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, 1998
[ ]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
(State of Incorporation)
52-1948274
(I.R.S. Employer Identification No.)
24 North Main Street,
Berlin, Maryland 21811
Address of principal executive offices
(410) 641-1700
(Issuer's 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 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 May 8, 1998.
Transitional Small Business
Disclosure Format (check one)
YES NO X
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
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)
March 31, December 31,
1998 1997
Assets
Cash and due
from banks $11,153,852 $ 9,150,979
Federal fund sold 21,201,342 20,207,703
Interest-bearing
deposits 1,229,000 1,229,000
Investment
securities available
for sale 2,690,129 2,573,450
Investment securities
held to maturity
(approximate fair
value of $59,384,421
and $63,457,503) 59,229,913 63,249,260
Loans, less allowance
for credit losses
of $2,075,729 and
$2,080,798 145,652,705 147,190,832
Premises
and equipment 4,140,071 4,152,389
Accrued interest
income 1,456,243 1,790,423
Intangible assets 88,181 107,476
Deferred income taxes 112,195 104,061
Other assets 51,318 137,039
$ 247,004,949 $ 249,892,612
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing $ 30,654,269 $ 33,093,588
Interest-bearing 171,644,717 173,699,610
202,298,986 206,793,198
Accrued interest
payable 440,925 433,344
Accrued income
taxes 526,302 21,527
Obligation under
capital lease - 61,720
Other liabilities 11,757 5,806
203,277,970 207,315,595
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 25,274,342 24,120,666
43,374,342 42,220,666
Net unrealized gain
on securities
available for sale 352,637 356,351
43,726,979 42,577,017
$ 247,004,94 9 $ 249,892,612
Calvin B. Taylor Bankshares,
Inc. and Subsidiary
Consolidated Statements
of Income (unaudited)
For the three months
ended March 31,
1998 1997
Interest and
dividend revenue
Loans,
including fees $ 3,085,908 $ 3,162,369
U.S. Treasury
securities 775,779 659,099
State and
municipal
securities 92,966 147,360
Federal funds
sold 341,748 205,274
Deposits with
banks 17,808 17,961
Equity securities 3,322 3,234
Total interest and
dividend revenue 4,317,531 4,195,297
Interest expense
Deposit interest 1,495,239 1,451,139
Other - -
Total interest
expense 1,495,239 1,451,139
Net interest
income 2,822,292 2,744,158
Provision for
credit losses - -
Net interest
income after
provision for
credit losses 2,822,292 2,744,158
Other operating
revenue
Service charges
on deposit
accounts 142,732 140,993
Miscellaneous
revenue 54,770 41,527
Total other
operating revenue 197,502 182,520
Other expenses
Salaries and
employee benefits 690,462 625,721
Occupancy 116,284 99,207
Furniture and
equipment 151,293 153,059
Other operating 276,031 228,128
Total other
expenses 1,234,070 1,106,115
Income before
income taxes 1,785,724 1,820,563
Income taxes 632,048 634,570
Net income $ 1,153,676 $ 1,185,993
Earnings per
common share $ 1.42 $ 1.46
Calvin B. Taylor Bankshares, Inc.
and Subsidiary
Consolidated Statements
of Cash Flows (unaudited)
For the Three Months Ended
March 31,
1998 1997
Cash flows
from operating
activities
Interest received $ 4,592,244 $ 4,269,012
Other revenue
received 196,870 166,363
Cash paid for
operating expenses (1,142,832) (1,023,787)
Interest paid (1,487,658) (1,473,173)
Taxes paid (32,212) (81,197)
2,126,412 1,857,218
Cash flows
from investing
activities
Cash paid for
premises,
equipment,
intangibles,
and construction
in progress (68,180) (516,339)
Net customer loans
repaid (advanced) 1,538,127 (3,097,467)
Redemption of
matured securities 18,385,000 10,682,000
Investment in
securities (14,428,915) -
Redemption of
certificates, net
of purchases - 194,000
5,426,032 7,262,194
Cash flows from
financing activities
Net change in
time deposits 3,645,041 (13,521,042)
Net change in
other deposits (8,139,253) 7,361,510
Payment on
capital lease (61,720) -
Dividends paid - -
(4,555,932) (6,159,532)
Net increase
(decrease) in
cash 2,996,512 2,959,880
Cash and
equivalents at
beginning of
period 29,358,682 23,802,923
Cash and
equivalents at
end of period $ 32,355,194 $ 26,762,803
Reconciliation of net income
to net cash provided
from operating activities
Net income $ 1,153,676 $ 1,185,993
Adjustments
Depreciation and
amortization 85,287 85,072
Loss on sale of
securities - -
Deferred tax
provision (5,798) -
Provision for
loan losses - -
Security discount
accretion, net of
premium amortization (59,467) (113,072)
Decrease (increase)
in accrued interest
receivable and other
assets 434,407 165,549
Increase (decrease)
in accrued interest
payable and other
liabilities 518,307 533,676
$ 2,126,412 $ 1,857,218
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, 1998
and 1997 are not necessarily indicative of the
results that may be expected for the years ending
December 31, 1998 and 1997. For further
information, refer to the financial statements
and footnotes thereto for the Registrant's fiscal
period ended December 31, 1997.
2. 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.
3. Allowance for Loan Losses
The Bank regulators have requested that the
portion of the allowance for loan losses related
to off-balance sheet items be included with other
liabilities. The Company has allocated $8,014 of
its allowance for loan losses to unfunded loan
commitments and letters of credit.
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 as a bank holding company. Stock
of a Maryland state bank with the name Calvin B.
Taylor Banking Company (the "Bank") was exchanged
in February, 1996 for the outstanding stock of
the Company.
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 in the process of obtaining final 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
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.
Because of decreased loan demand, the Bank has shifted
funds to more liquid investments causing the first
quarter, 1998 liquidity ratio to be higher than normal
for the period. 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 46.68% for the first quarter of
1998 compared to a rate of 42.71% for the first quarter
of 1997.
At March 31, 1997, the Bank's 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 13.00%.
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.
Tier one capital ratios of the Bank, based on average
assets for the quarters ended March 31, 1998 and 1997 were
15.71% and 16.48%, respectively. Both are substantially
in excess of regulatory minimum requirements.
Results and Plan of Operation
Net income for the three months ended March 31, 1998,
was $1,153,676, or $1.42 per share, compared to
$1,185,993, or $1.46 per share, for the first quarter
of 1997. The primary reason net income
decreased is due to a decrease in other operating expense.
Salaries and benefits have increased 10.35% when comparing
the first quarter of 1998 to the same period in 1997 as a
result of salary increases and additional staff. The Bank
has added staff in anticipation of opening a bank in Delaware.
Other operating expenses have also increased $47,903 or
21.00% from $228,128 for the first quarter of 1997 to $276,031
for the quarter ended March 31, 1998. During the first
quarter of 1998, a branch of the Bank was robbed resulting
in a loss of $18,102. Federal and State regulatory
assessments have increased by $14,375 during the first quarter
of 1998 compared to the comparable quarter in 1997.
The Bank reviewed its loan portfolio and determined the
allowance, at 1.41% of gross loans, was adequate at
March 31, 1998. At December 31, 1997, the allowance was
also 1.41% of gross loans. At March 31, 1998, there
were no nonaccruing loans and only .28% of the portfolio
was delinquent ninety days or more.
The Bank employed ninety six full time equivalent employees
during the first quarter of 1998. 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 1996 and 1997, the Company purchased two parcels
of land in Delaware. The Company expects to open full
service bank on one of the parcels during the second or
third quarter of 1998.
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 1998.
Item 5 Other information
Not applicable.
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits
2. Proxy Statement dated April 22, 1998,
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, 1998.
Calvin B. Taylor Bankshares, Inc.
Financial Data Schedule
Item
March 31,
Number
1998
9-03(1)
Cash and due from banks
11,153,852
9-03(2)
Interest-bearing deposits
1,229,000
9-03(3)
Federal funds sold
21,201,342
9-03(4)
Trading account assets
9-03(6)
Investment and mortgage-backed securities
held for sale
2,690,129
9-03(6)
Investment and mortgage-backed securities
held to maturity - carrying value
59,229,913
9-03(6)
Investment and mortgage-backed securities
held to maturity - market value
59,384,421
9-03(7)
Loans
147,728,434
9-03(7)(2)
Allowance for losses
2,075,729
9-03(11)
Total assets
247,004,949
9-03(12)
Deposits
202,298,986
9-03(13)
Short-term borrowings
-
9-03(15)
Other liabilities
978,984
9-03(16)
Long-term debt
9-03(19)
Preferred stock - mandatory redemption
9-03(20)
Preferred stock - no mandatory redemption
9-03(21)
Common stock
810,000
9-03(22)
Other stockholders' equity
42,916,979
9-03(23)
Total liabilities and stockholders' equity
247,004,949
Calvin B. Taylor Bankshares, Inc.
Financial Data Schedule
(continued)
Three Months Ended
Guide
March 31,
Number
1998
9-04(1)
Interest and fees on loans
3,085,908
9-04(2)
Interest and dividends on investments
872,067
9-04-(4)
Other interest income
359,556
9-04-(5)
Total interest income
4,317,531
9-04-(6)
Interest on deposits
1,495,239
9-04-(9)
Total interest expense
1,495,239
9-04-(10)
Net interest income
2,822,292
9-04-(11)
Provision for loan losses
-
9-04-(13)(h)
Investment securities gains/(losses)
-
9-04-(14)
Other expenses
1,234,070
9-04(15)
Income/loss before income tax
1,785,724
9-04(17)
Income/loss before extraordinary items
1,785,724
9-04(18)
Extraordinary items, less tax
-
9-04(19)
Cumulative change in accounting principles
-
9-04(20)
Net income or loss
1,153,676
9-04(21)
Earnings per share - basic
1.42
9-04(21)
Earnings per share - diluted
1.42
I.B.5
Net yield on interest earning assets
5.03
%
III.C.1(a)
Loans on nonaccrual
-
III.C.1(b)
Accruing loans past due 90 days or more
415,024
III.C.1(c)
Troubled debt restructuring
-
III.C.2
Potential problem loans
-
IV.A.1
Allowance for loan loss - beginning of period
2,080,798
IV.A.2
Total chargeoffs
4,639
IV.A.3
Total recoveries
7,584
IV.A.4
Allowance for loan loss - end of period
2,083,743
IV.B.1
Loan loss allowance allocated to domestic loans
2,083,743
IV.B.2
Loan loss allowance allocated to foreign loans
-
IV.B.3
Loan loss allowance - unallocated
-
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,153,852
<SECURITIES> 22,430,342
<RECEIVABLES> 0
<ALLOWANCES> 2,075,729
<INVENTORY> 0
<CURRENT-ASSETS> 1,707,937
<PP&E> 1,456,243
<DEPRECIATION> 85,287
<TOTAL-ASSETS> 247,004,949
<CURRENT-LIABILITIES> 202,298,986
<BONDS> 0
0
0
<COMMON> 810,000
<OTHER-SE> 42,916,979
<TOTAL-LIABILITY-AND-EQUITY> 247,004,949
<SALES> 3,085,908
<TOTAL-REVENUES> 4,317,531
<CGS> 1,495,000
<TOTAL-COSTS> 2,729,070
<OTHER-EXPENSES> 1,234,070
<LOSS-PROVISION> 2,083,743
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,785,724
<INCOME-TAX> 1,153,676
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,153,676
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.42
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