UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
0-22929
------------------
TALBOT BANCSHARES, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-2033630
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
18 East Dover Street, Easton, Maryland 21601
- --------------------------------------- ---------
(Address of Principal Executive Offices) (Zip Code)
(410) 822-1400
--------------------------------------------------
Registrant's Telephone Number, Including Area Code
---------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days Yes X . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
As of April 30, 2000, registrant had outstanding 1,194,157 shares of common
stock.
<PAGE>
INDEX
<TABLE>
<CAPTION>
Part I.
<S> <C> <C>
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets -
March 31, 2000 and 1999 (unaudited) and December 31, 1999 3
Condensed Consolidated Statements of Income -
Three months ended March 31, 2000 and 1999 (unaudited) 4
Condensed Consolidated Statements of Changes in Stockholders' Equity -
For the three months ended March 31, 2000 and 1999(unaudited) 5
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 2000 and 1999 (unaudited) 6
Notes to Condensed Consolidated Financial Statements (unaudited) 7
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
Part II.
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part I
Item 1. Financial Statements
TALBOT BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, March 31, December 31,
ASSETS: 2000 1999 1999
--------------- ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 7,893 $ 7,163 $ 5,535
Federal funds sold 6,630 12,863 24,714
Investment securities:
Held-to-maturity, at amortized cost (fair value of $6,295,
$15,742, $8,162, respectively) 6,450 15,689 8,302
Available for sale, at fair value 68,415 69,307 64,888
Loans, less allowance for credit losses ($2,808, $2,596,
$2,743, respectively) 225,487 198,864 216,033
Bank premise and equipment 2,974 2,983 2,978
Other real estate owned 139 119 74
Accrued interest receivable on loans and investment securities 2,451 2,494 2,122
Deferred income taxes 1,597 605 1,431
Other assets 944 1,047 992
---------- ---------- ---------
TOTAL ASSETS $ 322,980 $ 311,134 $ 327,069
======== ======== ========
LIABILITIES:
Deposits:
Non-interest bearing demand $ 28,942 $ 24,413 $ 31,691
NOW and Super NOW 49,605 56,437 50,104
Certificates of deposit $100,000 or more 54,147 43,986 58,324
Other time and savings 134,667 131,409 133,829
--------- --------- ---------
Total Deposits 267,361 256,245 273,948
Short term borrowings 17,754 19,161 16,343
Other liabilities 1,379 1,185 896
--------- --------- ---------
TOTAL LIABILITIES 286,494 276,591 291,187
--------- --------- ---------
STOCKHOLDERS' EQUITY:
Common Stock, Par Value $.01; authorized
25,000,000 shares; issued and
outstanding:
March 31, 2000 1,194,157
March 31, 1999 1,192,686
December 31, 1999 1,193,308 12 12 12
Surplus 12,760 12,688 12,724
Retained earnings 25,145 21,816 24,312
Accumulated other comprehensive income(loss) (1,431) 27 (1,166)
-------- --------- -----------
TOTAL STOCKHOLDERS' EQUITY 36,486 34,543 35,882
-------- --------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $322,980 $ 311,134 $ 327,069
======== ======== ===========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
TALBOT BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended March 31,
2000 1999
---- ----
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 4,677 $ 4,028
Interest and dividends on investment securities
Taxable 1,073 1,122
Tax-exempt 28 46
Federal funds sold 117 147
--------- ---------
Total interest income 5,895 5,343
--------- ---------
INTEREST EXPENSE
Certificates of deposit, $100,000 or more 702 632
Other deposits 1,714 1,681
Other interest 178 137
------- -------
Total interest expense 2,594 2,450
------- -------
NET INTEREST INCOME 3,301 2,893
PROVISION FOR CREDIT LOSSES 58 60
-------- -------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES 3,243 2,833
-------- -------
NONINTEREST INCOME
Service charges on deposit accounts 218 186
Other noninterest income 52 40
------- -------
Total noninterest income 270 226
------- -------
NONINTEREST EXPENSES
Salaries and employee benefits 994 915
Expenses of premises and fixed assets 205 191
Other noninterest expense 484 521
------- -------
Total noninterest expense 1,683 1,627
------- -------
INCOME BEFORE TAXES ON INCOME 1,830 1,432
Federal and State income taxes 639 482
------- -------
NET INCOME $ 1,191 $ 950
======= ======
Diluted earnings per common share $ .98 $ .79
Basic earnings per common share $ 1.00 $ .80
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
TALBOT BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
(Dollars in thousands)
Accumulated
other
Common Retained Comprehensive
Stock Surplus Earnings Income Total
----- ------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1999 $ 12 $ 12,663 $ 21,164 $445 $34,284
Comprehensive Income:
Net Income - - 950 - 950
Other Comprehensive income, net of tax:
Unrealized gain on available for sale
securities - - - (418) (418)
----------
Other comprehensive income - - - - 532
----------
Shares issued - 25 - - 25
Cash Dividends Paid $0.25 per share - - (298) - (298)
------------ ------------ ---------- -------------------- ----------
Balances, March 31, 1999 $ 12 $ 12,688 $ 21,816 $ 27 $ 34,543
========== ======== ======== ================= ========
Balances, January 1, 2000 $ 12 $ 12,724 $ 24,312 $(1,166) $ 35,882
Comprehensive Income:
Net Income - - 1,191 - 1,191
Other Comprehensive income, net of tax:
Unrealized (loss) on available for sale
securities - - - (265) (265)
---------
Other comprehensive income - - - - 926
----------
Shares issued - 36 - - 36
Cash Dividends Paid $0.30 per share - - (358) - (358)
------------ ------------ ---------- ---------------- ----------
Balances, March 31, 2000 $ 12 $ 12,760 $ 25,145 $ (1,431) $ 36,486
========== ======== ======== ============== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
TALBOT BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
<CAPTION>
For the Three Months Ended March 31,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,191 $ 950
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 136 152
Discount accretion on debt securities (95) (10)
Discount accretion on matured debt securities 2 10
Provision for credit losses, net 65 14
Loss on other real estate owned - 9
Net changes in:
Accrued interest receivable (329) (325)
Other assets 48 (4)
Accrued interest payable on deposits 48 59
Accrued expenses 435 196
------------- ----------
Net cash provided by operating activities 1,501 1,051
------------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and principal payments of securities
available for sale 16,998 7,096
Purchase of securities available for sale (20,920) (7,657)
Proceeds from maturities and principal payments of securities
held to maturity 2,162 559
Purchase of securities held to maturity (311) (2,382)
Net increase in loans (9,584) (5,862)
Purchase of loans - (1,400)
Proceeds from sale of loans - 165
Purchase of bank premises and equipment (94) (80)
Proceeds from sale of other real estate owned - 36
Proceeds from sale of premises and equipment 20 -
--------------- --------------
Net cash used in investing activities (11,729) (9,525)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand, NOW, money market and
savings deposits (2,186) 7,260
Net decrease in certificates of deposit (4,401) (944)
Net increase in securities sold under agreement to repurchase 1,411 2,050
Proceeds from issuance of common stock 36 25
Dividends paid (358) (298)
-------------- ------------
Net cash (used) provided by financing activities (5,498) 8,093
------------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (15,726) (381)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 30,249 20,407
------------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,523 $ 20,026
============ ===========
</TABLE>
6
<PAGE>
Talbot Bancshares, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) The consolidated financial statements conform to generally accepted
accounting principles and to general industry practices. The accompanying
interim financial statements are unaudited; however, in the opinion of
management all adjustments necessary to present fairly the financial
position at March 31, 2000 the results of operations for the three month
period ended March 31, 2000 and 1999, and cash flows for the three month
period ended March 31, 2000 and 1999 have been included. All such
adjustments are of a normal recurring nature. The results of operations for
the three month ended March 31, 2000 are not necessarily indicative of the
results to be expected for the full year.
2) Year to date basic earnings per share is arrived at by dividing net income
available to common stockholders by the weighted average number of common
shares outstanding during the period of 1,193,339 share for 2000 and
1,192,225 shares for 1999.
The diluted earnings per share calculation is arrived at by dividing net
income by the weighted average number of shares outstanding, adjusted for
the dilutive effect of outstanding options and warrants. The adjusted
average shares for the three months ended March 31, 2000 and 1999 were
1,213,968 and 1,207,541, respectively.
3) Under the provisions of Statements of Financial Accounting Standards (SFAS)
Nos. 114 and 118, "Accounting by Creditors for Impairment of a Loan" a loan
is considered impaired if it is probable that the Company will not collect
all principal and interest payments according to the loan's contracted
terms. The impairment of a loan is measured at the present value of
expected future cash flows using the loan's effective interest rate, or at
the loan's observable market price or the fair value of the collateral of
the loan is collateral dependent. Interest income generally is not
recognized on specific impaired loans unless the likelihood of further loss
is remote. Interest payments received on such loans are applied as a
reduction of the loan principal balance. Interest income on other
nonaccrual loans is recognized only to the extent of interest payments
received.
Information with respect to impaired loans and the related valuation allowance
is shown below:
<TABLE>
<CAPTION>
March 31, March 31, December 31,
(Dollars in thousands) 2000 1999 1999
- ---------------------- -------- --------- ------------
<S> <C> <C> <C>
Impaired loans with valuation allowance $ - $ 78 $ -
Impaired loans with no valuation allowance 717 754 773
-------- ------ ------
Total impaired loans $ 717 $ 832 $ 773
======== ====== =======
Allowance for credit losses applicable to impaired loans $ - $ 48 $ -
Allowance for credit losses applicable to other than impaired loans 2,808 2,548 2,743
------- ------ -----
Total allowance for credit losses $ 2,808 $ 2,596 $ 2,743
======= ====== ======
Interest income on impaired loans recorded on the cash basis $ 8 $ 8 $ 32
========== ========= ========
</TABLE>
Interest income of $21 thousand would have been recorded for the period
ended March 31, 2000 had the loans been current and in accordance with
their original terms. Impaired loans do not include groups of smaller
balance homogenous loans such as residential mortgage and consumer
installment loans that are evaluated collectively for impairment. Reserves
for probable credit losses related to these loans are based upon historical
loss ratios and are included in the allowance for credit losses.
4) In the normal course of business, to meet the financial needs of its
customers, the Bank is a party to financial instruments with off-balance
sheet risk. These financial instruments include commitments to extend
credit and standby letters of credit. At March 31, 2000 total commitments
to extend credit were approximately $49,509,000. Outstanding letters of
credit total commitments included were approximately $3,680,000 at March
31, 2000.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Forward-Looking Information
Portions of this Quarterly Report on Form 10-Q contain forward-looking
statements within the meaning of The Private Securities Litigation Reform
Act of 1995. Such statements are not historical facts and include
expressions about the Company's confidence, policies, and strategies, the
adequacy of capital levels, and liquidity. Such forward-looking statements
involve certain risks and uncertainties, including economic conditions,
competition in the geographic and business areas in which the Company and
its affiliates operate, inflation, fluctuations in interest rates,
legislation, and governmental regulation. These risks and uncertainties are
described in more detail in the Company's Form 10-K, under the heading
"Risk Factors." Actual results may differ materially from the such forward
looking statements, and the Company assumes no obligation to update forward
looking statements at any time.
Overview
Net income for the first quarter of 2000 was $1,191,000 an increase of 25%
over the $950,000 for the first quarter of 1999. On a per share basis
earnings were $ .98 compared to $ .79 for the same period last year. Return
on average assets was 1.49% for the first quarter of 2000 compared to 1.26%
for the first quarter of 1999. Return on average stockholders' equity was
13.04% compared to 10.77% for the first three months of 2000 and 1999,
respectively.
Increased volume of loans are the primary source of earnings growth. This
growth was funded by an increase in deposits and a decline in investment
securities. The average balance of loans increased $27.6 million to $223
million at March 31, 2000 compared to March 31, 1999. The average balance
of deposits increased $12 million to $264 million at March 31, 2000
compared to one year ago.
Net Interest Income
Net interest income on a fully tax equivalent basis for the three months
ended March 31, 2000 was $397,000 higher than the same period last year due
to an increase in average loans. The net interest margin increased 28 basis
points to 4.37% compared to 4.09% one year ago. Loan growth was funded by a
decline in investment securities and federal funds sold, as well as an
increase in deposits. The average yield on loans increased from 8.38% to
8.43% for the quarter when compared to the same period last year. The rate
paid on interest bearing deposits was 4.08% for the quarter compared to
4.07% one year ago. See the Analysis of Interest Rates and Interest
Differentials on Page 11 for further details.
Loans comprised 73.2% and 67.3% of total average earning assets at March
31, 2000 and 1999, respectively.
Non-interest Income
Total non-interest income increased 19.5% in the first quarter of 2000 when
compared to the same period in 1999. This increase is due to increased
service charges assessed on deposit accounts, Automated Teller Machine fees
assessed on non-bank customer transactions and income from non-deposit
product sales.
Non-interest expense
Total non-interest expense, excluding taxes and the provision for loan
losses, increased 3.4% for the quarter ended March 31, 2000 from the
comparable period in 1999. This increase is due to increases in salaries
and employee benefits with an offsetting decline in general overhead
expenses for the quarter.
Analysis of Financial Condition
Total loans increased $9,519,000 or 4.4% totalling $228,295,000 at March
31, 2000 compared to $218,776,000 at December 31, 1999. Total deposits
decreased $6,587,000 or 2.4% totalling $267,361,000 at March 31, 2000
compared to $273,948,000 at December 31, 1999. Investment securities
remained relatively unchanged from December 31, 1999, totalling $74,865,000
at March 31, 2000. Loan growth was funded primarily through a $18 million
decline in federal funds sold. Federal funds sold totalled $6,630,000 at
March 31, 2000 compared to $24,714,000 at December 31, 1999.
8
<PAGE>
Liquidity and Capital Resources
The Bank derives liquidity through increased customer deposits, maturities
in the investment portfolio, loan repayments and income from earning
assets. At March 31, 2000 the Company's liquidity ratio was approximately
17%. There are no known trends or demands, commitments, events or
uncertainties that management is aware of which will materially affect the
Bank's ability to maintain liquidity at satisfactory levels.
Total Stockholders' equity was $36.5 million at March 31, 2000, 5.6% higher
than one year ago. Net unrealized losses on investment securities available
for sale increased $1,404,000 compared to March 31, 1999 and $265,000
compared to December 31, 1999.
Bank regulatory agencies have adopted various capital standards for
financial institutions, including risk-based capital standards. The primary
objectives of the risk-based capital framework are to provide a more
consistent system for comparing capital positions of financial institutions
and to take into account the different risks among financial institutions'
assets and off-balance sheet items.
Risk-based capital standards have been supplemented with requirements for a
minimum Tier 1 capital to assets ratio (leverage ratio). In addition,
regulatory agencies consider the published capital levels as minimum levels
and may require a financial institution to maintain capital at higher
levels.
A comparison of the capital as of March 31, 2000, with the minimum
requirements is presented below.
Minimum
Actual Requirements
------ ------------
Tier 1 Risk-based Capital 15.97% 4.00%
Total Risk-based Capital 17.17% 8.00%
Leverage Ratio 11.76% 4.00%
Loans and Allowance for Credit Losses
The Company has established an allowance for credit losses, which is increased
by provisions charged against earnings and recoveries of previously charged-off
debts. The allowance is decreased by current period charge-off of uncollectible
debts. Management evaluates the adequacy of the allowance for credit losses on a
quarterly basis and adjusts the provision for credit losses based upon this
analysis. The evaluation of the adequacy of the allowance for credit losses is
based on a risk rating system of individual loans as well as collective
evaluation of smaller balance homogenous loans based on factors such as past
credit loss experience, local economic trends, non-performing and problem loans,
and other factors which may impact collectibility. A loan is placed on
nonaccrual when it is specifically determined to be impaired and principal and
interest is delinquent for 90 days or more.
The following table summarizes past due and non-performing assets of the
Company.
<TABLE>
<CAPTION>
March 31, March 31, December 31,
Non-performing Assets: 2000 1999 1999
------------ ------------ ----------------
<S> <C> <C> <C>
Non-accrual loans 717 832 773
Other real estate owned 139 119 74
-------- ------- --------
856 951 847
Past due loans 814 1,362 1,146
------- ------- -------
Total non-performing and past due loans $1,670 $2,313 $1,993
====== ====== ======
</TABLE>
9
<PAGE>
The provision for credit losses for the three month periods ended March 31, 2000
and 1999 was $58,000 and $60,000, respectively. The Company had net recoveries
of $7 thousand for the first quarter of 2000 compared to net charge-offs of $46
thousand for the same period last year. Despite this improvement, management has
continued to increase the allowance for credit losses through the provision
based on its evaluation and analysis of the allowance, including consideration
of general economic conditions, growth of the loan portfolio and past credit
loss experience. The allowance for credit losses as a percentage of average
loans was 1.26% and 1.33% as of March 31, 2000 and 1999, respectively. Based on
Management's quarterly evaluation of the adequacy of the allowance for credit
losses, Management feels that the allowance credit losses and the related
provision are adequate at March 31, 2000.
The following table presents a summary of the activity in the Allowance for
Credit Losses.
<TABLE>
<CAPTION>
Three Months Ended March 31,
(Dollars in thousands) 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Allowance balance - beginning of year $ 2,743 $ 2,582
Charge-offs:
Commercial and other - 13
Real estate - 25
Consumer 11 14
-------- ----------
Totals 11 52
-------- -------
Recoveries:
Commercial 4 2
Real Estate 5 -
Consumer 9 4
--------- ---------
Totals 18 6
--------- --------
Net (Recoveries)Charge-offs: (7) 46
Provision for credit losses 58 60
--------- --------
Allowance balance-ending $ 2,808 $ 2,596
========= =========
Average Loans outstanding during period $223,073 $195,450
======== ========
Net charge-offs (annualized) as a percentage of
average loans outstanding during period (.01)% .09%
========== ==========
Allowance for credit losses at period end as a
percentage of average loans 1.26% 1.33%
======== ========
</TABLE>
Because the Company's loans are predominately real estate secured, weaknesses in
the local real estate market may have an adverse effect on collateral values.
The Company does not have any concentrations of loans in any particular
industry, nor does it engage in foreign lending activities.
10
<PAGE>
Analysis of Interest Rates and Interest Differentials.
The following table presents the distribution of the average consolidated
balance sheets, interest income/expense and yields earned and rates paid through
the first three months of the year.
<TABLE>
March 31, 2000 March 31, 1999
-------------- --------------
<CAPTION>
Average Income Yield Average Income Yield
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Investment Securities $ 73,906 $1,115 6.04% $ 82,704 $ 1,192 5.85%
Loans 223,073 4,687 8.43 195,450 4,039 8.38
Federal Funds Sold 7,958 117 5.87 12,295 147 5.78
--------- -------- ---- --------- -------- ----
Total earning assets 304,937 5,919 7.76% 290,449 5,378 7.51%
------- ----- ----- -----
Non-interest earning assets 13,510 12,145
--------- ---------
Total Assets $318,447 $302,594
======== ========
Interest bearing liabilities
Interest bearing deposits $237,433 $ 2,416 4.08% $228,759 $2,313 4.10%
Borrowings 16,658 178 4.27 15,235 137 4.68
--------- ------- ---- --------- ------ ----
Total interest bearing liabilities 254,091 2,594 4.08 243,994 2,450 4.07
------ ---- ------ ----
Non-interest bearing liabilities 27,738 23,233
Stockholders' equity 36,249 35,367
-------- --------
Total liabilities and stockholders' equity $318,078 $302,594
======== ========
Net interest spread $3,325 3.68% $2,928 3.43%
Net interest margin 4.37% 4.09%
<FN>
(1) All amounts are reported on a tax equivalent basis computed using the
statutory federal income tax rate exclusive of the alternative minimum tax
rate of 34% and nondeductible interest expense.
(2) Average loan balances include non-accrual loans.
(3) Loan fee income is included in interest income for each loan category and
yields are stated to include all.
</FN>
</TABLE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company utilizes a simulation model to quantify the effect a hypothetical
plus or minus 200 basis point change in rates would have on net interest income
and the fair value of capital. The model takes into consideration the effect of
call features of investments as well as prepayments of loans in periods of
declining rates. When actual changes in interest rates occur the changes in
interest earning assets and interest bearing liabilities may differ from the
assumptions used in the model. As of December 31, 1999 the model produced the
following sensitivity profile for net interest income and the fair value
capital:
<TABLE>
<CAPTION>
Immediate Change in Rates
----------------------------------------------------------
+200 Basis Points -200 Basis Points Policy Limit
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
% Change in Net Interest Income 15.0% (17.9%) +/-25%
% Change in Fair Value of Capital 2.5% (7.0%) +/-15%
</TABLE>
Based on the composition of the Balance Sheet and the current interest rate
environment the results of this simulation would not be materially different at
March 31, 2000.
11
<PAGE>
Part II
Other Information
Item 4. Submission of Matters to Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on April 26, 2000, the
stockholders elected four individual to serve as a Director until the 2003
Annual Meeting of Stockholders, and until their successors are duly elected and
qualify. The Company submitted the matter to a vote through the solicitation of
proxies. The results of the election are as follows:
Class II Nominees (Term expires 2003) For Against Abstain
--- ------- -------
Gary L. Fairbank 919,480 8,334 0
Ronald N. Fox 925,324 2,490 0
Richard C. Granville 926,264 1,550 0
Jerome M. McConnell 920,984 6,830 0
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit 27 - Financial Data Schedule
b) No Forms 8-K filed.
12
<PAGE>
Signatures
Under the requirements of the Securities Exchange Act of 1934, the Company has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
TALBOT BANCSHARES, INC.
Date: May 12, 2000 By: /s/ W. Moorhead Vermilye
---------------------------------------------
W. Moorhead Vermilye
President
Date: May 12, 2000 By: /s/ Susan E. Leaverton
---------------------------------------------
Susan E. Leaverton, CPA
Treasurer/Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS AS OF AND FOR THE PERIOD ENDED
MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 1043056
<NAME> TALBOT BANCSHARES, INC.
<MULTIPLIER> 1000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 7,893
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,630
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68,415
<INVESTMENTS-CARRYING> 6,450
<INVESTMENTS-MARKET> 6,295
<LOANS> 228,295
<ALLOWANCE> 2,808
<TOTAL-ASSETS> 322,980
<DEPOSITS> 267,361
<SHORT-TERM> 17,754
<LIABILITIES-OTHER> 1,379
<LONG-TERM> 0
0
0
<COMMON> 12
<OTHER-SE> 36,474
<TOTAL-LIABILITIES-AND-EQUITY> 322,980
<INTEREST-LOAN> 4,677
<INTEREST-INVEST> 1,073
<INTEREST-OTHER> 28
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</TABLE>
