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, 2000
[ ] 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
(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 3,240,000 shares of common stock ($1.00 par) outstanding
as of July 31, 2000.
Transitional Small Business Disclosure Format (check one) YES
NO X
-1-
Calvin B. Taylor Bankshares, Inc. and Subsidiaries
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
Accountants' Review Report 7
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operation 8-9
Part II - Other Information
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
Item 3 Defaults Upon Senior Securities 10
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports on Form 8-K 10
-2-
Calvin B. Taylor Bankshares, Inc. and Subsidiaries
Part I - Financial Information
Consolidated Statements of Condition
(unaudited)
June 30, December 31,
2000 1999
Assets
Cash and due from banks $ 13,230,883 $ 18,546,576
Federal funds sold 23,966,299 15,877,383
Interest-bearing deposits 784,000 983,000
Investment securities available for sale 3,736,953 3,402,096
Investment securities held to maturity
(approximate fair value of $68,433,472
and $89,352,513 68,933,670 89,921,935
Loans, less allowance for credit losses
of $2,111,772 and $2,082,031 165,288,793 152,000,504
Premises and equipment 5,746,630 5,858,928
Accrued interest income 1,946,491 1,928,735
Deferred income taxes 179,234 222,986
Other assets 130,406 178,655
$ 283,943,359 $ 288,920,798
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing $ 42,646,169 $ 39,151,702
Interest-bearing 188,752,356 199,574,150
231,398,525 238,725,852
Accrued interest payable 409,119 424,042
Notes payable 237,832 246,413
Accrued income taxes - 56,490
Other liabilities 4,162 247,667
232,049,638 239,700,464
Stockholders' equity
Common stock, par value $1 per share
authorized 10,000,000 shares, issued and
outstanding 3,240,000 shares in 2000 and
1,620,000 in 1999 3,240,000 1,620,000
17,290,000 17,290,000
Retained earnings 31,012,792 30,030,340
51,542,792 48,940,340
Net unrealized gain on securities
available for sale 350,929 279,994
51,893,721 49,220,334
$ 283,943,359 $ 288,920,798
Calvin B. Taylor Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income (unaudited)
For the three months ended For the six months ended
June 30, June 30,
2000 1999 2000 1999
Interest and dividend revenue
Loans, including fees $3,386,255 $3,013,855 $6,650,015 $5,955,682
U.S. Treasury and Agency securities 799,047 953,156 1,752,879 1,854,349
State and municipal securities 96,356 143,170 202,662 270,872
Federal funds sold 380,430 281,054 680,937 601,186
Deposits with banks 10,402 15,089 22,338 31,384
Equity securities 5,708 4,577 14,815 8,969
Total interest and dividend revenue 4,678,198 4,410,901 9,323,646 8,722,442
Interest expense
Deposit interest 1,397,301 1,407,424 2,825,493 2,899,710
Other 3,605 - 8,497 -
Total interest expense 1,400,906 1,407,424 2,833,990 2,899,710
Net interest income 3,277,292 3,003,477 6,489,656 5,822,732
Provision for credit losses 41,000 4,355 83,080 5,055
Net interest income after
provision for credit losses 3,236,292 2,999,122 6,406,576 5,817,677
Other operating revenue
Service charges on deposit accounts 187,640 193,480 362,073 366,249
Miscellaneous revenue 124,447 100,172 193,409 153,795
Total other operating revenue 312,087 293,652 555,482 520,044
Other expenses
Salaries and employee benefits 818,945 761,557 1,543,568 1,486,459
Occupancy 140,310 105,810 310,622 209,837
Furniture and equipment 93,701 90,795 330,549 212,637
Other operating 484,173 400,899 794,053 908,140
Total other expenses 1,537,129 1,359,061 2,978,792 2,817,073
Income before income taxes 2,011,250 1,933,713 3,983,266 3,520,648
Income taxes 704,925 633,883 1,380,814 1,176,806
Net income $1,306,325 $1,299,830 $2,602,452 $2,343,842
Basic earnings per share $ 0.40 $ 0.40 $ 0.80 $ 0.72
Calvin B. Taylor Bankshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
For the six months ended
June 30,
2000 1999
Cash flows from operating activities
Interest received $ 9,322,123 $ 8,426,849
Other revenue received 572,728 481,633
Cash paid for operating expenses (2,735,723) (2,510,240)
Interest paid (2,848,913) (2,951,340)
Taxes paid (1,437,305) (953,588)
2,872,910 2,493,314
Cash flows from investing activities
Cash paid for premises, equipment, intangibles,
and construction in progress (340,108) (134,198)
Net customer loans repaid (advanced) (13,371,369) (6,539,444)
Redemption of matured securities 31,115,000 19,635,000
Investment in securities (10,363,137) (29,324,635)
Equipment sales proceeds 423 -
Redemption of certificates, net of purchases 199,000 100,000
7,239,809 (16,263,277)
Cash flows from financing activities
Net change in time deposits (2,686,390) (137,679,222)
Net change in other deposits (4,640,937) 140,723,108
Payment on capital lease and mortgage obligation (12,168) -
(7,339,495 3,043,886
Net increase (decrease) in cash 2,773,223 (10,726,077)
Cash and equivalents at beginning of period 34,423,959 45,495,379
Cash and equivalents at end of period $ 37,197,182 34,769,302
Reconciliation of net income to net cash provided
from operating activities
Net income $ 2,602,452 $ 2,343,842
Adjustments
Depreciation and amortization 239,725 155,015
Charitable donation of property - 128,806
Provision for loan losses 83,080 5,055
Security discount accretion, net of premium
amortization 16,233 (129,761)
Decrease (increase) in accrued interest
receivable and other assets (510) (11,925)
Increase (decrease) in accrued interest
payable and other liabilities (68,070) 2,282
$ 2,872,910 $ 2,493,314
Calvin B. Taylor Bankshares, Inc. and Subsidiaries
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
neccessary for a fair presentation have been included. Operating results of
the six months ended June 30, 2000 and 1999 are not neccessarily indicative of
the reulsts that may be expected for the years ending December 31, 2000 and
1999. For further information, refer to the financial statements and
footnotes thereto for the Registrant's fiscal period ended December 31, 1999.
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. Comprehensive Income
Comprehensive income consists of::
Six months ended June 30,
2000 1999
Net Income $2,602,452 $2,343,842
Unrealized gain (loss) on investment securities
available for sale net of income taxes 70,935 (188,144)
Comprehensive income $2,673,387 $2,155,698
Calvin B. Taylor Bankshares, Inc. and Subsidiaries
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 was exchanged in February, 1996 for the outstanding
stock of the Company. A second bank was chartered as a Delaware state bank
with the name Calvin B. Taylor Bank of Delaware.
The Maryland bank was established in 1890 and incorporated in 1907 while
the Delaware bank was chartered in 1997, opening late during the second
quarter of 1998. The Company currently engages in no business other than
owning and managing the Banks.
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 Banks receive seasonal deposits from tourists and summer residents.
Throughout the second and third quarters the Banks maintain a 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 47.53% for the
second quarter of 2000 compared to 51.22% for the first quarter of 2000
and 52.83% for the second quarter of 1999. During the first six months ofm
2000, the liquidity of the Company has decreased as management has shifted
funds from investment securities to loans. Earnings should increase as
funds are shifted from lower yielding securities to loans. Management
monitors its liquidity regularly.
At June 30, 2000, 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 20.33%.
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. Both banks have classified their 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 cumulative
gap declined primarily due to the shift from demand loans to investment
securities with longer terms while money market accounts, now accounts,
and savings accounts, which are considered immediately repriceable, have
increased.
Tier one risk-based capital ratios of the Company as of June 30, 2000 and
1999 were 35.41% and 39.65%, respectively. Both are substantially in excess
of regulatory minimum requirements.
Results and Plan of Operation
This following discussion contains certain forward-looking statements
within the meaning of and made pursuant to the safe harbor provisions of
the Private Litigation Securities Reform Act of 1995.
Net income for the three months ended June 30, 2000, was $1,306,325 or $.40
per share compared to $1,299,830 or $.40 per share for the second quarter of
1999. Year to date net income increased $258,610 or $.08 per share from
$2,343,842 or $.72 per share in 1999 to $2,602,452 or $.80
per share in 2000. The $666,924 increase in net interest income, offset
by the $218,697 increase in occupancy and equipment expenses and $204,008
increased taxes, was the primary reason the net interest income increased
year to date.
Net interest income increased $273,815 for the second quarter of 2000
compared to the second quarter of 1999 and $666,924 for the first half of
2000 compared to the comparable period in 1999 as the Company has shifted
funds from investment securities to loans. The increased yield on Federal
Funds Sold has also contributed to this increase.
Occupancy and furniture and equipment expenses have increased due to the
relocation of the Delaware bank in the second quarter of 1999 from a
temporary trailer to a permanent, fully furnished building and the
relocation of the downtown Pocomoke branch to a new facility. The Company
recently consolidated a second Pocomoke branch into this new branch.
Management expects to offset the lease of the abandoned branch by subletting
the location. Although the Company's current data processing equipment is
meeting the needs of the banks, it is nearing the end of its economic life.
The Company expects to replace its mainframe computer in the first half of
2001 and expects equipment depreciation and expense to increase with this
replacement.
The Company's other operating expense decreased $114,087 during the first
half of 2000 compared to the first six months of 1999. During the first
quarter of 1999, the Company made a charitable donation of property, with a
book value of $128,806. No comparable transactions have occurred during
2000.
The Company reviewed its consolidated loan portfolio and determined the
allowance, at 1.26% of gross loans, was adequate as of June 30, 2000. At
December 31, 1999, the allowance was 1.35% of gross loans. At June 30, 2000,
there were no nonaccruing loans and .26% of the portfolio was delinquent
ninety days or more.
The Banks employed one hundred three full time equivalent employees as of
June 30, 2000. The Maryland bank hires seasonal employees during the summer.
The Company employs no employees outside those hired by the Banks.
Net interest income of the company is one of the most important factors in
evaluating the financial performance of the Company. The Company uses
interest sensitivity analysis to determine the effect of rate changes.
Net interest income is projected over a one-year period to determine the
effect of an increase or decrease in the prime rate of 100 basis points.
If prime were to decrease one hundred basis points, the Company would
experience a negligible decrease of net interest income if all assets
and liabilities maturing within that period were adjusted for the rate
change. The sensitivity analysis does not consider the likelihood of
these rate changes nor whether management's reaction to this rate change
would be to reprice its loans and deposits.
Results and Plan of Operation (continued)
The Banks conduct general commercial banking businesses in their service
areas, of Worcester County, Maryland and Sussex County, Delaware, while also
emphasizing the banking needs of individuals and small- to medium-sized
businesses and professional concerns. The Banks offer 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 Banks also offer a full range of short- to medium-term commercial and
personal loans. The Banks originate demand mortgage loans and real estate
construction and acquisition loans. Loans originated to date are
anticipated to be held in the portfolios of the originating Banks.
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 Company is associated with the
MAC network of automated teller machines that may be used by Bank customers
throughout Maryland and other regions. The Banks offer MasterCard and VISA
credit card services through a correspondent bank as an agent for the Banks.
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 Company held its annual meeting on May 3, 2000, during which the items
detailed in the proxy statement dated February 8, 2000, were approved. This
includes the reelection of the Board of Directors.
Item 5 Other information
Not applicable.
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits
2. Proxy Statement dated February 8, 2000, 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, 2000.
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:8/1/00 By: /s/ Reese F. Cropper, Jr.
Reese F. Cropper, Jr.
President and CEO
Date: 8/1/00 By: /s/ William H. Mitchell
William H. Mitchell
Chief Financial Officer
Calvin B. Taylor Bankshares, Inc.
Financial Data Schedule
Item June 30,
Number 2000
9-03(1) Cash and due from banks 13,230,883
9-03(2) Interest-bearing deposits 784,000
9-03(3) Federal funds sold 23,966,299
9-03(4) Trading account assets
9-03(6) Investment and mortgage-backed securities
held for sale 3,736,953
9-03(6) Investment and mortgage-backed securities
held to maturity - carrying value 68,933,670
9-03(6) Investment and mortgage-backed securities
held to maturity - market value 68,433,472
9-03(7) Loans 167,400,565
9-03(7)(2) Allowance for losses 2,111,772
9-03(11) Total assets 283,943,359
9-03(12) Deposits 231,398,525
9-03(13) Short-term borrowings -
9-03(15) Other liabilities 413,281
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 3,240,000
9-03(22) Other stockholders' equity 48,653,721
9-03(23) Total liabilities and stockholders' equity 283,943,359
Calvin B. Taylor Bankshares, Inc.
Financial Data Schedule
(continued)
Six Months Ended
Guide June 30,
Number 2000
9-04(1) Interest and fees on loans 6,650,015
9-04(2) Interest and dividends on investments 1,970,356
9-04-(4) Other interest income 703,275
9-04-(5) Total interest income 9,323,646
9-04-(6) Interest on deposits 2,825,493
9-04-(9) Total interest expense 2,833,990
9-04-(10) Net interest income 6,489,656
9-04-(11) Provision for loan losses 83,080
9-04-(13)(h)Investment securities gains/(losses) -
9-04-(14) Other expenses 2,978,792
9-04(15) Income/loss before income tax 3,983,266
9-04(17) Income/loss before extraordinary items 3,983,266
9-04(18) Extraordinary items, less tax -
9-04(19) Cumulative change in accounting principles -
9-04(20) Net income or loss 2,602,452
9-04(21) Earnings per share - basic 0.80
9-04(21) Earnings per share - diluted 0.80
I.B.5 Net yield on interest earning assets 5.06
III.C.1(a) Loans on nonaccrual -
III.C.1(b) Accruing loans past due 90 days or more 619,082
III.C.1(c) Troubled debt restructuring -
III.C.2 Potential problem loans -
IV.A.1 Allowance for loan loss - beginning of period 2,082,031
IV.A.2 Total chargeoffs 56,771
IV.A.3 Total recoveries 3,432
IV.A.4 Allowance for loan loss - end of period 2,111,772
IV.B.1 Loan loss allowance allocated to
domestic loans 2,111,772
IV.B.2 Loan loss allowance allocated to foreign loans -
IV.B.3 Loan loss allowance - unallocated -
