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 June 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: 2,147,003 shares as of
August 12, 1996.
Transitional Small Business Disclosure Format (Check one): Yes ; No X
--- ---
<PAGE>
COLUMBIA BANCORP
C O N T E N T S
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Statements of Financial Condition as of
June 30, 1996 and December 31, 1995 3
Statements of Income for the Three Months and
Six Months Ended June 30, 1996 and 1995 4
Statements of Stockholders' Equity for the Six
Months Ended June 30, 1996 and the Years
Ended December 31, 1995 and 1994 5
Statements of Cash Flows for the Six Months
Ended June 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
(2)
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -----------
(unaudited)
ASSETS
<S> <C>
Cash and due from banks $ 13,181,589 $ 10,182,474
Federal funds sold 6,124,184 17,909,575
Investment securities ( fair value $25,604,711
in 1996 and $24,740,814 in 1995 ) 25,802,937 24,766,654
Securities available-for-sale 6,442,330 10,574,349
Residential mortgage loans originated-for-sale 1,274,455 1,045,170
Loans:
Commercial 28,858,825 29,274,548
Real estate development and construction 108,055,382 89,877,012
Real estate mortgage:
Residential 12,302,292 12,726,384
Commercial 12,527,756 9,107,672
Retail, principally residential equity
lines of credit 55,712,547 49,225,092
Credit card 1,370,957 1,527,825
----------- -----------
Total loans 218,827,759 191,738,533
Less: Unearned income, net of deferred
origination costs 1,195,353 1,047,163
Allowance for credit losses 3,287,210 2,929,177
----------- -----------
Loans, net 214,345,196 187,762,193
----------- -----------
Other real estate owned - 89,145
Investment in and advances to
limited partnerships 241,699 450,391
Property and equipment, net 7,012,588 6,580,100
Prepaid expenses and other assets 4,407,556 3,664,577
----------- -----------
Total Assets $ 278,832,534 $ 263,024,628
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 36,915,183 $ 32,553,238
Interest-bearing deposits 196,729,591 185,608,284
----------- -----------
Total deposits 233,644,774 218,161,522
Short-term borrowings 13,698,767 15,299,267
Accrued expenses and other liabilities 1,789,746 1,500,285
----------- -----------
Total liabilities 249,133,287 234,961,074
----------- -----------
Stockholders' Equity:
Common stock, $.01 par value per share;
authorized 9,550,000 shares; outstanding
2,147,003 shares and 2,145,753 shares,
respectively 21,470 21,457
Additional paid in capital 22,588,988 22,576,938
Retained earnings 7,117,164 5,513,921
Net unrealized loss on investments
available-for-sale (28,375) (48,762)
----------- -----------
Total stockholders' equity 29,699,247 28,063,554
----------- -----------
Total liabilities and
stockholders' equity $ 278,832,534 $ 263,024,628
=========== ===========
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
(3)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Six Months and Three MonthsEnded March 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- -----------
<S> <C>
Interest income:
Loans $ 11,249,465 $ 9,471,390 $ 5,755,948 $ 4,907,270
Investments securities 883,437 950,181 432,367 478,159
Federal funds sold 246,639 54,006 134,190 30,810
---------- ---------- ---------- -----------
Total interest income 12,379,541 10,475,577 6,322,505 5,416,239
---------- ---------- ---------- -----------
Interest expense:
Deposits 3,880,750 3,207,359 1,946,310 1,721,013
Short-term borrowings 233,877 597,450 117,508 311,983
---------- ---------- ---------- -----------
Total interest expense 4,114,627 3,804,809 2,063,818 2,032,996
---------- ---------- ---------- -----------
Net interest income 8,264,914 6,670,768 4,258,687 3,383,243
Provision for credit losses 360,000 232,000 175,400 116,000
---------- ---------- ---------- -----------
Net interest income after
provision for credit losses 7,904,914 6,438,768 4,083,287 3,267,243
---------- ---------- ---------- -----------
Noninterest income:
Gains and fees on sales of mortgage loans 371,356 259,467 194,335 113,825
Fees charged for services 454,730 324,872 236,726 177,205
Other 164,012 95,027 67,656 36,137
---------- ---------- ---------- -----------
Total noninterest income 990,098 679,366 498,717 327,167
---------- ---------- ---------- -----------
Noninterest expense:
Salaries and employee benefits 2,842,102 2,437,128 1,452,305 1,235,730
Equipment 383,122 331,827 197,989 169,308
Occupancy, net 523,020 310,131 267,275 154,055
Deposit insurance premiums and assessments 130,314 219,076 71,537 109,538
Marketing 258,519 195,785 118,527 88,318
Cash management services 222,626 192,994 123,874 103,167
Data processing 284,412 155,104 190,551 77,263
Professional fees 90,877 151,230 42,319 70,760
Loss on disposition of property - 128,466 - -
Equity in net loss of limited partnerships 48,000 48,000 24,000 24,000
Net expense (income) on other real estate owned 14,839 28,315 1,971 (10,461)
Other 772,539 654,108 441,031 338,724
---------- ---------- ---------- -----------
Total noninterest expense 5,570,370 4,852,164 2,931,379 2,360,402
---------- ---------- ---------- -----------
Income before income taxes 3,324,642 2,265,970 1,650,625 1,234,008
Income tax expense 1,292,000 875,450 641,000 476,800
---------- ---------- ---------- -----------
Net income $ 2,032,642 $ 1,390,520 $ 1,009,625 $ 757,208
========== ========== ========== ===========
Per share data:
Net income per common share:
Primary $ .90 $ 1.09 $ .45 $ .60
Fully diluted $ .90 $ .90 $ .45 $ .49
Cash dividends declared:
Common $ .20 $ .10 $ .10 $ .05
Preferred $ - $ 1.30 $ - $ .70
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
(4)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
( Information for the six months
ended June 30, 1996 is unaudited )
<TABLE>
<CAPTION>
Net
Unrealized
Loss on
Additional Investments 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
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
investments 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 - - - (429,399) - (429,399)
common stock
Stock options exercised - 13 12,050 - - 12,063
Net income - - - 2,032,642 - 2,032,642
Change in net unrealized
Loss on securities
available-for-sale - - - - 20,387 20,387
--------- --------- --------- ---------- ---------- -----------
Balance at June 30, 1996 $ - 21,470 2,588,988 7,117,164 (28,375) 29,699,247
========= ========= ========= ========== ========== ===========
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
(5)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------------------
1996 1995
----------- ----------
(unaudited)
<S> <C>
Cash flows from operating activities:
Net income $ 2,032,642 $ 1,390,520
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 373,751 313,240
Proceeds from the sale of residential
mortgage loans originated-for-sale 24,912,535 16,520,775
Disbursements for residential mortgage loans
originated-for-sale (25,141,820) (17,616,244)
Provision for credit losses 360,000 232,000
Net charge-offs (1,967) (94,783)
Provision for losses on other real estate owned 9,000 538
Increase in unearned income, net of
deferred origination costs 148,190 9,527
Loss on disposition of assets - 128,466
Decrease in investment in and advances
to limited partnerships 48,000 48,000
Decrease (increase) in prepaid expenses and
other assets (759,283) 292,301
Increase in accrued expenses and other liabilities 289,337 33,174
----------- -----------
Net cash provided by operating activities 2,270,385 1,257,514
----------- -----------
Cash flow provided by (used in) investing activities:
Loan disbursements in excess of principal repayments (26,392,216) (18,718,125)
Loan purchases (3,261,304) (292,400)
Loan sales 2,555,792 5,651,939
Purchases of investment securities (10,488,855) (3,495,495)
Proceeds from maturities and principal repayments
of investment securities 13,625,620 5,589,732
Additions to other real estate owned - (120,118)
Sales of other real estate owned 80,145 1,128,400
Purchases of property and equipment (817,657) (305,234)
Sales of property and equipment 15,582 -
Proceeds received on advances to limited partnerships 160,692 28,000
----------- -----------
Net cash used in investing activities (24,522,201) (10,533,301)
----------- -----------
Cash flow provided by (used in) financing activities:
Cash dividend distributed on preferred stock - (454,072)
Cash dividend distributed on common stock (429,275) (104,026)
Issuance of 685,903 shares of common stock, net of costs - 8,424,206
Proceeds from stock options exercised 12,063 47,329
Net increase in deposits 15,483,252 12,873,200
Decrease in short-term borrowings (1,600,500) (9,635,719)
----------- -----------
Net cash provided by financing activities 13,465,540 11,150,918
----------- -----------
Net increase (decrease) in cash and cash equivalents (8,786,276) 1,875,131
Cash and cash equivalents at beginning of period 28,092,049 13,527,352
----------- -----------
Cash and cash equivalents at end of period $ 19,305,773 $ 15,402,483
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid on deposits and short-term
borrowings $ 4,227,013 $ 3,803,333
Income taxes paid 1,513,750 825,000
Decrease in unrealized loss on securities
available-for sale, net of taxes 20,387 226,861
=========== ===========
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
(7)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of and for the six months
ended June 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 June 30, 1996 and for the
three and six months ended June 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 six months ended June 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 June 30, 1996 whose contract amounts represent
potential credit risk is as follows:
June 30, 1996
- --------------------------------------------------------------------------
(in thousands)
Commitments to extend credit(1) $111,817
Standby letters of credit 13,195
Limited recourse on mortgage
loans sold 8,750
- ---------------------------------------
(1) Includes unused lines of credit totaling $102.1 million
regardless of whether fee paid and whether adverse change
clauses exist. The amount also includes commitments to extend
new credit totaling $9.7 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 June 30, 1996, total deposits were $233.6 million.
Core deposits, defined as all deposits except certificates of deposit of
$100,000 or more, totaled $222.7 million or 95.3% of total deposits.
Stockholders' equity totaled $29.7 million at June 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 June 30, 1996, the Company had no advances
from the FHLB outstanding. Collateral must be pledged to the FHLB before
advances can be obtained. At June 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 $37.9 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 $19.3 million or 6.9% of total assets at June 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 had 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 June 30, 1996:
Minimun
Columbia Bankcorp Regulatory
June 30, 1996 Requirements
---------------------------------- ------------------------- --------------
Risk-based capital ratios
Tier 1 capital 12.07% 4.00%
Total capital 13.37 8.00
Tier 1 capital leverage ratios 11.10 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 June 30, 1996, the Company's loan portfolio, net of unearned income,
totaled $217.6 million, or 78.1% of its total assets of $278.8 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 $18.2 million or
67.2% of the $27.1 million increase in total loans. Increases in commercial
mortgages of $3.4 million and consumer loans of $6.5 million accounted for the
remainder of the growth. The real estate development and construction portfolio
consisted of the following at June 30, 1996:
Amount Percent
---------------------------------- ------------------------- --------------
(dollars in thousands)
Residential construction (1) $55,733 51.6%
Commercial construction 1,854 1.7
Residential land development 41,346 38.3
Resident land acquisition (2) 9,122 8.4
-------- -----
$108,055 100.0%
----------------------------- ======== =====
(1) Includes $17.3 million of loans to individuals for construction of their
primary personal residence.
(2) Includes $2.4 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 June 30,
1996, loans to individuals for the construction of their primary personal
residences accounted for $17.3 million of the $55.7 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 $38.4 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 June 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 June 30, 1996 the Allowance was 1.51%
of total loans, net of unearned income. The Allowance at June 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.
Six months ended June 30
-------------------------
1996 1995
- --------------------------------------------------------------------------
(dollars in thousands)
Allowance for credit losses-
beginning of period $ 2,929 $ 2,578
Provision for credit losses 360 232
Charge-offs (27) (135)
Recoveries 25 41
------ ------
Allowance for credit losses-
end of period $ 3,287 $ 2,716
====== ======
Allowance as a percentage of loans
receivable, net of unearned income 1.51% 1.55%
Allowance as a percentage of
non-performing and past due loans (1) 270.25% 132.43%
- ----------------------------------
(1) Non-performing and past due loans include loans on nonaccrual
status, restructured loans and loans past due 90 days or more.
At June 30, 1996 and 1995, non-performing and past-due loans
totaled $1.2 million and $2.1 million, 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.
(12)
<PAGE>
Results of Operations
The Company reported net income of $1.0 million and $2.0 million for
the three and six months ended June 30, 1996 as compared to $757,000 and $1.4
million for the corresponding periods during 1995, representing increases of
33.3% and 46.2%. Net income per share on a fully-diluted basis was $.45 for the
three months ended June 30, 1996 versus $.49 for the three months ended June 30,
1995 and $.90 for both the six months ended June 30, 1996 and 1995. Net income
per share on a fully-diluted basis remained flat for the six months ended June
30, 1996 and declined for the three months ended June 30, 1996 as compared to
the comparable periods in 1995 despite increases in net income as a result of
the effect of the issuance of 685,903 shares of common stock in June 1995.
Net Interest Income
Net interest income increased $1.6 million or 23.9% during the six
months ended June 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 91.9% during the six months ended
June 30, 1995 to 100.1% for the same period in 1996. Correspondingly, the net
yield on earning assets increased from 6.35% to 6.72% during the respective
periods.
The following table provides further analysis of the increase in net
interest income during the six months ended June 30, 1996 over the same period
in 1995.
Six months ended June 30, 1996
compared to the six months ended
June 30, 1995
- --------------------------------------------------------------------------------
Increase/(Decrease)
due to: (1)
Increase -------------------
(Decrease) Rate Volume
---------- ---- ------
(in thousands)
Interest income:
Loans $1,778 (98) 1,876
Investment securities and
securities available-for-sale (67) 72 (139)
Federal funds sold 193 15 178
------ ---- -----
Total interest income 1,904 (11) 1,915
------ ---- -----
Interest expense:
Deposits 673 112 561
Short-term borrowings (363) (148) (215)
------ ---- -----
Total interest expense 310 (36) 346
------ ---- -----
Net interest income $1,594 25 1,569
====== ==== =====
- ------------------------------------------
(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 $499,000 for the three months ended June 30,
1996 as compared to $327,000 for the corresponding period in 1995 and $990,000
for the six months ended June 30, 1996 as compared to $679,000 for the same
period in 1995. Growth in noninterest income during 1996 reflected improvement
in gains and fees recognized on the sale of mortgage loans and fees charged for
services. Gains and fees recognized on the sale of mortgage loans increased
$81,000 and $112,000 during the three months and six months ended June 30, 1996
as compared to the corresponding periods in 1995. The increases corresponded
with an increase in the volume of loans sold from $16.5 million during the six
months ended June 30, 1995 to $24.9 million during the six months ended June 30,
1996. Fees charged for services also contributed to the increase in noninterest
income and reflected growth in deposit accounts and increased business activity
associated with the Company's cash management services. Specifically, fees
charged for services increased $60,000 and $130,000 during the three months and
six months ended June 30, 1996 as compared to the same periods in 1995.
Noninterest Expense
Noninterest expense for the three months and six months ended June 30,
1996 increased $571,000 or 24.2% and $718,000 or 14.8% over the corresponding
periods in 1995. The overall increases in noninterest expense generally
corresponded with increased business activity, including loan growth, branch
expansion and the ongoing upgrade of data processing and management information
systems. Specifically, salaries and employee benefits increased $217,000 and
$405,000 during the three months and six months ended June 30, 1996 as compared
to the same periods in 1995 and represented the addition of 24 net new employees
since December 31, 1995 to accommodate growth in business activity as well as
merit increases. Occupancy costs increased $113,000 and $213,000 in the three
months and six months ended June 30, 1996 as compared to 1995 primarily as a
result of the opening of two full-service branch facilities. In addition,
equipment costs increased $29,000 and $51,000 during the three months and six
months ended June 30, 1996 over 1995 as a result of branch openings and
equipment upgrades in connection with improvements to the data processing and
management information systems. Also, data processing expense for the three
months and six months ended June 30, 1996 includes a charge of $75,000 for the
termination of the Company's existing data processing contract as part of the
overall improvement to the data processing systems.
The net increase in overhead during 1996 was mitigated by the
nonrecurring charge of $128,000 recorded in 1995 relating to the disposition of
property and the decline in deposit insurance premiums of $38,000 and $89,000
during the three months and six months ended June 30, 1996 as compared to 1995.
As noted in previous filings, the decline in deposit insurance premiums during
1996 resulted from the reduction in the assessment rate charged on deposits by
the Bank Insurance Fund from $.23 per $100 of deposits to $0 per $100 of
deposits. The assessment rate charged on deposits by the Savings Association
Insurance Fund ("SAIF") of $.23 per $100 of deposits remains unchanged.
Approximately 49% of the Company's deposits are assessed by SAIF.
(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 May 28, 1996, the Board of Directors of the Company declared a $.10 per share
cash dividend to common stockholders of record on June 18, 1996, payable July 5,
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
---------
11.1 Information used in the computation Page 17
of net income per share
27.1 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:
August 12, 1996 John M. Bond, Jr.
- --------------------------------- -----------------
Date President and Chief
Executive Officer
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER:
August 12, 1996 John A. Scaldara, Jr.
- --------------------------------- ---------------------
Date Corporate Secretary and
Chief Financial Officer
(16)
EXHIBIT 11.1
COLUMBIA BANCORP AND SUBSIDIARY
INFORMATION USED IN THE COMPUTATION
OF NET INCOME PER COMMON SHARE
For the Six Months Ended June 30, 1996 and 1995
1995
---------------------
Fully-
1996 (1) Primary Diluted
-------- ------- --------
Net income $2,032,642 1,390,520 1,390,520
Less accumulated dividends on Series A
preferred stock -- 157,776 --
---------- --------- ---------
Adjusted net income applicable to
common shares $2,032,642 1,232,944 1,390,520
========== ========= =========
Weighted average common shares
outstanding 2,147,003 1,045,024 1,215,521
Effect of dilutive stock options and
warrants 115,759 81,301 81,310
Effect of Series A preferred stock -- -- 248,707
---------- --------- ---------
Total weighted average shares
outstanding 2,262,762 1,126,325 1,545,529
========== ========= =========
Net income per common share $ .90 1.09 .90
========== ========= =========
- --------------------------------
(1) Represents both primary and fully-diluted earnings per share.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 13,181,589
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,124,184
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,442,330
<INVESTMENTS-CARRYING> 25,802,937
<INVESTMENTS-MARKET> 25,604,711
<LOANS> 218,906,861
<ALLOWANCE> (3,287,210)
<TOTAL-ASSETS> 278,832,534
<DEPOSITS> 233,644,744
<SHORT-TERM> 13,698,767
<LIABILITIES-OTHER> 1,789,746
<LONG-TERM> 0
0
0
<COMMON> 21,470
<OTHER-SE> 29,677,777
<TOTAL-LIABILITIES-AND-EQUITY> 278,832,534
<INTEREST-LOAN> 11,249,465
<INTEREST-INVEST> 883,437
<INTEREST-OTHER> 246,639
<INTEREST-TOTAL> 12,379,541
<INTEREST-DEPOSIT> 3,880,750
<INTEREST-EXPENSE> 4,114,627
<INTEREST-INCOME-NET> 8,264,914
<LOAN-LOSSES> 360,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,570,370
<INCOME-PRETAX> 3,324,642
<INCOME-PRE-EXTRAORDINARY> 2,032,642
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,032,642
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.90
<YIELD-ACTUAL> 6.72
<LOANS-NON> 718,267
<LOANS-PAST> 498,098
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 232,412
<ALLOWANCE-OPEN> (2,929,176)
<CHARGE-OFFS> 26,736
<RECOVERIES> 24,770
<ALLOWANCE-CLOSE> (3,287,210)
<ALLOWANCE-DOMESTIC> (3,287,210)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
