THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T.
FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1996
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-24302
COLUMBIA BANCORP
(exact name of small business issuer as specified in its charter)
Maryland 52-1545782
- ------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10480 Little Patuxent Parkway, Columbia, Maryland 21044
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(410) 465-4800
- --------------------------------------------------------------------------------
Issuer's telephone number
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 2,148,004 shares as of
November 12, 1996.
Transitional Small Business Disclosure Format (Check one): Yes ; No X
----- -----
<PAGE>
COLUMBIA BANCORP
C O N T E N T S
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements:
Statements of Financial Condition as of
September 30, 1996 and December 31, 1995 3
Statements of Income for the Three Months and
Nine Months Ended September 30, 1996 and 1995 4
Statements of Stockholders' Equity for the Nine
Months Ended September 30, 1996 and the Years
Ended December 31, 1995 and 1994 5
Statements of Cash Flows for the Nine Months
Ended September 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
(2)
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- --------------
(unaudited)
<S> <C>
ASSETS
Cash and due from banks $ 17,432,741 $ 10,182,474
Federal funds sold 1,707,256 17,909,575
Investment securities ( fair value $35,842,890
in 1996 and $24,740,814 in 1995 ) 35,969,267 24,766,654
Securities available-for-sale 5,403,125 10,574,349
Residential mortgage loans originated-for-sale 903,566 1,045,170
Loans:
Commercial 29,194,259 29,274,548
Real estate development and construction 109,089,879 89,877,012
Real estate mortgage:
Residential 13,008,441 12,726,384
Commercial 12,215,344 9,107,672
Retail, principally residential equity
lines of credit 61,901,513 49,225,092
Credit card 1,462,167 1,527,825
------------- --------------
Total loans 226,871,603 191,738,533
Less: Unearned income, net of deferred
origination costs 1,134,683 1,047,163
Allowance for credit losses 3,400,663 2,929,177
------------- --------------
Loans, net 222,336,257 187,762,193
------------- --------------
Other real estate owned - 89,145
Investment in and advances to limited partnerships - 450,391
Property and equipment, net 7,232,690 6,580,100
Prepaid expenses and other assets 5,047,311 3,664,577
------------- --------------
Total Assets $ 296,032,213 $ 263,024,628
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 42,418,107 $ 32,553,238
Interest-bearing deposits 200,931,988 185,608,284
------------- --------------
Total deposits 243,350,095 218,161,522
Short-term borrowings 20,690,066 15,299,267
Accrued expenses and other liabilities 1,742,345 1,500,285
------------- --------------
Total liabilities 265,782,506 234,961,074
------------- --------------
Stockholders' Equity:
Commonstock, $.01 par value per share;
authorized 9,550,000 shares;
outstanding 2,147,278 shares
and 2,145,753 shares, respectively 21,473 21,457
Additional paid in capital 22,591,485 22,576,938
Retained earnings 7,653,280 5,513,921
Net unrealized loss on investments
available-for-sale (16,531) (48,762)
------------- --------------
Total stockholders' equity 30,249,707 28,063,554
------------- --------------
Total liabilities and
stockholders' equity $ 296,032,213 $ 263,024,628
============= ==============
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
(3)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months and Three Months Ended September 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------ ------------ -----------
<S> <C>
Interest income:
Loans $ 17,205,776 $ 14,514,642 $ 5,956,311 $ 5,043,252
Investment securities 1,408,011 1,412,625 524,574 462,444
Federal funds sold 305,807 257,336 59,168 203,330
------------- ------------ ------------ -----------
Total interest income 18,919,594 16,184,603 6,540,053 5,709,026
------------- ------------ ------------ -----------
Interest expense:
Deposits 5,893,572 5,114,686 2,012,822 1,907,327
Short-term borrowings 436,376 694,819 202,499 97,369
------------- ------------ ------------ -----------
Total interest expense 6,329,948 5,809,505 2,215,321 2,004,696
------------- ------------ ------------ -----------
Net interest income 12,589,646 10,375,098 4,324,732 3,704,330
Provision for credit losses 549,501 334,000 189,501 102,000
------------- ------------ ------------ -----------
Net interest income after
provision for credit losses 12,040,145 10,041,098 4,135,231 3,602,330
------------- ------------ ------------ -----------
Noninterest income:
Gains and fees on sales of mortgage loans 563,502 510,185 192,146 250,718
Fees charged for services 707,033 529,305 252,303 204,433
Other 238,257 145,552 74,245 50,525
------------- ------------ ------------ -----------
Total noninterest income 1,508,792 1,185,042 518,694 505,676
------------- ------------ ------------ -----------
Noninterest expense:
Salaries and employee benefits 4,299,426 3,721,830 1,457,324 1,284,702
Equipment 584,296 495,964 201,174 164,137
Occupancy, net 808,919 483,598 285,899 173,467
Deposit insurance premiums and assessments 681,990 276,129 551,676 57,053
Marketing 377,903 259,845 119,384 64,060
Cash management services 342,873 307,354 120,247 114,360
Data processing 404,956 236,778 120,544 81,674
Professional fees 159,959 275,627 69,082 124,397
Loss on disposition of property - 128,466 - -
Equity in net loss of limited partnerships 87,390 72,000 39,390 24,000
Net expense (income) on other real estate owned 11,040 57,731 (3,799) 29,416
Other 1,235,773 1,014,424 463,234 360,316
------------- ------------ ------------ -----------
Total noninterest expense 8,994,525 7,329,746 3,424,155 2,477,582
------------- ------------ ------------ -----------
Income before income taxes 4,554,412 3,896,394 1,229,770 1,630,424
Income tax expense 1,770,400 1,505,150 478,400 629,700
------------- ------------ ------------ -----------
Net income $ 2,784,012 $ 2,391,244 $ 751,370 $ 1,000,724
============= ============ ============ ===========
Per share data:
Net income per common share:
Primary $ 1.23 $ 1.50 $ .33 $ .45
Fully diluted $ 1.23 $ 1.33 $ .33 $ .45
Cash dividends declared:
Common $ .30 $ .15 $ .10 $ .05
Preferred $ - $ 1.30 $ - $ -
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
(4)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Information for the nine months
ended September 30, 1996 is unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Loss on
Additional Securities Total
Preferred Common Paid-in Retained Available- Stockholders'
Stock Stock Capital Earnings for-Sale Equity
----------- ----------- ------------ ------------ ------------ --------------
<S> <C>
Balance at December 31, 1993 $ 4,500 10,400 14,209,093 1,235,104 - 15,459,097
Cash dividends declared on
Series A preferred stock - - - (540,000) - (540,000)
Cash dividends declared on
common stock - - - (145,636) - (145,636)
Stock options exercised - 2 2,498 - - 2,500
Net income - - - 2,415,664 - 2,415,664
Net unrealized loss on
securities available-
for-sale - - - - (318,548) (318,548)
----------- ----------- ------------ ------------ ------------ --------------
Balance at December 31, 1994 4,500 10,402 14,211,591 2,965,132 (318,548) 16,873,077
Cash dividends declared on
Series A preferred stock - - - (454,072) - (454,072)
Cash dividends declared on
common stock - - - (425,889) - (425,889)
Conversion of 444,000 shares
of Series A preferred stock,
net of cash in lieu of
fractional shares (4,440) 4,144 170 - - (126)
Issuance of 685,903 shares of
common stock, net of costs
of issuance - 6,859 8,380,840 - - 8,387,699
Redemption for cash of 6,000
shares of Series A preferred
stock (60) - (62,940) - - (63,000)
Stock options exercised - 52 47,277 - - 47,329
Net income - - - 3,428,750 - 3,428,750
Change in net unrealized
loss on securities
available-for-sale - - - - 269,786 269,786
----------- ----------- ------------ ------------ ------------ --------------
Balance at December 31, 1995 - 21,457 22,576,938 5,513,921 (48,762) 28,063,554
Cash dividends declared on - - - (644,653) - (644,653)
common stock
Stock options exercised - 16 14,547 - - 14,563
Net income - - - 2,784,012 - 2,784,012
Change in net unrealized
loss on securities
available-for-sale - - - - 32,231 32,231
----------- ----------- ------------ ------------ ------------ --------------
Balance at September 30, 1996 $ - 21,473 22,591,485 7,653,280 (16,531) 30,249,707
=========== =========== ============ ============ ============ ==============
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
(5)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------------
1996 1995
-------------- --------------
(unaudited)
<S> <C>
Cash flows from operating activities:
Net income $ 2,784,012 $ 2,391,244
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 562,631 471,669
Proceeds from the sale of residential
mortgage loans originated-for-sale 36,145,605 30,431,850
Disbursements for residential mortgage loans
originated-for-sale (36,004,001) (30,301,375)
Provision for credit losses 549,501 334,000
Net charge-offs (78,014) (179,543)
Provision for losses on other real estate owned 9,000 25,538
Increase in unearned income, net of
deferred origination costs 87,520 176,499
Loss on disposition of assets - 128,466
Decrease in investment in and advances
to limited partnerships 87,390 72,000
Increase in prepaid expenses and other assets (1,408,545) (8,891)
Increase in accrued expenses and other
liabilities 241,935 139,164
-------------- --------------
Net cash provided by operating activities 2,977,034 3,680,621
-------------- --------------
Cash flow provided by (used in) investing activities:
Loan disbursements in excess of principal repayments (37,603,543) (26,658,523)
Loan purchases (3,656,380) (331,809)
Loan sales 6,114,100 10,755,820
Purchases of investment securities and securities
available-for-sale (22,477,035) (4,493,915)
Proceeds from maturities and principal repayments
of investment securities and securities
available-for-sale 16,510,226 8,019,166
Additions to other real estate owned - (142,004)
Sales of other real estate owned 80,145 1,379,816
Purchases of property and equipment (1,234,070) (486,554)
Sales of property and equipment 25,064 -
Proceeds received on investments in and advances
to limited partnerships 363,001 28,000
-------------- --------------
Net cash used in investing activities (41,878,492) (11,930,003)
-------------- --------------
Cash flow provided by (used in) financing activities:
Cash dividend distributed on preferred stock - (454,072)
Cash dividend distributed on Series A common stock (644,529) (104,026)
Issuance of 685,903 shares of common stock, net of costs - 8,387,699
Proceeds from stock options exercised 14,563 47,329
Cash distributed in lieu of fractional shares upon
conversion of preferred stock - (126)
Redemption of preferred stock - (63,000)
Net increase in deposits 25,188,573 19,174,754
Purchase of deposits - 5,492,853
Increase (decrease) in short-term borrowings 5,390,799 (6,836,238)
-------------- --------------
Net cash provided by financing activities 29,949,406 25,645,173
-------------- --------------
Net increase (decrease) in cash and cash equivalents (8,952,052) 17,395,791
Cash and cash equivalents at beginning of period 28,092,049 13,527,352
-------------- --------------
Cash and cash equivalents at end of period $ 19,139,997 $ 30,923,143
============== ==============
Supplemental disclosures of cash flow information:
Interest paid on deposits and short-term borrowings $ 6,406,855 $ 5,768,123
Income taxes paid 2,414,750 1,325,000
Decrease in unrealized loss on securities
available-for sale, net of taxes 32,231 259,265
============== ==============
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
(6)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of and for the nine months
ended September 30, 1996 and 1995 is unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements for Columbia Bancorp
(the "Company") have been prepared in accordance with the instructions for Form
10-QSB and, therefore, do not include all information and notes necessary for a
fair presentation of financial condition, results of operations and cash flows
in conformity with generally accepted accounting principles. The consolidated
financial statements should be read in conjunction with the audited financial
statements included in the Company's 1995 Annual Report on Form 10-KSB.
The consolidated financial statements include the accounts of the
Company's subsidiary, The Columbia Bank and its wholly-owned subsidiary McAlpine
Enterprises, Inc. (collectively, the "Bank"). All significant intercompany
balances and transactions have been eliminated.
The consolidated financial statements as of September 30, 1996 and for
the nine months ended September 30, 1996 and 1995 are unaudited but include all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair presentation of financial position and results of
operations for those periods. The Consolidated Statements of Income for the
three and nine months ended September 30, 1996 are not necessarily indicative of
the results that will be achieved for the entire year.
NOTE 2 - PER SHARE DATA
Net income per common share is based upon the weighted average number
of common shares outstanding during the periods, adjusted by any outstanding
stock options, warrants, and other instruments determined to be common stock
equivalents.
NOTE 3 - COMMITMENTS AND CONTINGENT LIABILITIES
The Company is party to financial instruments with off-balance-sheet
risk in the normal course of business in order to meet the financing needs of
customers. These financial instruments include commitments to extend credit,
standby letters of credit and mortgage loans sold with limited recourse.
The Company applies the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. A summary
of the financial instruments at September 30, 1996 whose contract amounts
represent potential credit risk is as follows:
September 30, 1996
- -----------------------------------------------------------------
(in thousands)
Commitments to extend credit(1) $112,112
Standby letters of credit 13,803
Limited recourse on mortgage
loans sold 8,274
- -----------------------------------------
(1) Includes unused lines of credit totaling $100.1 million
regardless of whether fee paid and whether adverse change
clauses exist. The amount also includes commitments to extend
new credit totaling $12.0 million.
(7)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity
Liquidity describes the ability of the Company to meet financial
obligations, including lending commitments and contingencies, that arise during
the normal course of business. Liquidity is primarily needed to meet the
borrowing and deposit withdrawal requirements of the customers of the Company,
as well as to meet current and planned expenditures.
The Company's major sources of liquidity ("financing activities" as
used in the Consolidated Statements of Cash Flows) are the Bank's deposit base
and stockholders' equity. At September 30, 1996, total deposits were $243.4
million. Core deposits, defined as all deposits except certificates of deposit
of $100,000 or more, totaled $233.3 million or 95.9% of total deposits.
Stockholders' equity totaled $30.2 million at September 30, 1996. Also, the Bank
has established a credit line with the Federal Home Loan Bank of Atlanta
("FHLB") as an additional source of liquidity. At September 30, 1996, the
Company had $7.0 million in advances from the FHLB outstanding. Collateral must
be pledged to the FHLB before advances can be obtained. At September 30, 1996
the Company's approved credit limit with the FHLB was $32.0 million and the
Company had collateral sufficient to borrow up to $48.2 million. Borrowings
above the approved credit limit require special approval. In addition, liquidity
is also provided through the Company's portfolio of cash, interest-bearing
deposits in other banks, and federal funds sold. Such assets totaled $19.1
million or 6.5% of total assets at September 30, 1996.
Capital Resources
Bank holding companies currently are required to maintain a minimum
ratio of total capital to risk-weighted assets (including certain
off-balance-sheet activities, such as standby letters of credit) of 8%. At least
half of the total capital is required to be "Tier 1 capital", consisting of
common equity, retained earnings, noncumulative perpetual preferred stock and a
limited amount of cumulative perpetual preferred stock, less certain goodwill
items and other intangible assets. The remainder ("Tier 2 capital") may consist
of (a) the allowance for loan losses of up to 1.25% of risk-weighted risk
assets, (b) excess of qualifying perpetual preferred stock, (c) hybrid capital
instruments, (d) perpetual debt, (e) mandatory convertible debt securities, and
(f) a limited amount of subordinated debt and intermediate-term preferred stock
up to 50% of Tier 1 capital. The maximum amount of supplementary capital
elements that qualifies as Tier 2 capital is limited to 100% of Tier 1 capital
net of goodwill and certain other intangible assets. Total capital is the sum of
Tier 1 and Tier 2 capital less reciprocal holdings of other banking
organizations' capital instruments, investments in unconsolidated subsidiaries
and any other deductions as determined by the Federal Reserve Board (determined
on a case by case basis or as a matter of policy after formal rule-making).
In addition to the risk-based capital guidelines, the Federal Reserve
Board has adopted a minimum Tier 1 capital leverage ratio, under which a bank
holding company must maintain a minimum level of Tier 1 capital to average total
consolidated assets of at least 3% in the case of a bank holding company that
has the highest regulatory examination rating and is not contemplating
significant growth or expansion. All other bank holding companies are expected
to maintain a leverage ratio of at least 1.0% to 2.0% above the stated minimum.
The leverage capital ratio assists in the assessment of the capital adequacy of
bank holding companies. Its principal objective is to place a constraint on the
maximum degree to which a banking organization can leverage its equity capital
base, even if it invests primarily in assets with low risk-weights.
(8)
<PAGE>
The following table summarizes the Company's capital ratios at September 30,
1996:
Minimun
Columbia Bancorp Regulatory
September 30, 1996 Requirements
- --------------------------------------- ------------------------- --------------
Risk-based capital ratios
Tier 1 capital 11.88% 4.00%
Total capital 13.13 8.00
Tier 1 capital leverage ratios 10.51 3.00
(9)
<PAGE>
Material Changes in Financial Condition
Cash and Due from Banks
Cash and due from banks represents cash on hand, cash on deposit with
other banks and cash items in the process of collection. As a result of the
Company's cash management services provided to large, sophisticated corporate
customers (which includes processing coin and currency transactions for, and
checks received by, retail customers), the Company's cash balances may fluctuate
more widely on a daily basis and may be higher than industry averages for banks
of a similar asset size.
Loans
At September 30, 1996, the Company's loan portfolio, net of unearned
income, totaled $225.7 million, or 76.3% of its total assets of $296.0 million.
The categories of loans in the Company's portfolio are commercial, real estate
development and construction, residential and commercial mortgages and consumer.
Real estate development and construction loans constitute the largest
portion of the Company's lending activities. Since December 31, 1995, real
estate development and construction loans have accounted for $19.2 million or
54.7% of the $35.1 million increase in total loans. Increases in retail loans of
$12.7 million, representing principally residential equity lines of credit, and
commercial mortgages of $3.1 million accounted for the remainder of the growth.
The real estate development and construction portfolio consisted of the
following at September 30, 1996:
Amount Percent
---------------------------------------------------------------
(dollars in thousands)
Residential construction (1) $ 52,954 48.5%
Commercial construction 2,798 2.6
Residential land development 46,277 42.4
Residential land acquisition (2) 7,061 6.5
-------- -----
$109,090 100.0%
======== =====
--------------------------
(1) Includes $13.9 million of loans to individuals for construction
of their primary personal residence.
(2) Includes $2.5 million of loans to individuals for the purchase
of residential building lots.
The real estate development and construction loan portfolio primarily
represents loans for the construction of single family dwellings. At September
30, 1996, loans to individuals for the construction of their primary personal
residences accounted for $13.9 million of the $53.0 million residential
construction portfolio. These loans are typically secured by the property under
construction, frequently include additional collateral (such as a second
mortgage on the borrower's present home), and commonly have maturities of six to
twelve months. The remaining $39.1 million of residential construction loans
represented loans to residential builders and developers. Approximately 45% of
these loans were for the construction of residential homes for which a binding
sales contract existed and the prospective buyers had been pre-qualified for
permanent mortgage financing by either third-party lenders (mortgage companies
or other financial institutions) or the Company. To date, permanent mortgage
loan financing has primarily been provided by third-party lenders. The Company
attempts to obtain the permanent mortgage loan under terms, conditions and
documentation standards which permit the sale of the mortgage loan in the
secondary mortgage loan market. The Company's practice is to immediately sell
substantially all residential mortgage loans in the secondary market with
servicing released.
(10)
<PAGE>
Loans for the development of residential land represented the second
largest component of the real estate development and construction loan portfolio
at September 30, 1996. Generally, development loans are extended only when
evidence is provided that the lots under development will be sold to builders
satisfactory to the Company.
The Company makes residential real estate development and construction
loans generally to provide interim financing on property during the construction
period. These loans are typically made for 80% or less of the appraised value of
the property. Residential real estate development and construction loan funds
are disbursed periodically as pre-specified stages of completion are attained
based upon site inspections. Interest rates on these loans are usually
adjustable.
The Company has successfully limited losses in this area of lending
through careful monitoring of development and construction loans with on-site
inspections and control of disbursements on loans in process. Development and
construction loans are secured by the properties under development/ construction
and personal guarantees are typically obtained. Further, to assure that reliance
is not placed solely upon the value of the underlying collateral, the Company
considers the financial condition and reputation of the borrower and any
guarantors, the amount of the borrower's equity in the project, independent
appraisals, cost estimates and pre-construction sale information.
Allowance for Credit Losses
The Company provides for credit losses through the establishment of an
allowance for credit losses (the "Allowance") by provisions charged against
earnings. Based upon management's evaluation, monthly provisions are made to
maintain the Allowance at a level adequate to absorb potential losses within the
loan portfolio. The factors used by management in determining the adequacy of
the Allowance include the historical relationships among loans outstanding;
credit loss experience and the current level of the Allowance; a continuing
evaluation of non-performing loans and loans classified by management as having
potential for future deterioration taking into consideration collateral value
and the financial strength of the borrower and guarantors; and a continuing
evaluation of the present and future economic environment. Regular review of the
loan portfolio's quality is conducted by the Company's staff. In addition,
independent consultants, bank regulatory agencies and independent accountants
periodically review the loan portfolio. At September 30, 1996 the Allowance was
1.51% of total loans, net of unearned income. The Allowance at September 30,
1996 is considered by management to be sufficient to address the possible risks
in the loan portfolio given current conditions and information.
(11)
<PAGE>
The changes in the Allowance are presented in the following table.
Nine months ended September 30
------------------------------------
1996 1995
-----------------------------------------------------------------------
(dollars in thousands)
Allowance for credit losses-
beginning of period $2,929 $2,578
Provision for credit losses 550 334
Charge-offs (108) (227)
Recoveries 30 48
------ ------
Allowance for credit losses-
end of period $3,401 $2,733
====== ======
Allowance as a percentage of loans
receivable, net of unearned income 1.51% 1.53%
Allowance as a percentage of
non-performing and past-due loans(1) 88.00% 314.86%
----------------------------------
(1) Non-performing and past-due loans include loans on nonaccrual
status, restructured loans and loans past due 90 days or more.
At September 30, 1996 and 1995, non-performing and past-due
loans totaled $3.9 million and $868,000, respectively. There
is no direct relationship between the size of the Allowance
(and the related provision for credit losses) and the
non-performing and past-due loans. Accordingly, the ratio of
Allowance to non-performing and past-due loans may tend to
fluctuate significantly.
Loans on nonaccrual status increased from $1.1 million at December 31, 1995 to
$3.7 million at September 30, 1996. Of the $2.6 million increase, $2.3 million
represented loans to a single borrower and its related entities, all of which
are secured by residential real estate in various stages of completion. In
addition, at September 30, 1996, the underlying real estate of loans on
nonaccrual status totaling approximately $651,000 had been sold at foreclosure
auction. The sales represent full recovery of principal and are expected to
settle in the fourth quarter of 1996.
(12)
<PAGE>
Results of Operations
The Company reported net income for the three months ended September
30, 1996 of $751,000 or $.33 per share compared to $1.0 million or $.45 per
share for the corresponding period in 1995. Core operating earnings remained
strong. However, the Company recorded a special one-time after-tax charge of
$299,000 or $.14 per share as a result of congressional legislation providing
for the recapitalization of the Savings Association Insurance Fund ("SAIF").
This one-time charge also affected approximately 700 other commercial banks
which acquired deposits from savings institutions and should result in
significant future reductions in deposit insurance premiums paid by the Company.
Return on average assets and return on average equity were 1.05% and 10.13%,
respectively, for the third quarter. If adjusted to exclude the one-time SAIF
assessment, return on average assets and return on average equity would have
been 1.47% and 14.15%, respectively.
Net income was $2.8 million for the nine months ended September 30,
1996 as compared to $2.4 million for the corresponding period in 1995. Earnings
per share for the nine months ended September 30, 1996 were $1.23 ($1.37 if
adjusted to exclude the one-time SAIF assessment) compared to $1.33 for 1995.
While net income, adjusted to exclude the one-time SAIF assessment, increased
28.9% from period to period, earnings per share, as adjusted, increased only
3.0% as a result of the successful completion of the June 27, 1995 common stock
offering which included the issuance of 862,500 shares. Return on average assets
and return on average equity were 1.36% and 12.75%, respectively, through the
nine months ended September 30, 1996. If adjusted to exclude the one-time SAIF
assessment, return on average assets and return on average equity would have
been 1.51% and 14.11%, respectively.
Net Interest Income
Net interest income increased $2.2 million or 21.3% during the nine
months ended September 30, 1996 as compared to the same period in 1995.
Improvement in net interest income was primarily the result of the continued
growth of the loan portfolio. The ratio of average loans, net of unearned income
to average interest-bearing liabilities increased from 92.2% during the nine
months ended September 30, 1995 to 101.4% for the same period in 1996.
Correspondingly, the net yield on earning assets increased from 6.40% to 6.68%
during the respective periods.
The following table provides further analysis of the increase in net
interest income during the nine months ended September 30, 1996 over the same
period in 1995.
<TABLE>
<CAPTION>
Nine months ended September 30, 1996
compared to the nine months ended
September 30, 1995
- ----------------------------------------------------------------------------------------------
Increase/(Decrease)
Increase due to: (1)
-----------------------
(Decrease) Rate Volume
-----------------------------------------
(in thousands)
<S> <C>
Interest income:
Loans $ 2,691 (166) 2,857
Investment securities and
securities available-for-sale (5) 71 (76)
Federal funds sold 49 33 16
------- ------- -------
Total interest income 2,735 (62) 2,797
------- ------- -------
Interest expense:
Deposits 778 47 731
Short-term borrowings (258) (126) (132)
------- ------- -------
Total interest expense 520 (79) 599
------- ------- -------
Net interest income $ 2,215 17 2,198
======= ======= =======
</TABLE>
------------------------------------------
(1) The changes in interest income and interest expense due to
both rate and volume have been allocated to rate and volume
changes in proportion to the absolute dollar amounts of the
change in each.
(13)
<PAGE>
Noninterest Income
Noninterest income totaled $519,000 for the three months ended
September 30, 1996 as compared to $506,000 for the corresponding period in 1995
and $1.5 million for the nine months ended September 30, 1996 as compared to
$1.2 million for the same period in 1995. Growth in noninterest income during
1996 primarily reflected increases in fees charged for services of $48,000 and
$178,000 for the three months and nine months ended September 30, 1996 over the
same periods in 1995. These increases resulted from an increasing deposit
account base as well as improved business activity associated with the company's
cash management services. Gains on the sales of mortgage loans also contributed
to the growth in noninterest income during the nine months ended September 30,
1996, increasing $53,000 over the same period in 1995. However, a decline in
loans sold from $13.9 million to $11.2 million during the three months ended
September 30, 1995 as compared to the corresponding period of 1996 resulted in a
decline of $59,000 in gains recognized for the quarter.
Noninterest Expense
Noninterest expense for the three months and nine months ended
September 30, 1996 increased $947,000 or 38.2% and $1.7 million or 22.7% over
the corresponding periods in 1995. The increase during each period was, in large
part, the result of the special one-time deposit insurance assessment of
$487,000 pre-tax recorded by the Company in September, 1996. As previously
mentioned, the charge represented that mandated by Congress in an effort to
recapitalize the SAIF. The increase in noninterest expenses also corresponded
with increased business activity, including related marketing efforts, and the
ongoing upgrade of data processing and management information systems.
Specifically, salaries and employee benefits increased $173,000 and $578,000
during the three months and nine months ended September 30, 1996 as compared to
the same periods in 1995 and primarily represented the addition of 19 net new
employees since December 31, 1995. Growth in the employee base has been
necessary to accommodate increased business activity, including branch
expansion. Occupancy costs increased $112,000 and $325,000 during the three
months and nine months ended September 30,1996 as compared to 1995 as a result
of branch expansion efforts. Also as a result of expansion efforts, marketing
costs increased $55,000 and $118,000 during these same periods as compared to
1995. In addition, equipment costs increased $37,000 and $88,000 during the
three and nine months ended September 30, 1996, respectively, as compared to
1995 and reflected the upgrade of data processing systems as well as general
expansion efforts.
The increase in noninterest expense during 1996 was mitigated by
decreases in professional fees, expenses associated with other real estate owned
and losses on the disposition of assets.
(14)
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On August 30, 1996, the Board of Directors of the Company declared a $.10 per
share cash dividend to common stockholders of record on September 13, 1996,
payable October 7, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K are set forth below.
Exhibit No. Reference
11.0 Information used in the computation Page 17
of net income per share
27.0 Financial Data Schedule Page 18
(b) Reports on Form 8-K
None
(15)
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
COLUMBIA BANCORP
PRINCIPAL EXECUTIVE:
November 12, 1996 John M. Bond, Jr.
- ----------------------------------- -----------------
Date President and Chief
Executive Officer
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER:
November 12, 1996 John A. Scaldara, Jr.
- ----------------------------------- ---------------------
Date Corporate Secretary and
Chief Financial Officer
(16)
EXHIBIT 11.0
COLUMBIA BANCORP AND SUBSIDIARY
INFORMATION USED IN THE COMPUTATION
OF NET INCOME PER COMMON SHARE
For the Nine Months Ended September 30, 1996 and 1995
1995
-------------------------
Fully-
1996 (1) Primary Diluted
----------- ----------- -----------
Net income $ 2,784,012 2,391,244 2,391,244
Less accumulated dividends on
Series A preferred stock - 184,072 -
----------- ----------- -----------
Adjusted net income applicable to
common shares $ 2,784,012 2,207,172 2,391,244
=========== =========== ===========
Weighted average common shares
outstanding 2,146,840 1,388,373 1,690,112
Effect of dilutive stock options and
warrants 110,265 83,467 102,462
----------- ----------- -----------
Total weighted average shares
outstanding 2,257,105 1,471,840 1,792,574
=========== =========== ===========
Net income per common share $ 1.23 1.50 1.33
=========== =========== ===========
- ------------------------------------------
(1) Represents both primary and fully-diluted earnings per share.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> $17,432,741
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,707,256
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,403,125
<INVESTMENTS-CARRYING> 35,969,267
<INVESTMENTS-MARKET> 35,842,890
<LOANS> 226,640,486
<ALLOWANCE> (3,400,663)
<TOTAL-ASSETS> 296,032,213
<DEPOSITS> 243,350,095
<SHORT-TERM> 20,690,066
<LIABILITIES-OTHER> 1,742,345
<LONG-TERM> 0
0
0
<COMMON> 21,473
<OTHER-SE> 30,228,234
<TOTAL-LIABILITIES-AND-EQUITY> 296,032,213
<INTEREST-LOAN> 17,205,776
<INTEREST-INVEST> 1,408,011
<INTEREST-OTHER> 305,807
<INTEREST-TOTAL> 18,919,594
<INTEREST-DEPOSIT> 5,893,572
<INTEREST-EXPENSE> 6,329,948
<INTEREST-INCOME-NET> 12,589,646
<LOAN-LOSSES> 549,501
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,994,525
<INCOME-PRETAX> 4,554,412
<INCOME-PRE-EXTRAORDINARY> 2,784,012
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,784,012
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
<YIELD-ACTUAL> 6.68
<LOANS-NON> 3,720,215
<LOANS-PAST> 143,440
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 310,718
<ALLOWANCE-OPEN> (2,929,176)
<CHARGE-OFFS> 108,293
<RECOVERIES> 30,279
<ALLOWANCE-CLOSE> (3,400,663)
<ALLOWANCE-DOMESTIC> (3,400,663)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
