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, 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 May 5, 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
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Calvin B. Taylor Bankshares, Inc. and Subsidiaries
Part I - Financial Information
Consolidated Statements of Condition
(unaudited)
March December 31,
2000 1999
Assets
Cash and due from banks $ 11,220,283 $ 18,546,576
Federal funds sold 27,317,902 15,877,383
Interest-bearing deposits 883,000 983,000
Investment securities available for sale 3,617,799 3,402,096
Investment securities held to maturity
(approximate fair value of $68,151,948
and $89,352,513) 68,802,062 89,921,935
Loans, less allowance for credit losses
of $2,076,437 and $2,082,031 160,190,811 152,000,504
Premises and equipment 5,780,923 5,858,928
Accrued interest income 1,684,542 1,928,735
Deferred income taxes 180,805 222,986
Other assets 147,209 178,655
$ 279,825,336 $ 288,920,798
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing $ 36,578,810 $ 39,151,702
Interest-bearing 191,186,708 199,574,150
227,765,518 238,725,852
Accrued interest payable 414,712 424,042
Notes payable 241,547 246,413
Accrued income taxes 670,297 56,490
Other liabilities 148,363 247,667
229,240,437 239,700,464
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
Capital surplus 17,290,000 17,290,000
Retained earnings 29,706,467 30,030,340
50,236,467 48,940,340
Net unrealized gain on securities
available for sale 348,432 279,994
50,584,899 49,220,334
$ 279,825,336 $ 288,920,798
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Calvin B. Taylor Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income (unaudited)
For the three months ended
March 31,
2000 1999
Interest and dividend revenue
Loans, including fees $ 3,263,760 $ 2,941,827
U.S. Treasury securities 953,832 901,193
State and municipal securities 106,306 127,702
Federal funds sold 300,507 320,132
Deposits with banks 11,936 16,295
Equity securities 9,107 4,392
Total interest and dividend revenue 4,645,448 4,311,541
Interest expense
Deposit interest 1,428,192 1,492,286
Other 4,892 -
Total interest expense 1,433,084 1,492,286
Net interest income 3,212,364 2,819,255
Provision for credit losses 42,080 700
Net interest income after
provision for credit losses 3,170,284 2,818,555
Other operating revenue
Service charges on deposit accounts 174,433 172,769
Miscellaneous revenue 68,962 53,623
Total other operating revenue 243,395 226,392
Other expenses
Salaries and employee benefits 724,623 724,902
Occupancy 170,312 104,027
Furniture and equipment 236,848 121,842
Other operating 309,880 507,241
Total other expenses 1,441,663 1,458,012
Income before income taxes 1,972,016 1,586,935
Income taxes 675,889 542,923
Net income $ 1,296,127 $ 1,044,012
Basic earnings per share $ 0.40 $ 0.32
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Calvin B. Taylor Bankshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
For the three months ended
March 31,
2000 1999
Cash flows from operating activities
Interest received $ 4,889,441 $ 4,600,666
Other revenue received 259,339 224,651
Cash paid for operating expenses (1,317,518) (1,248,026)
Interest paid (1,442,414) (1,513,409)
Taxes paid (62,082) (3,481)
2,326,766 2,060,401
Cash flows from investing activities
Cash paid for premises, equipment,
intangibles,and construction in
progress (126,779) (88,971)
Net customer loans repaid (advanced) (8,232,387) (4,594,872)
Redemption of matured securities 21,120,000 14,185,000
Investment in securities (105,010) (16,373,427)
Equipment sales proceeds 423
Redemption of certificates,
net of purchases 100,000 -
12,756,247 (6,872,270)
Cash flows from financing activities
Net change in time deposits (2,156,531) (93,352)
Net change in other deposits (8,803,803) (3,172,305)
Payment on capital lease and
mortgage obligation (8,453) -
(10,968,787) (3,265,657)
Net increase (decrease) in cash 4,114,226 (8,077,526)
Cash and equivalents at
beginning of period 34,423,959 45,495,379
Cash and equivalents at end of period $ 38,538,185 $ 37,417,853
Reconciliation of net income to net cash provided
from operating activities
Net income $ 1,296,127 $ 1,044,012
Adjustments
Depreciation and amortization 119,862 77,507
Charitable donation of property - 128,806
Provision for loan losses 42,080 700
Security discount accretion,
net of premium amortization (200) (72,622)
Decrease (increase) in accrued interest
receivable and other assets 260,137 513,880
Increase (decrease) in accrued interest
payable and other liabilities 608,760 368,118
$ 2,326,766 $ 2,060,401
-5-
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 necessary for a fair presentation have been included. Operating
results of the three months ended March 31, 2000 and 1999 are not necessarily
indicative of the results 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:
Three months ended March 31,
2000 1999
Net income $1,296,127 $1,044,012
Unrealized gain (loss) on
investment securities
available for sale net of income taxes 68,438 (146,972)
Comprehensive income $1,364,565 $ 897,040
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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 form
banks, interest bearing deposits in other banks, federal funds sold, and
investment securities) compared to average deposits were 51.22% for the first
quarter of 2000 compared to 54.42% first quarter of 1999.
At March 31, 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 64.09%.
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 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 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 March 31, 2000 and
1999 were 35.45% and 37.1%, respectively. Both are substantially in excess
of regulatory minimum requirements.
Results and Plan of Operation
Net income for the three months ended March 31, 2000, was $1,296,127 or $.40
per share, compared to $1,044, 012 or $.32 per share for the first quarter
of 1999. The Company experienced increased earnings of $252,115, from prior
year earnings. The primary reason net income increased is due to an increase
in net interest income. Other operating expenses decreased because during the
first quarter of 1999, the Company made a charitable donation of property, with
a book value of $128,806. 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.
The Company reviewed its consolidated loan protfolio and determined the allow-
ance, at 1.28% of gross loans, was adequate as of March 31,2000. At December
31, 1999, the allowance was 1.35% of gross loans. At March 31, 2000, there
were no nonaccruing loans and .38% of the portfolio was delinquent ninety
days or more.
The Banks employed ninety-seven full time equilavent employees as of March 31,
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 decrease of
net interest income of .03% if all assets and liabilities maturing within
that period were adjusted for the rate change. The sensivity 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.
This paragraph 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.
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 of
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.
- 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
Not Applicable
Item 5 Other Information
Not Applicable
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits
2. Proxy Statement dated April, 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, 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: __05/09/2000_______ By: /s/ Reese F. Cropper, Jr.
Reese F. Cropper, Jr.
President and CEO
Date: __05/09/2000______ By: /s/ William H. Mitchell
William H. Mitchell
Chief Financial Officer
- -10-
Calvin B. Taylor Bankshares, Inc.
Financial Data Schedule
Item March 31,
Number 2000
9-03(1) Cash and due from banks 11,220,283
9-03(2) Interest-bearing deposits 883,000
9-03(3) Federal funds sold 27,317,902
9-03(4) Trading account assets
9-03(6) Investment and mortgage-backed securities
held for sale 3,617,799
9-03(6) Investment and mortgage-backed securities
held to maturity - carrying value 68,802,062
9-03(6) Investment and mortgage-backed securities
held to maturity - market value 68,151,948
9-03(7) Loans 162,267,248
9-03(7)(2) Allowance for losses 2,076,437
9-03(11) Total assets 279,825,336
9-03(12) Deposits 227,765,518
9-03(13) Short-term borrowings -
9-03(15) Other liabilities 1,233,372
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 47,344,899
9-03(23) Total liabilities and stockholders' equity 279,825,336
- - 11 -
Calvin B. Taylor Bankshares, Inc.
Financial Data Schedule
(continued)
Three Months Ended
Guide March 31,
Number 2000
9-04(1) Interest and fees on loans 3,263,760
9-04(2) Interest and dividends on investments 1,069,245
9-04-(4) Other interest income 312,443
9-04-(5) Total interest income 4,645,448
9-04-(6) Interest on deposits 1,428,192
9-04-(9) Total interest expense 1,433,084
9-04-(10) Net interest income 3,212,364
9-04-(11) Provision for loan losses 42,080
9-04-(13)(h)Investment securities gains/(losses) -
9-04-(14) Other expenses 1,441,663
9-04(15) Income/loss before income tax 1,972,016
9-04(17) Income/loss before extraordinary items 1,972,016
9-04(18) Extraordinary items, less tax -
9-04(19) Cumulative change in accounting principles -
9-04(20) Net income or loss 1,296,127
9-04(21) Earnings per share - basic 0.40
9-04(21) Earnings per share - diluted 0.40
I.B.5 Net yield on interest earning assets 5.04 %
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 50,506
IV.A.3 Total recoveries 2,832
IV.A.4 Allowance for loan loss - end of period 2,076,437
IV.B.1 Loan loss allowance allocated to domestic loans 2,076,437
IV.B.2 Loan loss allowance allocated to foreign loans -
IV.B.3 Loan loss allowance - unallocated -
- - 12 -
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