SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No. 33-99762
CALVIN B. TAYLOR BANKSHARES, INC.
(Exact name of registrant as specified in its Charter)
Maryland 52-1948274
State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
P. O. Box 5, Berlin, Maryland 21811
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code:
(410) 641-1700
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
Check whether the small business issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act during the
past 12 months (or for such shorter period that the small business issuer
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the small business issuer's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
State small business issuer's revenues for its most recent fiscal year:
$19,044,903.
The aggregate market value of the Common Stock held by non-affiliates of the
small business issuer on December 31, 1999, was $113,400,000. This calculation
is based upon an estimation by the Company's Board of Directors of fair
market value of the Common Stock of $70 per share. There is not an active
trading market for the Common Stock and it is not possible to identify
precisely the market value of the Common Stock.
On February 17, 2000, 1,620,000 shares of the small business issuer's
common stock were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual report to Shareholders for the year ended
December 31, 1999, is incorporated by reference in this Form 10-KSB in
Part II Item 5, Item 6, and Item 7. The Company's Proxy Statement for
Annual Meeting of Shareholders to be held on May 3, 2000, is incorporated
by reference in this Form 10-KSB in Part III, Item 9, Item 10, Item 11, and
Item 12.
This Report contains statements which constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and the
Securities Exchange Act of 1934. These statements appear in a number of
places in this Report and include all statements regarding the intent,
belief or current expectations of the Company, its directors, or its
officers with respect to, among other things: (i) the Company's financing
plans; (ii) trends affecting the Company's financial condition or results of
operations; (iii) the Company's growth strategy and operating strategy; and
(iv) the declaration and payment of dividends. Investors are cautioned that
any such forward-looking statements are not guarantees of future performance
and involve risks and uncertainties, and that actual results may differ
materially from those projected in the forward-looking statements as a
result of various factors discussed herein and those factors discussed in
detail in the Company's filings with the Securities and Exchange Commission.
PART I
Item 1. Description of Business
General
Calvin B. Taylor Bankshares, Inc. (the "Company") was incorporated as a
Maryland corporation on October 31, 1995. The Company owns all of the
stock of two banks. The Maryland bank is a commercial bank incorporated
under the laws of the State of Maryland on December 17, 1907. This bank
operates 10 banking offices in Worcester County with the Bank's main office
located in Berlin, Maryland. It is engaged in a general commercial and
retail banking business serving individuals, businesses, and governmental units
in Worcester County, Maryland and neighboring counties. The second bank
was incorporated in Delaware in 1997 but opened late in the second quarter
of 1998. This one-branch Delaware bank offers the same services as the
Maryland bank.
The Company's holding company structure can assist the banks in maintaining
their required capital ratios because the Company may, subject to compliance
with debt guidelines implemented by the Board of Governors of the Federal
Reserve System (the "Board of Governors" or the "Federal Reserve"), borrow
money and contribute the proceeds to the banks as primary capital. The
holding company structure also permits greater flexibility in issuing stock
for cash, property, or services and in reorganization transactions.
Moreover, subject to certain regulatory limitations, a holding company
can purchase shares of its own stock, which the banks may not do without
regulatory approval. A holding company may also engage in certain nonbanking
activities which the Board of Governors has deemed to
be closely related to banking and proper incidents to the business of a
bank holding company. These activities include making or servicing loans
and certain types of leases; performing certain data processing services;
acting as a fiduciary or investment or financial advisor; acting as a
management consultant for other depository institutions; providing courier,
appraisal, and consumer financial counseling services; providing tax planning
and preparation services; providing check guaranty and collection agency
services; engaging in limited real estate investment activities; underwriting
, brokering, and selling credit life and disability insurance; engaging in
certain other limited insurance activities; providing discount brokerage
services; underwriting and dealing in certain government
obligations and money market instruments and providing portfolio
investment advice; acting as a futures commission merchant with respect to
certain financial instrument transactions; providing foreign exchange
advisory and transactional services; making investments in certain
corporations for projects designed primarily to promote community welfare;
and owning and operating certain healthy savings and loans associations.
Although the Company has no present intention of engaging in any of these
services, if circumstances should lead the Company's management to believe
that there is a need for these services in the banks' marketing areas and
that such activities could be profitably conducted, the management of the
Company would have the flexibility of commencing these activities upon
filing notice thereof with the Board of Governors.
Location and Service Area
The Company conducts a general commercial banking industry in its primary
service areas, emphasizing the banking needs of individuals and small- to
medium-sized businesses and professional concerns. The Maryland bank
operates from ten branches located throughout Worcester County, Maryland
while the Delaware bank operates from one branch located in Sussex County,
Delaware. The Banks draw most of their customer deposits and conduct most
of their lending transactions from within their primary service areas,
which encompasses Worcester County, Maryland, Sussex County, Delaware and
neighboring counties.
Both Sussex County, Delaware and Worcester County, Maryland are located
along the shores of the Atlantic Ocean and have experienced growth in
population in recent years. The area is growing as both a resort and
retirement community.
The principal components of the economy of the counties are tourism and
agriculture. Berlin has a strong component of health-care related businesses.
The tourist businesses of Ocean City, Maryland and Bethany, Delaware and
the health-care facilities in Berlin, Maryland (including Berlin Nursing
Home and Atlantic General Hospital) are the largest employers in the
Counties. The largest industrial employers are Perdue Farms and Hudson
Farms.
Banking Services
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 transaction accounts and time certificates
are tailored to the banks' principal market areas at rates competitive to
those offered in the area. In addition, the banks offer certain retirement
account services, such as Individual Retirement Accounts
("IRAs"). All deposits are insured by the Federal Deposit Insurance
Corporation (the "FDIC") up to the maximum amount allowed by law (generally,
$100,000 per depositor subject to aggregation rules). The banks solicit
these accounts from individuals, businesses, associations and organizations,
and governmental authorities.
The Company, through its banks, also offers a full range of short- to
medium-term commercial and personal loans. Commercial loans include both
secured and unsecured loans for working capital (including inventory and
receivables), business expansion (including acquisition of real estate and
improvements), and purchase of equipment and machinery. Consumer loans
include secured and unsecured loans for financing automobiles, home
improvements, education, and personal investments. The Company also
originates mortgage loans and real estate
construction and acquisition loans. These lending activities are subject
to a variety of lending limits imposed by state and federal law. Neither
bank may make any loans to any director, officer, or employee (except for
commercial loans to directors who are not officers or employees) unless the
loans are approved by the Board of Directors of the bank. The Board of
Directors must review any such loans every six months.
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, Delaware, and other regions. The Company also offers
credit card services through a correspondent bank.
Competition
The Company faces strong competition in all areas of its operations. The
competition comes from entities operating in Worcester County, Maryland and
Sussex County, Delaware and neighboring counties and includes branches of
some of the largest banks in Maryland, Delaware, and Virginia. Its most
direct competition for deposits historically has come from other commercial
banks, savings banks, savings and loan associations, and credit unions
operating in its service areas. The banks compete for deposits with
money market mutual funds and
corporate and government securities. The banks compete with the same
banking entities for loans, as well as mortgage banking companies and
other institutional lenders. The competition for loans varies from time
to time depending on certain factors. These factors include, among others,
the general availability of lendable funds and credit, general and local
economic conditions, current interest rate levels, conditions in the
mortgage market, and other factors which are not readily predictable.
Employees
As of December 31, 1999, the Banks employed 97 full-time equivalent
employees. The Company's operations are conducted through the banks.
Consequently, the Company does not have separate employees. None of the
employees of the banks are represented by any collective bargaining unit.
The banks consider their relations with their employees to be good.
SUPERVISION AND REGULATION
The Company and the banks are subject to state and federal banking laws and
regulations which impose specific requirements or restrictions on, and
provide for general regulatory oversight with respect to, virtually all
aspects of operations. These laws and regulations are generally intended to
protect depositors, not shareholders. The following is a brief summary of
certain statutes, rules, and regulations affecting the Company and the banks.
To the extent that the following summary describes statutory
or regulatory provisions, it is
qualified in its entirety by reference to the particular statutory and
regulatory provisions. Any change in applicable laws or regulations may
have a material adverse effect on the business and prospects of the Company.
Legislative changes and the policies of various regulatory authorities may
affect the operations of the Company and the banks. The Company is unable to
predict the nature or the extent of the effect on its business and earnings
that fiscal or monetary policies, economic control, or new feder
federal or state legislation may have in the future.
The Company
Because it owns the outstanding common stock of the banks, the Company is a
bank holding company within the meaning of the federal Bank Holding Company
Act of 1956 (the "BHCA"). Under the BHCA, the Company is subject to periodic
examination by the Federal Reserve and is required to file periodic reports
of its operations and such additional information as the
Federal Reserve may require. The Company's and the Bank's activities are
limited to banking, managing or controlling banks, furnishing services to
or performing services for its subsidiaries, or engaging in any other
activity that the Federal Reserve determines to be so closely related to
banking or managing and controlling banks as to be a proper incident thereto.
Investments, Control, and Activities. With certain limited exceptions, the
BHCA requires every bank holding company to obtain the prior approval of the
Federal Reserve before (i) acquiring substantially all the assets of any bank
, (ii) acquiring direct or indirect ownership or control of any voting shares
of any bank if after such acquisition it would own or control more than 5%
of the voting shares of such bank (unless it already owns or controls the
majority of such shares), or (iii) merging or consolidating with another bank
holding company.
In addition, and subject to certain exceptions, the BHCA and the Change in
Bank Control Act, together with regulations thereunder, require Federal
Reserve approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a bank
holding company, such as the Company. Control is conclusively presumed to
exist if an individual or company acquires 25% or more of any class of
voting securities of the bank holding company. Because the Company's
Common Stock is registered under the Securities Exchange Act of 1934, under
Federal Reserve regulations control will be rebuttably presumed
to exist if a person acquires at least 10% of the outstanding shares of any
class of voting securities of the Company. The regulations provide a
procedure for challenge of the rebuttable control presumption.
Under the BHCA, the Company is generally prohibited from engaging in, or
acquiring direct or indirect control of more than 5% of the voting shares
of any company engaged in nonbanking activities, unless the Federal Reserve,
by order or regulation, has found those activities to be so closely related
to banking or managing or controlling banks as to be a proper incident
thereto. Some of the activities that the Federal Reserve has determined by
regulation to be proper incidents to the business of banking include
making or servicing loans and certain types of leases, engaging in certain
insurance and discount brokerage activities, performing certain data processing
services, acting in certain circumstances as a fiduciary or investment or
financial advisor, owning savings associations, and making investments
in certain corporations or projects designed primarily to promote community
welfare.
Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
policy, the Company is expected to act as a source of financial strength to
its banks and to commit resources to support the banks in circumstances in
which the Company might not otherwise do so. Under the BHCA, the Federal
Reserve may require a bank holding company to terminate any activity or
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary
of a bank) upon the Federal Reserve's determination that such activity or
control constitutes a serious risk to the financial soundness or stability of
any subsidiary depository institution of the bank holding company. Further,
federal bank regulatory authorities have additional discretion to require a
bank holding company to divest itself of any bank or nonbank subsidiary if
the agency determines that divestiture may aid the depository institution's
financial condition. The banks may be required to indemnify, or cross-
guarantee, the FDIC against losses it incurs with respect to any other bank
controlled by the Company, which in effect makes the Company's equity
investments in healthy bank subsidiaries available to the FDIC to assist
any failing or failed bank subsidiary of the Company.
The Banks
General. The banks operate as state nonmember banking associations
incorporated under the laws of the State of Maryland and the State of Delaware.
They are subject to examination by the FDIC and the State Bank Commissioners.
Deposits in the banks are insured by the FDIC up to maximum amount (generally
$100,000 per depositor, subject to aggregation rules). The Commissioners
and FDIC regulate or monitor all areas of the banks' operations, including
security devices and procedures, adequacy of capitalization and loss reserves,
loans, investments, borrowings, deposits, mergers, issuance's of securities,
payment of dividends, interest rates payable on deposits, interest rates or
fees chargeable on loans, establishment of branches, corporate reorganizations,
maintenance of books and records, and adequacy of staff training to carry on
safe lending and deposit gathering practices. The FDIC requires the banks to
maintain certain capital ratios and imposes limitations on each of the bank's
aggregate investment in real estate, bank premises, and furniture and fixtures.
The banks are required by the FDIC and the Commissioner to prepare
quarterly reports on the banks' financial condition.
Under FDICIA, all insured institutions must undergo periodic on-site
examinations by their appropriate banking agency. The cost of the
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as
it deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC and the appropriate agency (and the state
supervisor when applicable). FDICIA also directs the FDIC to develop with
other appropriate agencies a method for insured depository institutions
to provide supplemental disclosure of the estimated fair market value of
assets and liabilities, to the extent feasible and practicable, in any balance
sheet, financial statement, report of condition, or other report of any
insured depository institution. FDICIA also requires the federal banking
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions and depository institution holding companies relating,
among other things, to: (i) internal controls, information systems, and audit
systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest
rate risk exposure; and (v) asset quality.
Newly chartered state nonmember banks, chartered within the past two years,
and state nonmember banks and their holding companies which have undergone
a change in control within the past two years or which have been deemed by
the FDIC to be troubled institutions, must give 30 days notice to the FDIC
or the Board of Governors before appointment of any executive
officer or director. During the 30 days, the FDIC or Board of Governors
may disapprove any such appointment.
Transactions With Affiliates and Insiders. The banks are subject to Section
23A of the Federal Reserve Act, which places limits on the amount of loans
and extensions of credit to, or investment in, or certain other transactions
with, affiliates and on the amount of advances to third parties collateralized
by the securities or obligations of affiliates. In addition, most of these
loans and certain other transactions must be secured in prescribed amounts.
The banks are also subject to Section 23B of the Federal Reserve Act which,
among other things, prohibits an institution from engaging in certain trans-
actions with certain affiliates unless the transactions are on terms
substantially the same, or at least as favorable to such institution or its
subsidiaries, as those prevailing at the time for comparable transactions
with nonaffiliate companies. The banks are subject to certain restrictions on
extensions of credit to executive officers, directors, certain principal
shareholders, and their related interests. Such extensions of credit (i) must
be made on substantially the same terms, including interest rates and collateral
as those prevailing at the time for comparable transactions with third
parties, and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.
Branching. Under Maryland law, the Maryland bank may open branches
state-wide, subject to the prior approval of the Commissioner and the FDIC.
Maryland law permits banking organizations in other states to acquire
Maryland banking organizations, as long as such states grant similar
privileges for acquiring banking organizations in their states to banking
organizations in Maryland, by opening a de novo branch, by acquiring an
existing branch from a Maryland depository institution, or as a result of an
interstate merger with a Maryland banking organization. Delaware law also
allows branches statewide with prior approval of the Commissioner and the
FDIC. Delaware law is more restrictive allowing other state banking
organizations to branch to Delaware through opening a de novo bank, or
as the result of an interstate merger.
Community Reinvestment Act. The Community Reinvestment Act requires that
each insured depository institution shall be evaluated by its primary
federal regulator with respect to its record in meeting the credit needs
of its local community, including low and moderate income neighborhoods,
consistent with the safe and sound operation of those institutions. These
factors are also considered in evaluating mergers, acquisitions, and
applications to open a branch or facility. The banks received satisfactory
ratings in their most recent evaluations.
Other Regulations. Interest and certain other charges collected or
contracted for by the banks are subject to state usury laws and certain
federal laws concerning interest rates. Loan operations are also subject
to certain federal laws applicable to credit transactions, such as the
federal Truth-In-Lending Act governing disclosures of credit terms to
consumer borrowers, the Home Mortgage Disclosure Act of 1975, requiring
financial institutions to provide information to enable the public and
public officials to determine financial institution is fulfilling its
obligation to help meet the housing needs of the community it serves,
the Equal Credit Opportunity Act prohibiting discrimination on the basis
of race, creed, or other prohibited factors in extending credit, the Fair
Credit Reporting Act of 1978, governing the use and provision of information
to credit reporting agencies, the Fair Debt Collection Act governing the
manner in which consumer debts may be collected by collection agencies,
and the rules and regulations of the various federal agencies charged with
the responsibility of implementing such federal laws. The deposit operations
of the Bank are also subject to the Right to Financial Privacy Act, which
imposes a duty to maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative subpoenas of
financial records, and the Electronic Funds Transfer Act and Regulation E
issued by the Federal Reserve Board to implement that act, which governs
automatic deposits to and withdrawals from deposit accounts and customers'
rights and liabilities arising from the use of automated teller machines
and other electronic banking services.
Deposit Insurance
The deposits of the banks are currently insured to a maximum of $100,000
per depositor, subject to certain aggregation rules. The FDIC establishes
rates for the payment of premiums by federally insured banks and thrifts for
deposit insurance. Separate insurance funds (BIF and SAIF) are maintained
for commercial banks and thrifts, with insurance premiums from the industry
used to offset losses from insurance payouts when banks and thrifts fail.
The FDIC current premiums range from $.00 to $.31 per $100 in deposits.
The assessment rate for each bank is currently $1,000 for each six-month
period. In addition to the FDIC assessment, banks are required to pay an
assessment to the Financing Corporation (FICO) to service the interest on
its bond obligations. The insurance assessment will remain at $.00 to $.31
per $100 in deposits through June 2000. Any increase in deposit insurance
premiums for the banks will increase the banks' cost of funds, and there can
be no assurance that such costs can be passed on to the banks' customers.
The Banks are assessed an additional amount to service the interest on the
bond obligations of the Financial Corporation.
Dividends
The principal source of the Company's cash revenues comes from dividends
received from the Maryland bank. The amount of dividends that may be paid
by the bank to the Company depends on the bank's earnings and capital
position and is limited by federal and state laws, regulations, and policies.
The Federal Reserve has stated that bank holding companies should refrain
from or limit dividend increases or reduce or eliminate dividends under
circumstances in which the bank holding company fails to meet minimum capital
requirements or in which earnings are impaired.
The Company's ability to pay any cash dividends to its shareholders in the
future will depend primarily on the Maryland bank's ability to pay dividends
to the Company. In order to pay dividends to the Company, the bank must
comply with the requirements of all applicable laws and regulations. Under
Maryland law, the bank must pay a cash dividend only from the following,
after providing for due or accrued expenses, losses, interest, and taxes:
(i) its undivided profits, or (ii) with the prior approval of the
Commissioner, its surplus in excess of 100% of its required capital stock.
Under FDICIA, the bank may not pay a dividend if, after paying the dividend,
the bank would be undercapitalized. See "Capital Regulations" below. See
Item 5 for a discussion of dividends paid by the bank in the past two years.
In addition to the availability of funds from the Maryland bank, the future
dividend policy of the Company is subject to the discretion of the Board of
Directors and will depend upon a number of factors, including future earnings
, financial condition, cash needs, and general business conditions. If
dividends should be declared in the future, the amount of such dividends
presently cannot be estimated and it cannot be known whether such dividends
would continue for future periods.
Capital Regulations
The federal bank regulatory authorities have adopted risk-based capital
guidelines for banks and bank holding companies that are designed to make
regulatory capital requirements more sensitive to differences in risk
profile among banks and bank holding companies, account for off-balance
sheet exposure, and minimize disincentives for holding liquid assets.
The resulting capital ratios represent qualifying capital as a percentage
of total risk-weighted assets and off-balance sheet items. The guidelines
are minimums, and the regulators have noted that banks and bank holding
companies contemplating significant expansion programs should not allow
expansion to diminish their capital ratios and should maintain ratios well
in excess of the minimums. The current guidelines require all bank holding
companies and federally regulated banks to maintain a minimum risk-based
total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital.
Tier 1 capital includes common shareholders' equity before the unrealized
gains and losses on securities available for sale, qualifying
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, but excludes goodwill and most other intangibles,
and excludes the allowance for loan and lease losses. Tier 2 capital
includes the excess of any preferred stock not included in Tier 1 capital,
mandatory convertible securities, hybrid capital instruments, subordinated
debt and intermediate term-preferred stock, and general reserves for loan
and lease losses up to 1.25% of risk-weighted assets.
Under the guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50%, and 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight will apply. These
computations result in the total risk-weighted assets. Most loans are
assigned to the 100% risk category, except for first mortgage loans fully
secured by residential property and, under certain circumstances, residential
construction loans, both of which have a 50% rating. Most investment securities
are assigned to the 20% category, except for municipal or state revenue bonds,
which have a 50% rating, and direct obligations of or obligations
guaranteed by the United States Treasury or United States Government agencies,
which have a 0% rating.
The federal bank regulatory authorities have also implemented a leverage
ratio, which is Tier 1 capital as a percentage of average total assets less
intangibles, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity
capital base. The minimum required leverage ratio for top-rated institutions
is 3%, but most institutions are required to maintain an additional cushion
of at least 100 to 200 basis points.
FDICIA established a new capital-based regulatory scheme designed to
promote early intervention for troubled banks and requires the FDIC to
choose the least expensive resolution of bank failures. The new capital-
based regulatory framework contains five categories for compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To qualify as a "well capitalized"
institution, a bank must have a leverage ratio of no less than 5%,
a Tier 1 risk-based ratio of no less than 6%, and a total risk-based
capital ratio of no less than 10%, and the bank must not be under any
order or directive from the appropriate regulatory agency to meet and
maintain a specific capital level. As of December 31, 1999, the Company
and its banks were qualified as "well capitalized." See "Item 6.
Management's Discussion and Analysis or Plan of Operation - Capital."
Under the FDICIA regulations, the applicable agency can treat an
institution as if it were in the next lower category if the agency
determines (after notice and an opportunity for hearing) that the
institution is in an unsafe or unsound condition or is engaging in an
unsafe or unsound practice. The degree of the regulatory scrutiny of a
financial institution will increase, and the permissible activities of the
institution will decrease as it moves downward through the capital
categories. Bank holding companies controlling financial institutions
can be called upon to boost the institutions' capital and to partially
guarantee the institutions' performance under their capital restoration
plans.
These capital guidelines can affect the Company in several ways. If a
bank begins to grow at a rapid pace, capital infusion may be needed to
boost capital. This could impact the Company's ability to pay dividends.
The capital levels of the Company and its banks are more than adequate.
Rapid growth, deterioration of the loan portfolio performance, poor
earnings or a combination of these factors could change the current
capital positions.
Effective January 1, 1997, the FDIC amended the risk-based capital
guidelines to incorporate a measure for market risk to cover all positions
located in an institution's trading account and foreign exchange or
commodity positions. Banks and holding companies with significant
exposure to market risk are required to measure the risk and hold
capital commensurate with that risk. These guidelines have no effect
on the banks or the holding company since the banks do not engage in,
or plan to engage in, the activities of trading accounts, foreign
exchange or commodity positions.
Recent Legislative Developments
Periodically, the Federal and state legislatures consider bills with
respect to the regulation of financial institutions. Some of these
proposals could significantly change the regulation of banks and the
financial services industry. The Company cannot predict if such
proposals will be adopted or the affect to the Company.
Item 2. Description of Property
The Company has eleven branch locations, all of which are owned by the
Company. The locations are described as follows:
OFFICE LOCATION Square Footage
Main Office, MD 24 North Main Street, Berlin, Maryland 21811 6,500
East Berlin Office 10524 Old Ocean City Boulevard, Berlin, MD 21811 1,500
20th Street Office 100 20th Street, Ocean City, Maryland 21842 3,100
Ocean Pines Office 11003 Cathell Road, Berlin, Maryland 21811 2,420
Mid-Ocean City Office 9105 Coastal Highway, Ocean City, Maryland 21842 1,984
N. Ocean City Office 14200 Coastal Highway, Ocean City, Maryland 21842 2,545
W. Ocean City Office 9923 Golf Course Road, Ocean City, Maryland 21842 2,496
Route 13 Pocomoke Office Pocomoke, Maryland 21851 3,240
South Pocomoke Office 121 Ames Plaza, Pocomoke, Maryland 21851 1,715
Snow Hill Office 108 West Market Street, Snow Hill, Maryland 21863 3,773
Main Office, Delaware 50 Atlantic Avenue, Ocean View, Delaware 4,900
The Berlin office is the centralized location for the Company and for all
the Maryland branches; that is to say that all proof and bookkeeping is
performed there. The Delaware office has its own proof and bookkeeping
functions.
Each branch has a manager that also serves as its loan officer, with
exception of the East Berlin Office which does not have a loan officer.
All offices participate in normal day-to-day banking operations.
Eight Maryland offices offer automated teller machines; all locations
except the East Berlin and South Pocomoke Offices. The Delaware bank has
an automated teller machine on-premise. The Company operates one automated
teller machine which is located at a local hospital.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Company or the
banks or any of their properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the shareholders of the
Company during the fourth quarter of 1999.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's Articles of Incorporation authorize it to issue up to 2,000,000
shares of the common stock.
As of February 17, 2000, there were approximately 664 holders of record of
the common stock and 3,240,000 shares of Common Stock issued and outstanding.
There is no established public trading market in the stock, and there is no
likelihood that a trading market will develop in the near future. The
development of a trading market may be inhibited because a large portion of
the Company's shares is held by insiders. Transactions in the common stock
are infrequent and are negotiated privately between the persons involved in
those transactions.
All outstanding shares of common stock of the Company are entitled to
share equally in dividends from funds legally available, when, as, and if
declared by the Board of Directors. The Company paid dividends of $1.20
per share in 1999, and $.65 per share in 1998, after giving retroactive
effect to the 1998 stock split effected in the form of a 100% stock dividend.
During 1999, the Company paid a special mid-year cash dividend of $.50 per
share which was not expected to be an annual event.
Item 6. Management's Discussion and Analysis or Plan of Operation
BUSINESS OF THE COMPANY
Calvin B. Taylor Bankshares, Inc. (the "Company") was incorporated as a
Maryland corporation on October 31, 1995, to become a bank holding company
by acquiring all of the capital stock of Calvin B. Taylor Banking Company
(the "Maryland Bank"). The Maryland Bank was incorporated under the laws of
the State of Maryland on December 17, 1907. The Maryland Bank was organized
as a nonmember state bank under the laws of the State of Maryland. Calvin B.
Taylor Bank of Delaware (the "DE Bank") was incorporated under the laws of
Delaware on September 18, 1997. The DE Bank was organized as a nonmember state
bank under the laws of the State of Delaware. Calvin B. Taylor Bankshares,
Inc. acquired all of the capital stock of Calvin B. Taylor Bank of Delaware
also. Both banks are engaged in a general commercial banking business,
emphasizing in their marketing the Company's local management and ownership,
from their main offices located in their primary service areas of Worcester
County, Maryland and Sussex County, Delaware, and their neighboring counties.
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. In addition, the banks offer certain retirement account
services, such as Individual Retirement Accounts. The banks also offer a
full range of short- to medium-term commercial and personal loans. The banks
originate fixed rate mortgage loans and real estate construction and acquistion
loans. These loans generally have a demand feature. 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the Company's financial
statements and related notes and other statistical information included
elsewhere herein.
Overview
Consolidated income of the Company is derived primarily from operations of
the banks. The 1999 net income was $5,019,660, compared to 4,697,014 for
1998. The Company continued its history of above average earnings with a
return on average equity of 10.47% and return on average assets of 1.78%
for 1999, compared to returns of 10.54% and 1.78%, respectively for 1998.
Results of Operations
The Company reported net income of $5,019,660, or $3.10 per share, for the
year ended December 31, 1999, which was an increase of $322,646, or 6.87%,
over the net income of $4,697,014, or $2.90 per share, for the year ended
December 31, 1998. The primary contribution to this increase is the
$667,107 growth in net interest income, which was partially offset by
$328,109 growth in operating expenses.
Net interest income increased $667,107, or 5.77%, to $12,220,818 in 1999,
from $11,553,711 in 1998. This increase in net interest income was the
result of an increase in interest revenue of $144,401 while interest
expense decreased by $522,706. Net interest income increased primarily
because the yield on interest-bearing deposits decreased to 2.94% during
1999 from 3.43% in 1998. Growth in the security portfolio also contributed
to the net interest income. The yield on interest-earning assets decreased
to 6.97% in 1999, from 7.36% in 1998, while the combined yield on deposits
and borrowed funds decreased to 2.47% from 2.89% for the same period.
Noninterest income and noninterest expense increased by 4.93% and 6.17%,
respectively during 1999, compared to 1998. Discussion of these items is
presented later under their respective headings.
Net Interest Income
The primary source of income for the Company is net interest income, which
is the difference between revenue on interest-earning assets, such as
investment securities and loans, and interest incurred on interest-bearing
sources of funds, such as deposits and borrowings. The level of net
interest income is determined primarily by the average balance of interest-
earning assets and funding sources and the various rate spreads between the
interest-earning assets and the Company's funding sources. The table "Average
Balances, Income and Expenses, and Rates" which follows shows the Company's
average volume of interest-earning assets and interest-bearing liabilities
for 1999 and 1998, and related income/expense and yields. Changes in net
interest income from period to period result from increases or decreases in
the volume of interest-earning assets and interest-bearing liabilities, and
increases or decreases in the average rates earned and paid on such assets
and liabilities. The volume of interest-earning assets and interest-bearing
liabilities is affected by the ability to manage the earning-asset
portfolio (which includes loans), and the availability of particular sources
of funds, such as noninterest bearing deposits. The table "Analysis of
Changes in Net Interest Income" shows the amount of net interest income
change from rate changes and from activity changes.
The key performance measure for net interest income is the "net margin on
interest-bearing assets," or net interest income divided by average interest-
earning assets. The Company's net interest margin for 1999, was 4.77%
compared to 4.80% for 1998. Because most of the loans of the banks are
written with a demand feature, the income of the banks should not change
dramatically as interest rates change. Management of the Company expects
to maintain the net margin on interest-earning assets. The net margin may
decline, however, if competition increases, loan demand decreases, or the
cost of funds rises faster than the return on loan and securities. Although
such expectations are based on management's judgement, actual results will
depend on a number of factors that cannot be predicted with certainty, and
fulfillment of management's expectations cannot be assured.
Average Balances, Interest, and Yields
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
Average Interest Yield Average Interest Yield
balance balance
Assets
Federal funds sold and securities
sold under repurchase agreements 25119944 1261883 5.02% 26359775 1411818 5.36%
Interest bearing deposits 1135879 59892 5.27% 1248049 70757 5.67%
Investment securities:
U. S. Treasury 70035826 3744040 5.35% 60151499 3468511 5.77%
U. S. Government Agency 5202345 311991 6.00% 272603 14923 5.47%
State and municipal 14684452 775402 5.28% 12353098 710258 5.75%
Other 936104 26211 2.80% 351216 24076 6.86%
Total investment securities 90858727 4857644 5.35% 73128416 4217768 5.77%
Loans:
Commercial 16466323 1328643 8.07% 14919040 1298811 8.71%
Mortgage 125807308 10299329 8.19% 127295155 10585496 8.32%
Consumer 5029127 480141 9.55% 5019523 512712 10.21%
Total loans 147302758 12108113 8.22% 147233718 12397019 8.42%
Allowance for loan losses 2083668 2086253
Total loans, net of allowance 145219090 12108113 8.34% 145147465 12397019 8.54%
Total interest-earning assets 262333640 18287532 6.97% 245883705 18097362 7.36%
Noninterest-bearing cash 12929195 0 10887288 0
Premises and equipment 5537756 0 4584091 0
Other assets 1898309 0 2112827 0
Total assets 282698900 18287532 263467911 18097362
Interest-bearing Deposits
Savings and NOW 69549683 1410850 2.03% 60545046 1493594 2.47%
Money market and supernow 58167683 1331935 2.29% 57902148 1530457 2.64%
Other time 68899821 3032241 4.40% 65020172 3277413 5.04%
Total interest-bearing deposits196617187 5775026 2.94% 183467366 6301464 3.43%
Borrowed funds 122984 3732 3.03% 10822 0 0
Total interest-bearing liabilities196740171 5778758 2.94% 183478188 63014643.43%
Noninterest-bearing deposits 37290913 0 34675359 0
234031084 5778758 2.47% 218153547 6301464 2.89%
Other liabilities 746991 0 748148 0
Stockholders' equity 47920825 0 44566216 0
Total liabilities and
stockholders' equity 282698900 5778758 263467911 6301464
Net interest spread 4.03% 3.93%
Net interest income 12508774 11795898
Net margin on interest-earning assets 4.77% 4.80%
Interest on tax-exempt securities and dividends are reported on fully taxable
equivalent basis.
Analysis of Changes in Net Interest Income
Year ended December 31, Year ended December 31,
1999 compared with 1998 1998 compared with 1997
variance due to variance due to
Total Rate Volume Total Rate Volume
Earning assets
Interest-bearing deposits -10865 -4505 -6360 1360 1090 270
Federal funds sold -149935 -83480 -66455 198779 -56708 255487
Investment securities:
U. S. Treasury 275529 -294797 570326 611574 -129016 740590
U. S. Government Agency 297068 27411 269657 14923 0 14923
State, county, and municipals 65144 -68909 134053 3730 -17572 21302
Other 2135 -37988 40123 4076 -4130 8206
Loans:
Commercial 29832 -104936 134768 26143 36351 -10208
Mortgage -286167 -162378 -123789 -426996 -74026 -352970
Consumer -32571 -33552 981 2212 1342 870
Total interest revenue 190170 -763134 953304 435801 -242669 678470
Interest-bearing liabilities
Savings and NOW deposits -82744 -305159 222415 103598 -70580 174178
Money market and supernow -198522 -205532 7010 33446 -45161 78607
Other time deposits -245172 -440706 195534 198557 97038 101519
Other borrowed funds 3732 3732 0 -1820 -247 -1573
Total interest expense -522706 -947665 424959 333781 -18950 352731
Net interest income 712876 184531 528345 102020 -223719 325739
Interest on tax-exempt securities, including dividends, are reported on fully
taxable equivalent basis. The variance that is both rate/volume related is
reported with the rate variance.
Composition of Loan Portfolio
Because loans are expected to produce higher yields than investment
securities and other interest-earning assets (assuming that loan losses are
not excessive), the absolute volume of loans and the volume as a percentage
of total earning assets is an important determinant of net interest margin.
Average loans, net of the allowance for loan losses, were $145,219,090 and
$145,147,465 during 1999 and 1998, respectively, which constituted 55.36% and
59.03% of average interest-earning assets for the periods. A
deposit ratio was 63.67% compared to 60.60% at December 31, 1998, while the
1999 average loans to average deposits were 62.08%. The Company extends
loans primarily to customers located in and near Worcester County, Maryland
and Sussex County, Delaware. There are no industry concentrations in the
Company's loan portfolio. The Company does, however, have a substantial
portion of its loans in real estate and its performance will be influenced
by the real estate market in the region.
The following table sets forth the composition of the Company's loan
portfolio as of December 31, 1999 and 1998, respectively.
Composition of Loan Portfolio
December 31,
1999 1998
Percent Percent
Amount of total Amount of total
Commercial 17825019 11.57% 16253621 11.46%
Real estate 130378776 84.62% 118837336 83.78%
Construction 824071 0.53% 1795952 1.27%
Consumer 5054669 3.28% 4950912 3.49%
Total loans 154082535 100.00% 141837821 100.00%
Less allowance
for credit losses 2082031 2080358
Net loans 152000504 139757463
The following table sets forth the maturity distribution, classified
according to sensitivity to changes in interest rates, for selected
components of the Company's loan portfolio as of December 31, 1999.
Loan Maturity Schedule and Sensitivity to Changes in Interest Rates
December 31, 1999
Over one
One year through Over five
or less five years years Total
Commercial 17825019 0 0 17825019
Real estate 130378776 0 0 130378776
Construction 824071 0 0 824071
Consumer 311862 4258632 484175 5054669
Total 149339728 4258632 484175 154082535
Fixed interest rate 6994937 4258632 484175 11737744
Variable interest
rate (or demand) 142344791 0 0 142344791
Total 149339728 4258632 484175 154082535
As of December 31, 1999, $142,344,791 or 92.38%, of the total loans were
either variable rate loans or loans written on demand.
The Company has the following commitments, lines of credit, and letters
of credit outstanding as of December 31, 1999 and 1998, respectively.
1999 1998
Construction loans 9486899 1470375
Other loan commitments 4843120 6012019
Standby letters of credit 1504241 1387865
Total 15834260 8870259
Loan commitments are agreements to lend to a customer as long as there is
no violation of any condition to the contract. Loan commitments may have
interest fixed at current rates, fixed expiration dates, and may require the
payment of a fee. Letters of credit are commitments issued to guarantee the
performance of a customer to a third party. Loan commitments and letters of
credit are made on the same terms, including collateral, as outstanding
loans. The Company's exposure to credit loss in the event of nonperformance
by the borrower is represented by the contract amount of the commitment.
Loan Quality
The allowance for loan losses represents a reserve for potential losses in
the loan portfolio. The adequacy of the allowance for loan losses is
evaluated periodically based on a review of all significant loans, with a
particular emphasis on non-accruing, past due, and other loans that
management believes require attention. The determination of the reserve
level rests upon management's judgment about factors affecting loan quality
and assumptions about the economy. Management considers the year-end allowance
appropriate and adequate to cover possible losses in the loan portfolio;
however, management's judgment is based upon a number of assumptions about
future events, which are believed to be reasonable, but which may or may not
prove valid. Thus, there can be no assurance that charge-offs in future
periods will not exceed the allowance for loan loss or that additional
increases in the loan loss allowance will not be required.
For significant problem loans, management's review consists of evaluation
of the financial strengths of the borrowers and guarantors, the related
collateral, and the effects of economic conditions. The overall evaluation
of the adequacy of the total allowance for loan losses is based on an
analysis of historical loan loss ratios, loan charge-offs, delinquency
trends, and previous collection experience, along with an assessment of the
effects of external economic conditions. Although the Company has a history
of low loan charge-offs, its current policy is to maintain an allowance of
approximately 1.35% of gross loans unless management's evaluation of the
risk associated with each loan indicates that the allowance should be higher.
This allowance may be increased for reserves for specific loans identified
as substandard during management's loan review. Generally, the Company will
not require a negative provision to reduce the allowance as a result of
either net recoveries or a decrease in loans. This may cause the allowance
as a percentage of gross loans to exceed the Company's target of 1.35%.
The table "Allocation of Allowance for Loan Losses" which follows shows the
specific allowance applied by loan type and also the general allowance
included in the December 31, 1999 and 1998, allowance for loan losses.
The provision for loan losses is a charge to earnings in the current
period to replenish the allowance and maintain it at a level management has
determined to be adequate. As of December 31, 1999 and 1998, the respective
allowance for loan losses were 1.35% and 1.47% of outstanding loans.
The provision for loan losses was $5,745 in 1999, an increase of $4,570
from the $1,175 provision in 1998. The increased provision is the result
of a $8,435 increase in net charge-offs for 1999, creating a net charge-off
of $7,061. Outstanding loans increased 8.63% during the same period.
Allocation of Allowance for Loan Losses
1999 1998
Commercial 213549 10.26% 318138 15.29%
Real estate 651894 31.31 698303 33.57
Construction 4120 .20 2175 0.1
Consumer 152313 7.31 151124 7.26
Commitments 0 0 0 0
General 1060155 50.92 910618 43.78
Total 2082031 100.00% 2080358 100.00%
Allowance for Loan Losses
1999 1998
Balance at beginning of year 2080358 2080798
Loan losses:
Commercial 13628 2652
Mortgages 0 0
Consumer 8256 10453
Total loan losses 21884 13105
Recoveries on loans previously charged off
Commercial 6504 0
Consumer 8319 14479
Total loan recoveries 14823 14479
Net loan losses 7061 -1374
Provision for loan losses
charged to expense 5745 1175
Provision related to commitments 2989 -2989
Balance at end of year 2082031 2080358
Allowance for loan losses to
loans outstanding at end of year 1.35% 1.47%
Net charge-offs to average loans 0.00% 0.00%
As a result of management's ongoing review of the loan portfolio, loans
are classified as nonaccrual when it is not reasonable to expect collection
of interest under the original terms. These loans are classified as
nonaccrual even though the presence of collateral or the borrower's
financial strength may be sufficient to provide for ultimate repayment.
Interest on nonaccrual loans is recognized only when received. A delinquent
loan is generally placed in nonaccrual status when it becomes 90 days or
more past due. When a loan is placed in nonaccrual status, all interest which
has been accrued on the loan but remains unpaid is reversed and deducted from
earnings as a reduction of reported interest income. No additional interest
is accrued on the loan balance until the collection of both principal
and interest becomes reasonably certain.
The Company had no nonperforming loans at December 31, 1999 or 1998. Where
real estate acquired by foreclosure and held for sale is included with
nonperforming loans, the result comprises nonperforming assets.
Nonperforming assets at December 31, 1998, totaled $39,000. Loans are
classified as impaired when the collection of contractual obligations,
including principal and interest, is doubtful. Management has identified
no significant impaired loans as of December 31, 1999 or 1998.
Liquidity and Interest Rate Sensitivity
The primary objective of asset/liability management is to ensure the steady
growth of the Company's primary source of earnings, net interest income.
Net interest income can fluctuate with significant interest rate movements.
To lessen the impact of these margin swings, the balance sheet should be
structured so that repricing opportunities exist for both assets and
liabilities in roughly equivalent amounts at approximately the same time
intervals. Imbalances in these repricing opportunities at any point in time
constitute interest rate sensitivity.
Liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities, as well as to provide sufficient
funds to cover deposit withdrawals and payment of debt and operating
obligations. These funds can be obtained by converting assets to cash or
by attracting new deposits.
Average liquid assets (cash and amounts due from banks, interest bearing
deposits in other banks, federal funds sold, and investment securities) were
55.60% of average deposits for 1999, compared to 51.17% for 1998.
Interest rate sensitivity may be controlled on either side of the balance
sheet. On the asset side, management can exercise some control on maturities.
Also, loans may be structured with rate floors and ceilings on variable rate
notes and by providing for repricing opportunities on fixed rate notes. The
Company's investment portfolio, including federal funds sold, provides the
most flexible and fastest control over rate sensitivity since it can
generally be restructured more quickly than the loan portfolio.
On the liability side, deposit products can be restructured so as to
offer incentives to attain the maturity distribution desired. Competitive
factors sometimes make control over deposits more difficult and less
effective.
Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to changes in market interest rates. The rate-
sensitive position, or gap, is the difference in the volume of rate-
sensitive assets and liabilities at a given time interval. The general
objective of gap management is to actively manage rate-sensitive assets and
liabilities to reduce the impact of interest rate fluctuations on the net
interest margin. Management generally attempts to maintain a balance between
rate-sensitive assets and liabilities as the exposure period is lengthened
to minimize the overall interest rate risk to the Company.
The asset mix of the balance sheet is continually evaluated in terms of
several variables; yield, credit quality, appropriate funding sources, and
liquidity. Management of the liability mix of the balance sheet focuses on
expanding the various funding sources.
The interest rate sensitivity position at December 31, 1999, is presented
in the table "Interest Sensitivity Analysis." The difference between rate-
sensitive assets and rate-sensitive liabilities, or the interest rate
sensitivity gap, is shown at the bottom of the table. The Company was
asset-sensitive for all time horizons. For asset-sensitive institutions,
if interest rates should decrease, the net interest margins should decline.
Since all interest rates and yields do not adjust at the same velocity, the
gap is only a general indicator of rate sensitivity.
Interest Sensitivity Analysis
December 31, 1999
After three
Within but within After one
Three twelve but within After
Months months five years five years Total
Assets
Earning assets
Federal funds sold 15877383 0 0 0 15877383
Interest-bearing
deposits 100000 689000 194000 0 983000
Investment securities 21002226 27745242 40701133 2582094 92030695
Loans 149036842 302886 4258632 484175 154082535
Total earning assets 186016451 28737128 45153765 3066269 262973613
Liabilities
Interest-bearing
liabilities
Money market 52985409 0 0 0 52985409
Savings and NOW
deposits 76458281 0 0 0 76458281
Certificates $100,000
and over 1394088 9356422 2067556 0 12818066
Certificates under
$100,000 15285666 31277695 10749033 0 57312394
Total interest-bearing
liabilities 146123444 40634117 12816589 0 199574150
Period gap 39893007 -11896989 32337176 3066269 63399463
Cumulative gap 39893007 27996018 60333194 63399463 63399463
Ratio of cumulative gap to
total earning assets 15.17% 10.65 22.94% 24.11% 24.11
The table "Investment Securities Maturity Distribution and Yields" shows
that as of December 31, 1999, $48,747,468, or 52.97% of the investment debt
securities mature in one year or less. The funds invested in federal funds
sold provide liquidity so the banks do not need a large portfolio of
securities classified as "available-for-sale." Other sources of liquidity
include letters of credit, overnight federal funds, and reverse repurchase
agreements available from correspondent banks. The total lines of credit
available from correspondent banks at December 31, 1999, were $19,000,000.
Investment Securities Maturity Distribution and Yields
Investment Securities Maturity Distribution and Yields
December 31, 1999 December 31, 1998
Amount Percent Amount Percent
U. S. Treasury securities
One year or less 43479940 5.29% 26331468 5.46%
Over one through five years 22986692 5.11% 38494930 5.41%
Over ten years 2108760 7.29% 2480799 7.29%
Total U.S. Treasury
securities 68575392 5.29% 67307197 5.5%
U.S. Government Agencies
Over one through five years 10649787 6.08% 1000000 5.51%
State, county, and
municipal securities
One year or less 5267528 3.56% 7080443 3.8%
Over one through five years 7064654 3.61 7368870 3.71
Over five through ten years 100671 3.71 0 0
Over ten years 372663 3.45% 0 0%
Total state, county, and
municipal securities 12805516 3.59% 14449313 5.16%
Total debt securities
One year or less 48747468 5.10% 33411911 5.11%
Over one through five years 40701133 5.10% 46863800 5.14%
Over five through ten years 100671 3.71 0 0
Over ten years 2481423 6.71% 2480799 7.29%
Total debt securities 92030695 5.15% 82756510 5.16%
Equity securities 1293336 3.72% 516338 8.03%
Total securities 93324031 5.13% 83272848 5.91%
Deposits and Other Interest-Bearing Liabilities
Average interest-bearing liabilities increased $13,261,983, or 7.23%, to
$196,740,171 in 1999, from $183,478,188 in 1998. Average interest-bearing
deposits increased $13,149,821, or 7.17%, to $196,617,187 in 1999,
from $183,467,366 in 1998, while average demand deposits increased
$2,615,554, or 7.54% to $37,290,913 in 1999, from $34,675,359 in 1998.
At December 31, 1999, total deposits were $238,725,852, compared to
$230,617,685 at December 31, 1998, an increase of 3.52%.
The following table sets forth the deposits of the Company by category
as of December 31, 1999 and 1998, respectively.
December 31,
1999 1998
Amount Percent of Amount Percent of
deposits deposits
Demand deposit accounts 39151702 16.40% 36648979 15.89%
NOW accounts 41203474 17.26% 33925681 14.71%
Money market and
Supernow accounts 52985409 22.19% 57683937 25.01%
Savings accounts 35254807 14.77% 32681102 14.17%
Time deposits less than
$100,000 57312394 24.01% 55080850 23.89%
Time deposits of $100,000
or more 12818066 5.37% 14597136 6.33%
Total deposits 238725852 100.00% 230617685 100.00%
Core deposits, which exclude certificates of deposit of $100,000 or more,
provide a relatively stable funding source for the Company's loan portfolio
and other earning assets. The Company's core deposits increased $9,887,237
during 1999. Deposits, and particularly core deposits, have been the
Company's primary source of funding and have enabled the Company to meet both
its short-term and long-term liquidity needs. Management anticipates that
such deposits will continue to be the Company's primary source of funding in
the future. The maturity distribution of the Company's time deposits over
$100,000 at December 31, 1999, is shown in the following table.
Maturities of Certificates of Deposit
and Other Time Deposits of $100,000 or More
December 31, 1999
After six
After three through
Within three through twelve After twelve
months six months months months Total
Certificates of deposit
of $100,000 or more 1394088 3614631 5741791 2067556 12818066
Large certificate of deposit customers tend to be extremely sensitive to
interest rate levels, making these deposits less reliable sources of funding
for liquidity planning purposes than core deposits. Some financial
institutions partially fund their balance sheets using large certificates of
deposit obtained through brokers. These brokered deposits are generally
expensive and are unreliable as long-term funding sources. Accordingly,
the Company does not accept brokered deposits.
Noninterest Income
Noninterest income for 1999 was $1,045,327, compared to noninterest income
in 1998 of $996,188, an increase of $49,139, or 4.93%. The "club" account,
which was first offered in 1998, provided increased service charge revenues
of approximately $45,000.
The following table presents the principal components of noninterest income
for the years ended December 31, 1999 and 1998, respectively.
Noninterest Income
1999 1998
Service charges on deposit accounts 724067 691945
Other noninterest revenue 321260 304243
Total noninterest income 1045327 996188
Noninterest income as a percentage
of average total assets 0.37% 0.38%
Noninterest Expense
Noninterest expense increased by $328,109, or 6.17%, from $5,319,503 in
1998 to $5,647,612 in 1999. Increased personnel costs were due to annual
raises. The Company donated property with a book value of $128,806 to a
municipality in Worcester County after relocating its branch. The Company
did not incur the same level of costs associated with offering the "club"
accounts, which were new in 1998, resulting in decreased expenses of $60,603.
Stationery and supplies increased $43,200 as a result of relocating a branch,
sending multiple notices about the potential year 2000 computer problem and
from increased deposit accounts.
The following table presents the principal components of noninterest
expense for the years ended December 31, 1999 and 1998, respectively.
Noninterest Expense
1999 1998
Compensation and related expenses 3076309 3052536
Occupancy expense 413073 351601
Furniture and equipment expense 511037 483506
Amortization of intangible assets 19721 6064
Advertising 146341 141736
Business and product development 57649 118252
Courier service 93968 78900
Deposit insurance 37917 19499
Director fees 64120 71170
Dues, donations, and subscriptions 83105 64451
Donated real property 128806 0
Freight 57879 60697
Liability insurance 64686 68460
Postage 155092 154295
Professional fees 61538 82128
Stationery and supplies 309727 266527
Telephone 82466 72682
Teller machine fees 110791 84720
Miscellaneous 173387 142279
Total noninterest expense 5647612 5319503
Noninterest expense as a percentage
of average total assets 2.00% 2.02%
Capital
Under the capital guidelines of the Federal Reserve Board and the FDIC, the
Company and its banks are currently required to maintain a minimum risk-based
total capital ratio of 8%, with at least 4% being Tier 1 capital. Tier 1
capital consists of common shareholders' equity, qualifying perpetual
preferred stock, and minority interests in equity accounts of consolidated
subsidiaries, less certain intangibles. In addition, the Company and the
banks must maintain a minimum Tier 1 leverage ratio (Tier 1 capital to total
assets) of at least 3%, but this minimum ratio is increased by 100 to 200
basis points for other than the highest-rated institutions.
At December 31, 1999, the Company and the banks exceeded their regulatory
capital ratios, as set forth in the following table.
Analysis of Capital
1999 1998
Req'd Consol'd MD DE Consolidated MD DE
Minimums Company Bank Bank Company Bank Bank
Total risk-based
capital ratio 8.0% 38.4% 35.0% 99.6% 38.4% 34.7% 349.0%
Tier I risk-based
capital ratio 4.0% 37.1% 33.8% 99.3% 37.2% 37.2% 348.9%
Tier I leverage ratio 3.0% 17.5% 15.4% 30.8% 17.5% 14.8% 85.0%
Accounting Rule Changes
FASB Statement No. 135, Rescission of FASB Statement No. 75 and Technical
Corrections, amends FASB Statement No. 35 Accounting and Reporting by
Defined Benefit Plans, to exclude from its scope plans that are sponsored
by and provide benefits for the employees of one or more state or local
governments. The Statement is effective for financial statements issued
for fiscal years ending after February 15, 1999. It will have no effect
on the financial statements of the Company.
FASB Statement No. 136, Transfers of Assets to a Not-for-Profit Organization
or Charitable Trust that Raises or Holds Contributions for Others, is
effective for fiscal years beginning after December 15, 1999. The Statement
establishes standards for transactions in which a donor makes a contribution
by transferring assets to a recipient organization that accepts the assets
from the donor and agrees to use those assets on behalf of another entity
that is specified by the donor. It will have no effect on the financial
statements of the Company.
FASB Statement No. 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133,
delays the effective date of FASB Statement No. 133 for one year, to fiscal
years beginning after June 15, 2000. The Company's security portfolio has
no derivative instruments. The implementation of this statement is expected
to have minimal impact on the Company's financial statements.
Impact of Inflation
Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Company and the Bank are primarily monetary in
nature. Therefore, interest rates have a more significant effect on the
Company's performance than do the effects of changes in the general rate of
inflation and change in prices. In addition, interest rates do not
necessarily move in the same direction or in the same magnitude as the
prices of goods and services. As discussed previously, management seeks
to manage the relationships between interest sensitive assets and liabilities
in order to protect against wide interest rate fluctuations, including those
resulting from inflation. See "Liquidity and Interest Rate Sensitivity"
above.
Year 2000 Issues
The Company spent considerable resources, primarily in time, to assess and
remedy the Year 2000 issue (y2k) as it relates to the operation of the banks.
No significant problems were encountered in January as a result of the
year change. During 1999, the Company incurred $2,507 of expense, above the
normal replacement costs, related to y2k compliance.
Item 7. Financial Statements
In response to this Item, the information included on pages 2 through 23
of the Company's Annual Report to Shareholders for the year ended
December 31, 1999, is incorporated herein by reference.
PART III
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
Not applicable.
Item 9. Directors and Executive Officers; Compliance with Section 16(a) of
the Exchange Act
In response to this item, the information included on pages 1 through 3 of
the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held May 3, 2000, is incorporated herein by reference.
Item 10. Executive Compensation
In response to this item, the information included on page 4 of the
Company's Proxy Statement for the Annual Meeting of Shareholders to be
held May 3, 2000, is incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
In response to this item, the information included on pages 4 through 5 of
the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held May 3, 2000, is incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
In response to this item, the information included on pages 2 through 3 of
the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held May 3, 2000, is incorporated herein by reference.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 of Registration Statement Form S-4, File No. 33-99762).
3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 of
Registration Statement Form S-4, File No. 33-99762).
13 Annual Report to Shareholders for the year ended December 31, 1999.
21 Subsidiaries of the Company.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1999.
SIGNATURES
In accordance with 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.
(Registrant)
Date: 2/18/2000 By: /s/Reese F. Cropper, Jr.
Reese F. Cropper, Jr.
President and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: 2/18/2000 By: /s/James R. Bergey, Jr.
James R. Bergey, Jr.
Director
Date: 2/18/2000 By: /s/James R. Bergey, Sr.
James R. Bergey, Sr.
Director
Date: 2/18/2000 By: /s/Richard L. Bunting
Richard L. Bunting
Director
Date: 2/18/2000 By: /s/John H. Burbage, Jr.
John H. Burbage, Jr.
Director
Date: 2/18/2000 By: /s/Reese F. Cropper, Jr.
Reese F. Cropper, Jr.
President, Chief Executive Officer
and Director
Date: 2/18/2000 By: /s/Hale Harrison
Hale Harrison
Director
Date: 2/18/2000 By: /s/Gerald T. Mason
Gerald T. Mason
Director
Date: 2/18/2000 By: /s/William H. Mitchell
William H. Mitchell
Vice President and Director
Date: 2/18/2000 By: /s/Joseph E. Moore
Joseph E. Moore
Director
Date: 2/18/2000 By: /s/Michael L Quillin
Michael L. Quillin
Director
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1998
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Financial Statements
December 31, 1999
Calvin B. Taylor Bankshares, Inc.
and subsidiaries
Table of Contents
Page
Report of independent auditors 1
Consolidated financial statements
Consolidated balance sheets 2
Consolidated statements of income 3
Consolidated statements of changes in
stockholders' equity 4
Consolidated statements of cash flows 5-6
Notes to consolidated financial statements 7-23
Report of Independent Auditors
The Board of Directors and Stockholders
Calvin B. Taylor Bankshares, Inc. and Subsidiaries
Berlin, Maryland
We have audited the accompanying consolidated balance sheets of Calvin B.
Taylor Bankshares, Inc. and Subsidiaries as of December 31, 1999, 1998, and
1997, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Calvin
B. Taylor Bankshares, Inc. and Subsidiaries as of December 31, 1999, 1998,
and 1997, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/Rowles and Company, LLP
Salisbury, Maryland
January 5, 2000
Calvin B. Taylor Bankshares, Inc.
and subsidiaries
Consolidated Balance Sheets
December 31,
1999 1998 1997
Assets
Cash and due from banks 18546576 12157944 9150979
Federal funds sold 15877383 33337435 20207703
Interest-bearing deposits 983000 1228000 1229000
Investment securities available for sale 3402096 2997137 2573450
Investment securities held to maturity
(approximate market value of $89,352,513,
$80,848,955, and $63,457,503) 89921935 80275711 63249260
Loans, less allowance for credit losses
of $2,082,031 $2,080,358,and $2,080,798 152000504 139757463 147190832
Premises and equipment 5858928 5530566 4152389
Accrued interest income 1928735 1869686 1790423
Intangible assets 161579 10603 107476
Deferred income taxes 222986 67354 104061
Other assets 17076 231351 137039
288920798 277463250 249892612
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing 39151702 36648979 33093588
Interest-bearing 199574150 193968706 173699610
238725852 230617685 206793198
Accrued interest payable 424042 456133 433344
Accrued income taxes 56490 0 21527
Mortgage and capital lease obligations 246413 0 61720
Other liabilities 247667 46233 5806
239700464 231120051 207315595
Stockholders' equity
Common stock, par value $1 per share;
authorized 2,000,000 shares; issued
and outstanding 1,620,000 shares in
1999 and 1998, and 810,000 in 1997 1620000 1620000 810000
Additional paid in capital 17290000 17290000 17290000
Retained earnings 30030340 26954680 24120666
48940340 45864680 42220666
Accumulated other comprehensive income 279994 478519 356351
49220334 46343199 42577017
288920798 277463250 249892612
The accompanying notes are an integral part of these financial statements.
Calvin B. Taylor Bankshares, Inc.
and subsidiaries
Consolidated Statements of Income
Years Ended December 31,
1999 1998 1997
Interest and dividend revenue
Loans, including fees 12070649 12383846 12793350
U. S. Treasury and agency securities 4056031 3483434 2856937
State and municipal securities 531857 489430 486343
Federal funds sold and securities
purchased under agreements to resell 1261883 1411818 1213039
Time certificates of deposit 59892 70757 69397
Equity securities 19264 15890 13200
Total interest and dividend revenue 17999576 17855175 17432266
Interest expense
Deposit interest 5775026 6301464 5965863
Other 3732 0 1820
Total interest expense 5778758 6301464 5967683
Net interest income 12220818 11553711 11464583
Provision for credit losses 5745 1175 50000
Net interest income after provision
for credit losses 12215073 11552536 11414583
Other operating revenue
Service charges on deposit accounts 724067 691945 607647
Other noninterest revenue 321260 304243 245631
Total other operating revenue 1045327 996188 853278
Other expenses
Salaries 2554963 2468954 2291375
Employee benefits 521346 583582 466490
Occupancy 413073 351601 366170
Furniture and equipment 511037 483506 450593
Other operating 1647193 1431860 1065408
Total other expenses 5647612 5319503 4640036
Income before income taxes and
cumulative effect of a change in
accounting method 7612788 7229221 7627825
Income taxes 2593128 2472274 2692922
Income before cumulative effect
of a change in accounting method 5019660 4756947 4934903
Cumulative effect of a change in
the method of accounting for
organization costs, net of taxes of $30,875 0 -59933 0
Net income 5019660 4697014 4934903
Earnings per common share
Income before cumulative effect of a
change in accounting method 3.10 2.94 3.05
Cumulative effect of a change in the
method of accounting for organization
costs, net of taxes 0 -0.04 0
Earnings per common share 3.10 2.90 3.05
The accompanying notes are an integral part of these financial statements.
Calvin B. Taylor Bankshares, Inc. and subsidiaries
Statements of Changes in Stockholders' Equity
Accumulated
other
Common stock Undivided compreh Compreh
Shares Par value Surplus profits income income
Balance, December 31,1996 810000 810000 17290000 21372763 226310
Net income 0 0 0 4934903 0 4934903
Unrealized gain on investment
securities available for sale
net of income taxes 0 0 0 0 130041 130041
Comprehensive income 5064944
Cash dividend, $1.35 per share 0 0 0 -2187000 0
Balance, December 31, 1997 810000 810000 17290000 24120666 356351
Net income 0 0 0 4697014 0 4697014
Stock split effected in the
form of a 100% stock div 810000 810000 0 -810000 0
Unrealized gain on investment
securities available for sale
net of income taxes 0 0 0 0 122168 122168
Comprehensive income 4819182
Cash dividend, $.65 per share 0 0 0 -1053000 0
Balance, December 31, 1998 1620000 1620000 17290000 26954680 478519
Net income 0 0 0 5019660 0 5019660
Unrealized gain on investment
securities available for sale
net of income taxes 0 0 0 0 -198525 -198525
Comprehensive income 4821135
Cash dividend, $1.20 per share 0 0 0 1944000 0
Balance, December 31, 1999 1620000 1620000 17290000 30030340 279994
The accompanying notes are an integral part of these financial statements.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31,
1999 1998 1997
Cash flows from operating activities
Interest received 17649136 17484837 6835399
Fees and commissions received 1029416 996155 856139
Interest paid -5810849 -6312142 -5962790
Cash paid to suppliers and employees -4864057 -4932100 -4297300
Income taxes paid -2413486 -2556102 -2885011
5590160 4680648 4546437
Cash flows from investing activities
Proceeds from maturities of investment securities 39025000 45815000 33192000
Purchase of investment securities held to maturity-49108227 -62741560-33399142
Certificates of deposits purchased, net of maturities245000 1000 194000
Loans made, net of principal collected -12248786 7435183 1818828
Sale (purchase) of foreclosed real estate 39000 -39000 0
Purchases of and deposits on premises, equipment,
software, and other intangibles -776547 -1724341 -1039865
Proceeds from sale of equipment 2400 0 0
-22822160 -11253718 765821
Cash flows from financing activities
Net increase (decrease) in
Time deposits 452474 6675598 -1673740
Other deposits 7655693 17148889 4169132
Payments on capital lease and mortgage obligations -3587 -61720 -64891
Dividends paid -1944000 -1053000 -2187000
6160580 22709767 243501
Net increase (decr) in cash and cash equivalents -11071420 16136697 5555759
Cash and cash equivalents at beginning of year 45495379 29358682 23802923
Cash and cash equivalents at end of year 34423959 45495379 29358682
The accompanying notes are an integral part of these financial statements.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
(Continued)
Years Ended December 31,
1999 1998 1997
Reconciliation of net income to net cash provided by
operating activities
Net income 5019660 4697014 4934903
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 418403 437177 347663
Provision for credit losses 5745 1175 50000
Deferred income taxesn -30721 -40160 -31560
Amortization of premiums and accretion of discounts,
net -291392 -324542 -433063
Charitable donation of property 128806 0 0
(Gain) loss on disposition of assets -2400 5860 0
Decrease (increase) in
Accrued interest receivable -59049 -79263 -163804
Other assets 175275 -55313 -100904
Increase (decrease) in
Accrued interest payable -32091 22789 4893
Accrued income taxes 56490 -21527 -59670
Other liabilities 201434 37438 -2021
5590160 4680648 4546437
Noncash Activity
Property acquired by issuance of debt 250000 0 0
The accompanying notes are an integral part of these financial statements.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
The accounting and reporting policies reflected in the financial statements
conform to generally accepted accounting principles and to general practices
within the banking industry.
Calvin B. Taylor Bankshares, Inc. is a bank holding company. Its
principal subsidiary, Calvin B. Taylor Banking Company, is a financial
institution operating primarily in Worcester County, Maryland. The other
subsidiary, Calvin B. Taylor Bank of Delaware, is a financial institution
operating primarily in Sussex County, Delaware. The Banks offer deposit
services and loans to individuals, small businesses, associations and
government entities. Other services include direct deposit of payroll
and social security checks, automatic drafts from accounts, automated teller
machine services, safe deposit boxes, money orders and travelers cheques.
The Banks also offer credit card services and discount brokerage services
through correspondents.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. These estimates and assumptions may affect the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from these estimates.
Principles of consolidation
The consolidated financial statements of Calvin B. Taylor Bankshares, Inc.
include the accounts of its wholly owned subsidiaries, Calvin B. Taylor
Banking Company and Calvin B. Taylor Bank of Delaware.
Cash equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold. Federal funds
are purchased and sold for one-day periods.
Investment securities
As securities are purchased, management determines if the securities
should be classified as held to maturity or available for sale. Securities
which management has the intent and ability to hold to maturity are recorded
at amortized cost which is cost adjusted for amortization of premiums and
accretion of discounts to maturity. Securities classified as available-for-
sale are recorded at fair value.
Gains and losses on disposal are determined using the specific-
identification method.
Premises and equipment
Premises and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed under both straight-line and accelerated methods
over the estimated useful lives of the assets.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies (Continued)
Intangible assets
In 1998, the Company adopted Statement of Position 98-5 of the Accounting
Standards Executive Committee of the American Institute of Certified Public
Accountants, Reporting on the Costs of Start-up Activities, which requires
that start-up costs and organization costs be expensed as incurred. During
1998, the Company wrote off organization costs, all of which were incurred
prior to 1998. Prior to 1998, organization costs were amortized over five
years.
The Company amortizes software costs over their useful lives using the
straight-line method.
Loans and allowance for credit losses
Loans are stated at face value less the allowance for credit losses.
Interest on loans is credited to income based on the principal amounts
outstanding. The accrual of interest is discontinued when any portion of
the principal or interest is ninety days past due and collateral is
insufficient to discharge the debt in full.
The allowance for credit losses is maintained at a level deemed appropriate
by management to provide adequately for known and inherent risks in the
loan portfolio. The allowance is based upon a continuing review of past
loan loss experience, current economic conditions which may affect the
borrowers' ability to pay, and the underlying collateral value of the loans.
If the current economy or real estate market were to suffer a severe
downturn, the estimate for uncollectible accounts would need to be increased.
Loans which are deemed to be uncollectible are charged off and deducted from
the allowance. The provision for credit losses and recoveries on loans
previously charged off are added to the allowance.
Loans are considered impaired when, based on current information,
management considers it unlikely that collection of principal and interest
payments will be made according to contractual terms. Generally, loans are
not reviewed for impairment until the accrual of interest has been
discontinued.
Income taxes
The provision for income taxes includes taxes payable for the current year
and deferred income taxes. Deferred income taxes are provided for the
temporary differences between financial and taxable income. Tax expense and
tax benefits are allocated to the banks and company based on their
proportional share of taxable income.
Per share data
Earnings per common share and dividends per common share are determined by
dividing net income and dividends by the 1,620,000 shares outstanding,
giving retroactive effect to the stock dividend distributed.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
2. Cash and Due From Banks
The Company normally carries balances with other banks that exceed the
federally insured limit. The average balances carried in excess of the
limit, including unsecured federal funds sold to the same banks, were
$25,041,212 for 1999, $26,371,278 for 1998, and $21,777,954 for 1997.
Banks are required to carry noninterest-bearing cash reserves at
specified percentages of deposit balances. The Company's normal amount of
cash on hand and on deposit with other banks is sufficient to satisfy the
reserve requirements.
3. Investment Securities
Investment securities are summarized as follows:
Amortized Unrealized Unrealized Market
cost gains losses value
December 31, 1999
Available for sale
U.S. Treasury 1993463 115297 0 2108760
Equity 952467 346869 6000 1293336
2945930 462166 6000 3402096
Held to maturity
U.S. Treasury 66466632 7153 386382 66087403
U.S. Government agency
obligations 10649787 0 119085 10530702
State and municipal 12805516 785 71893 12734408
89921935 7938 577360 89352513
December 31, 1998
Available for sale
U.S. Treasury 1993174 487625 0 2480799
Equity 224363 291975 0 516338
2217537 779600 0 2997137
Held to maturity
U.S. Treasury 64826398 504666 14311 65316753
U.S. Government agency
obligations 1000000 157 469 999688
State and municipal 14449313 87156 3955 14532514
80275711 591979 18735 80848955
December 31, 1997
Available for sale
U.S. Treasury 1992885 317115 0 2310000
Equity 0 263450 0 263450
1992885 580565 0 2573450
Held to maturity
U.S. Treasury 53890145 175832 3052 54062925
State and municipal 9359115 40321 4858 9394578
63249260 216153 7910 63457503
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
3. Investment Securities (Continued)
The amortized cost and estimated market value of debt securities, by
contractual maturity and the amount of pledged securities, follow. Actual
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
December 31, 1999 December 31, 1998 December 31, 1997
Amortized Market Amortized Market Amortized Market
cost value cost value cost value
Available for sale due
After ten years 1993463 2108760 1993174 2480799 1992885 2310000
Held to maturity due
In one year
or less 49004373 48908330 33406599 33531104 40640738 40725433
After one year
through five years 40917562 40444183 46869112 47317851 22608522 22732070
89921935 89352513 80275711 80848955 63249260 63457503
Pledged securities 4592597 4562493 5094242 5150876 5494785 5531876
Investments are pledged to secure deposits of federal and local governments.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
4. Loans and Allowance for Credit Losses
Major classifications of loans are as follows:
1999 1998 1997
Demand and time 17825019 16253621 13237003
Mortgage 130378776 118837336 129549396
Construction 824071 1795952 1372853
Installment 5054669 4950912 5112378
154082535 141837821 149271630
Allowance for credit losses 2082031 2080358 2080798
Loans, net 152000504 139757463 147190832
The rate repricing distribution of the loan portfolio follows:
Immediately 149036842 136750569 144169000
Within one year 302886 522434 427141
Over one to five years 4258632 4223521 4122176
Over five years 484175 341297 553313
154082535 141837821 149271630
Outstanding loan commitments and letters of credit are as follows:
Loan commitments
Construction and
land development 9486899 1470375 2616516
Other 4843120 6012019 1981942
14330019 7482394 4598458
Standby letters of credit
Secured by deposits 1380593 1200650 1021080
Other 123648 187215 98000
1504241 1387865 1119080
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
4. Loans and Allowance for Credit Losses (Continued)
Loan commitments are agreements to lend to customers as long as there is
no violation of any conditions of the contracts. Loan commitments generally
have interest at current market rates, fixed expiration dates, and may
require payment of a fee.
Letters of credit are commitments issued to guarantee the performance of a
customer to a third party.
Loan commitments and letters of credit are made on the same terms,
including collateral, as outstanding loans. The Company's exposure to
credit loss in the event of nonperformance by the borrower is represented
by the contract amount of the commitment.
The Company makes loans to customers located primarily in the Delmarva
region. Although the loan portfolio is diversified, its performance will
be influenced by the economy of the region.
Transactions in the allowance for credit losses were as follows:
1999 1998 1997
Beginning balance 2086336 2080798 2040475
Provision charged to operations 5745 1175 50000
Recoveries 14823 14479 8878
2106904 2096452 2099353
Loans charged off 21884 13105 18555
2085020 2083347 2080798
Change in allowance related
to loan commitments 2989 -2989 0
Ending balance 2082031 2086336 2080798
Amounts past due 90 days or more, and still accruing interest, and
nonaccrual loans are as follows:
December 31, 1999 December 31, 1998 December 31, 1997
Past due Nonaccrual Past due Nonaccrual Past due Nonaccrual
Demand and time 50371 0 303500 0 1645 0
Mortgage 0 0 194622 0 201047 0
Installment 1346 0 6887 0 12671 0
51717 0 505009 0 215363 0
Interest not accrued
on nonaccrual loans 0 0 0
Management has identified no impaired loans at December 31, 1999, 1998,
and 1997.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
5. Intangibles
A summary of intangible assets and the related amortization is as follows:
Estimated useful 1999 1998 1997
life
Computer software 3 - 5 years 330086 159388 159388
Other acquisition costs 3 - 25 years 0 1718 1718
Organization costs 5 years 0 0 110831
330086 161106 271937
Accumulated amortization 168507 150503 164461
Net intangible assets 161579 10603 107476
Amortization expense 19721 96873 18249
As a result of adopting Statement of Position 98-5, Reporting on the
Costs of Start-up Activities, during 1998 the Company wrote off organization
costs totaling $90,808.
6. Premises and Equipment
A summary of premises and equipment and the related depreciation is as
follows:
Estimated useful 1999 1998 1997
life
Land 1891950 2506475 1882545
Premises 5-50 years 4602879 4253722 3451955
Furniture and equipment 5-40 years 3678167 2875819 2294630
Property held under
capital lease 5 years 0 0 329303
10172996 9636016 7958433
Accumulated depreciation 4314068 4105450 3806044
Net premises and equipment 5858928 5530566 4152389
Depreciation expense 398682 340304 329414
The Company leased data processing equipment under a capital lease that
expired in 1998. The interest rate on the capital lease was imputed based
on the Company's incremental borrowing rate at the inception of the lease.
Real estate with an original cost of $250,000 is pledged to secure a note
payable with a balance of $246,413 as of December 31, 1999.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
7. Deposits
Major classifications of interest-bearing deposits are as follows:
1999 1998 1997
Money market and Supernow 52985409 57683937 55482239
Savings and NOW 76458281 66606783 55214983
Other time 70130460 69677986 63002388
199574150 193968706 173699610
Included in other time deposits are certificates of deposit of $100,000 or
more with the following maturities:
Three months or less 1394088 3962747 1490525
Over three through twelve months 9356422 9453247 5653695
Over one through five years 2067556 1181142 1203917
12818066 14597136 8348137
8. Mortgage Obligation
The Company purchased real estate, financing 100% of the purchase price.
The 6% mortgage has a final maturity of September, 2011.
Maturities of this mortgage are as follows:
2000 14896
2001 15815
2002 16790
2003 17826
2004 18925
Remaining years 162161
246413
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
9. Other Operating Expenses
The components of other operating expenses follow:
1999 1998 1997
Amortization of intangible assets 19721 6064 18249
Advertising 146341 141736 117356
Business and product development 57649 118252 14000
Courier service 93968 78900 66615
Deposit insurance 37917 19499 31666
Director fees 64120 71170 64352
Dues, donations, and subscriptions 83105 64451 58658
Donated real property 128806 0 0
Freight 57879 60697 47145
Liability insurance 64686 68460 56172
Postage 155092 154295 150210
Professional fees 61538 82128 63194
Stationery and supplies 309727 266527 163105
Telephone 82466 72682 61145
ATM fees 110791 84720 65207
Miscellaneous 173387 142279 88334
1647193 1431860 1065408
10. Income Taxes
The components of income tax expense, including taxes related to the
change in accounting method for origination costs, are as follows:
1999 1998 1997
Current
Federal 2369389 2218578 2346813
State 254460 262981 377669
2623849 2481559 2724482
Deferred -30721 -40160 -31560
2593128 2441399 2692922
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
10. Income Taxes (Continued)
The components of the deferred tax benefit are as follows:
1999 1998 1997
Provision for credit losses 243 -400 -15574
Pension expense -13973 0 1795
Depreciation -35808 -7511 -16247
Discount accretion 2795 -12412 11470
Health insurance premium deposits 8486 4837 -13350
Organization costs 7536 -24674 0
Nonaccrual loans 0 0 346
-30721 -40160 -31560
The components of the net deferred tax assets are as follows:
Deferred tax asset
Allowance for credit losses 562530 562773 562373
Health insurance premium deposits 27 8513 13350
Organization costs 17138 24674 0
579695 595960 575723
Deferred tax liabilities
Depreciation 168963 204771 212282
Pension 0 13973 13973
Discount accretion 11576 8781 21193
Unrealized gain on
securities available for sale 176170 301081 224214
356709 528606 471662
222986 67354 104061
A reconciliation of the provision for taxes on income from the statutory
federal income tax rates to the effective income tax rates follows:
1999 1998 1997
Statutory federal income tax rate 34% 34% 34%
Increase (decrease) in tax rate
resulting from
Tax-exempt income -2 -2.2 -1.9
State income taxes net of
federal income tax benefit 2.1 2.4 3.2
34.1% 34.2% 35.3%
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
11. Lease Commitments
The Company leases the land on which the Route 50 branch is located and
the branch office in South Pocomoke. Lease obligations will require
payments as follows:
Minimum
Period rentals
2000 28162
2001 28162
2002 28162
2003 15000
2004 15000
Remaining years 70000
184486
The Route 50 lease expires August 31, 2009.
The South Pocomoke lease provides for an increase in rent every five years
based on the consumer price index. The lease expires January 1, 2003. All
costs associated with the properties, including real estate taxes, are
obligations of the Company.
12. Profit Sharing and Pension Plans
In 1999, the Company adopted a defined contribution profit sharing plan
under Section 401(k) of the Internal Revenue Code. The plan covers
substantially all of the employees and allows discretionary Company
contributions. The Board of Directors approved contributions of 3% of
employee salaries and an additional matching of 50% of employee
contributions to a maximum of 6% of the employee wages.
The Company terminated its defined benefit pension plan during 1999. The
plan covered substantially all of the employees. Benefits were based on
years of service and the employee's average rate of earnings for the final
five full years before retirement. The total cost of the pension and profit
sharing plans for 1999, 1998, and 1997 were $155,869, $115,840, and $101,953,
respectively.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
13. Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments are
summarized below. The fair values of a significant portion of these
financial instruments are estimates derived using present value techniques
prescribed by the FASB and may not be indicative of the net realizable or
liquidation values. The calculation of estimated fair values is based on
market conditions at a specific point in time and may not reflect current
or future fair values.
December 31, 1999 December 31, 1998 December 31, 1997
Carrying Fair Carrying Fair Carrying Fair
amount value amount value amount value
Financial assets
Cash and due from
banks 18546576 18660884 12157944 12284957 9150979 9263907
Federal funds sold 15877383 15877383 33337435 33337435 20207703 20207703
Interest-bearing
deposits 983000 979200 1228000 1236676 1229000 1238186
Investment
securities (total) 93324031 92754609 83272848 83846092 65822710 66030953
Loans, net 152000504 151961767 139757463 139771766 147190832 146996644
Accrued interest
receivable 1928735 1928735 1869686 1869686 1790423 1790423
Financial liabilities
Noninterest-bearing
deposits 39151702 39151702 36648979 36648979 33093588 33093588
Interest-bearing
deposits 199574150 199607450 193968706 194296343 173699610 173776507
Capital lease and
mortgage
obligations 246413 246413 0 0 61720 61720
Accrued interest
payable 424042 424042 456133 456133 433344 433344
The fair value of silver coin included with cash is determined based on
quoted market prices.
The fair value of interest-bearing deposits with other financial
institutions is estimated based on quoted interest rates for certificates
of deposit with similar remaining terms.
The fair values of equity securities are determined using market
quotations. The fair values of debt securities are estimated using a
matrix that considers yield to maturity, credit quality, and marketability.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
13. Fair Value of Financial Instruments (Continued)
The fair value of fixed-rate loans is estimated to be the present value
of scheduled payments discounted using interest rates currently in effect
for loans of the same class and term. The fair value of variable-rate
loans, including loans with a demand feature, is estimated to equal the
carrying amount. The valuation of loans is adjusted for possible loan
losses.
The fair value of interest-bearing checking, savings, and money market
deposit accounts is equal to the carrying amount. The fair value of fixed-
rate time deposits is estimated based on interest rates currently offered
for deposits of similar remaining maturities.
It is not practicable to estimate the fair value of outstanding loan
commitments, unused lines, and letters of credit.
14. Related Party Transactions
The executive officers and directors of the Company enter into loan
transactions with the Bank in the ordinary course of business. The terms
of these transactions are similar to the terms provided to other borrowers
entering into similar loan transactions.
1999 1998 1997
Beginning balance 8641536 9466973 9482547
Advances 3095000 3034421 2651499
11736536 12501394 12134046
Repayments 1624714 3836363 2667073
Other changes 880794 23495 0
Ending balance 9231028 8641536 9466973
The Company obtains legal services from a law firm in which one of the
principal attorneys is also a member of the Board of Directors. Fees
charged for these services are at similar rates charged by unrelated law
firms for similar legal work. Amounts paid to this related party totaled
$3,746 and $4,374 during the years ended December 31, 1999 and 1997.
15. Lines of Credit
The Company has available lines of credit, including overnight federal
funds, reverse repurchase agreements and letters of credit, totaling
$19,000,000, as of December 31, 1999, and $15,000,000 as of December 31,
1998 and 1997.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
16. Capital Standards
The Federal Reserve Board and the Federal Deposit Insurance Corporation
have adopted risk-based capital standards for banking organizations. These
standards require ratios of capital to assets for minimum capital adequacy
and to be classified as well capitalized under prompt corrective action
provisions. The capital ratios and minimum capital requirements of the
Company are as follows:
Minimum To be well
Actual capital adequacy capitalized
(in thousands) Amount Ratio Amount Ratio Amount Ratio
December 31, 1999
Total capital
(to risk-weighted assets) 50589 38.4% 10520 8.0% 13150 10.0%
Tier 1 capital
(to risk-weighted assets) 48940 37.1% 5260 4.0% 7890 6.0%
Tier 1 capital
(to average fourth
quarter assets) 48940 17.5% 11691 4.0% 14614 5.0%
December 31, 1998
Total capital
(to risk-weighted assets) 47413 38.4% 9873 8.0% 12342 10.0%
Tier 1 capital
(to risk-weighted assets) 45864 37.2% 4937 4.0% 7405 6.0%
Tier 1 capital
(to average assets) 45864 17.5% 10513 4.0% 13142 5.0%
December 31, 1997
Total capital
(to risk-weighted assets) 43741 36.2% 9680 8.0% 12100 10.0%
Tier 1 capital
(to risk-weighted assets) 42221 34.9% 4840 4.0% 7260 6.0%
Tier 1 capital
(to average assets) 42221 16.7% 10090 4.0% 12612 5.0%
Tier 1 capital consists of capital stock, additional paid in capital, and
retained earnings. Total capital includes a limited amount of the allowance
for credit losses. In calculating risk-weighted assets, specific risk
percentages are applied to each category of asset and off-balance sheet
items.
Failure to meet the capital requirements could affect the Company's
ability to pay dividends and accept deposits, and may significantly affect
the operations of the Company.
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
17. Parent Company Financial Information
The Parent Only information for Calvin B. Taylor Bankshares, Inc. follows:
December 31,
Balance Sheets 1999 1998 1997
Assets
Cash and due from banks 151751 57056 255797
Interest-bearing deposits 100000 500000 500000
Securities available for sale 1293336 516338 263450
Investment in subsidiary banks 46061690 43609263 40598524
Premises and equipment 1639139 1668338 874125
Organization costs 0 0 90808
Other assets 18241 8721 2597
Total assets 49264157 46359716 42585301
Liabilities and Stockholders' Equity
Liabilities
Deferred income taxes 43823 16517 8284
Stockholders' equity
Common stock, par value $1.00
per share; authorized 2,000,000
shares; issued and outstanding
1,620,000 in 1999 and 1998, and
810,000 in 1997 1620000 1620000 810000
Additional paid-in capital 17290000 17290000 17290000
Retained earnings 30030340 26954680 24120666
Accumulated other comprehensive
income 279994 478519 356351
Total stockholders' equity 49220334 46343199 42577017
Total liabilities and
stockholders' equity 49264157 46359716 42585301
Statements of Income Years Ended December 31,
1999 1998 1997
Interest revenue 10240 33467 30586
Dividend revenue 19264 15890 13200
Dividends from subsidiaries 2344000 1803000 5929000
Equity in undistributed
income of subsidiaries 2680964 2906079 -1001768
Rental income 2925 2700 1575
5057393 4761136 4972593
Expenses
Occupancy 31570 8027 4476
Furniture and equipment 3423 2280 2616
Other 12418 65760 31406
47411 76067 38498
Income before income taxes 5009982 4685069 4934095
Income taxes (benefit) -9678 -11945 -808
Net income 5019660 4697014 4934903
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
17. Parent Company Financial Information (Continued)
Years Ended December 31,
Statements of Cash Flows 1999 1998 1997
Cash flows from operating activities
Interest and dividends received 2375011 1852499 5728997
Rental payments received 2925 2700 1575
Cash paid for operating expenses -18211 -35660 -27340
Income taxes refunded 7074 808 3162
2366799 1820347 5706394
Cash flows from investing activities
Organization costs 0 0 -58912
Organization costs reimbursed 0 58912 0
Purchase of premises and equipment 0 -800637 -614660
Investment in new subsidiary 0 0 -3000000
Purchase of equity securities -728104 -224363 0
Purchase of certificate of deposit 0 0 -500000
Redemption of certificate of deposit 400000 0 0
-328104 -966088 -4173572
Cash flows from financing activities
Dividends paid -1944000 -1053000 -2187000
Net increase (decrease) in cash 94695 -198741 -654178
Cash and equivalents at beginning of year 57056 255797 909975
Cash and equivalents at end of year 151751 57056 255797
Reconciliation of net income to net cash
provided by operating activities
Net income 5019660 4697014 4934903
Adjustments to reconcile net
income to net cash used in
operating activities
Undistributed net income
of subsidiary -2680964 -2906079 1001768
Noncash distribution from subsidiary 0 0 -242000
Amortization and depreciation 29200 38320 13121
Increase (decrease) in deferred
income taxes and other liabilities 8423 -2784 -1963
Decrease (increase) in other assets -9520 -6124 565
2366799 1820347 5706394
Calvin B. Taylor Bankshares, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
18. Quarterly Results of Operations (Unaudited)
Three months ended
December 31, September 30, June 30, March 31,
1999
Interest revenue 4607224 4669910 4410901 4311541
Interest expense 1439769 1439279 1407424 1492286
Net interest income 3167455 3230631 3003477 2819255
Provision for loan losses -7980 8670 4355 700
Net income 1273784 1402034 1299830 1044012
Comprehensive income 1611696 1200713 1111686 897040
Earnings per share 0.87 0.87 0.80 0.64
1998
Interest revenue 4543201 4622908 4371535 4317531
Interest expense 1624594 1660900 1520731 1495239
Net interest income 2918607 2962008 2850804 2822292
Provision for loan losses 0 1175 0 0
Net income 1117550 1292315 1133473 1153676
Comprehensive income 1057343 1424048 1187829 1149962
Earnings per share 0.69 0.80 0.70 0.71
1997
Interest revenue 4462491 4523650 4250828 4195297
Interest expense 1541685 1534663 1440196 1451139
Net interest income 2920806 2988987 2810632 2744158
Provision for loan losses 25000 0 25000 0
Net income 1282099 1352094 1114717 1185993
Comprehensive income 1384727 1414060 1149413 1116744
Earnings per share 0.79 0.84 0.69 0.73
This statement has not been reviewed, or confirmed for accuracy or relevance,
by the Federal Deposit Insurance Corporation.
Financial Data Schedule
Item December 31
Number 1999
9-03(1) Cash and due from banks 18,546,576
9-03(2) Interest-bearing deposits 983,000
9-03(3) Federal funds sold 15,877,383
9-03(4) Trading account assets
9-03(6) Investment and mortgage-backed securities
held for sale 3,402,096
9-03(6) Investment and mortgage-backed securities
held to maturity - carrying value 89,921,935
9-03(6) Investment and mortgage-backed securities
held to maturity - market value 89,352,513
9-03(7) Loans 154,082,535
9-03(7)(2)Allowance for losses 2,082,031
9-03(11) Total assets 288,920,798
9-03(12) Deposits 238,725,852
9-03(13) Short-term borrowings -
9-03(15) Other liabilities 728,199
9-03(16) Long-term debt 246,413
9-03(19) Preferred stock - mandatory redemption
9-03(20) Preferred stock - no mandatory redemption
9-03(21) Common stock 1,620,000
9-03(22) Other stockholders' equity 47,600,334
9-03(23) Total liabilities and stockholders' equity 288,920,798
Calvin B. Taylor Bankshares, Inc.
Financial Data Schedule
(continued)
Year Ended
Guide December 31
Number 1999
9-04(1) Interest and fees on loans 12,070,649
9-04(2) Interest and dividends on investments 4,607,152
9-04-(4) Other interest income 1,321,775
9-04-(5) Total interest income 17,999,576
9-04-(6) Interest on deposits 5,775,026
9-04-(9) Total interest expense 5,778,758
9-04-(10)Net interest income 12,220,818
9-04-(11)Provision for loan losses 5,745
9-04-(13)(h)Investment securities gains/(losses) -
9-04-(14)Other expenses 5,647,612
9-04(15)Income/loss before income tax 7,612,788
9-04(17)Income/loss before extraordinary items 7,612,788
9-04(18)Extraordinary items, less tax -
9-04(19)Cumulative change in accounting principles -
9-04(20)Net income or loss 5,019,660
9-04(21)Earnings per share - basic 3.10
9-04(21)Earnings per share - diluted 3.10
I.B.5 Net yield on interest earning assets 4.77 %
III.C.1(a)Loans on nonaccrual -
III.C.1(b)Accruing loans past due 90 days or more 51,717
III.C.1(c)Troubled debt restructuring -
III.C.2 Potential problem loans -
IV.A.1 Allowance for loan loss - beginning of period 2,083,347
IV.A.2 Total chargeoffs 21,884
IV.A.3 Total recoveries 14,823
IV.A.4 Allowance for loan loss - end of period 2,082,031
IV.B.1 Loan loss allowance allocated to domestic loans 2,082,031
IV.B.2 Loan loss allowance allocated to foreign loans -
IV.B.3 Loan loss allowance - unallocated -
48
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