatory minimum requirements.
Results and Plan of Operation
Net income for the three months ended September 30, 1997, was $1,352,094, or
$1.67 per share, compared to $1,261,815, or $1.56 per share, for the three
months ended September 30, 1996 which contributed to the year to date
increase in net income of $303,219 from $3,349,585 or $4.14 per share in 1996
to $3,652,804 or $4.51 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.
Results and Plan of Operation (continued)
The Bank reviewed its loan portfolio and determined the allowance, at 1.39%
of gross loans, was adequate at September 30, 1997. At December 31, 1996,
the allowance was 1.35% of gross loans. At September 30, 1997, no loans were
nonaccruing, and only .19% of the portfolio was delinquent ninety days or
more.
The Bank employed ninety three full time equivalent employees during the
third quarter of 1997. The Bank expects to maintain this level through the
fourth quarter. 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 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 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.
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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
Not applicable
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 September 30, 1997.
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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.
Reese F. Cropper, Jr.
President and CEO
Date: _________________ By: /s/ William H. Mitchell
William H. Mitchell
Chief Financial Officer
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