FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(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, 1997
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934
For the transition period from _____________ to ______________
Commission file number 0-24302
COLUMBIA BANCORP
(exact name of registrant 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
- --------------------------------------------------------------------------------
(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
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 2,165,437 shares as of
August 11, 1997.
<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
June 30, 1997 and December 31, 1996 3
Statements of Income for the Six Months and Three Months
Ended June 30, 1997 and 1996 4
Statements of Stockholders' Equity for the Six
Months Ended June 30, 1997 and the Years
Ended December 31, 1996 and 1995 5
Statements of Cash Flows for the Six Months
Ended June 30, 1997 and 1996 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>
June 30, December 31,
1997 1996
------------- -------------
(unaudited)
<S> <C>
ASSETS
Cash and due from banks $ 15,966,069 $ 17,753,174
Federal funds sold 4,781,217 3,477,436
Investment securities ( fair value $54,471,141
in 1997 and $39,839,135 in 1996) 54,412,355 39,795,128
Securities available-for-sale 3,220,610 4,353,884
Residential mortgage loans originated-for-sale 2,685,771 1,551,408
Loans:
Commercial 33,881,558 30,517,140
Real estate development and construction 121,471,093 112,837,758
Real estate mortgage:
Residential 11,373,796 11,897,386
Commercial 15,805,376 14,470,139
Retail, principally residential equity
lines of credit 74,124,381 67,730,804
Credit card 1,489,282 1,543,175
------------- -------------
Total loans 258,145,486 238,996,402
Less: Unearned income, net of deferred
origination costs 864,230 1,121,326
Allowance for credit losses 3,514,334 3,292,754
------------- -------------
Loans, net 253,766,922 234,582,322
Other real estate owned 1,318,978 447,550
Property and equipment, net 8,781,224 7,683,598
Prepaid expenses and other assets 9,719,661 7,589,425
------------- -------------
Total assets $ 354,652,807 $ 317,233,925
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 49,636,394 $ 43,980,900
Interest-bearing deposits 239,074,296 210,658,986
------------- -------------
Total deposits 288,710,690 254,639,886
Short-term borrowings 31,175,615 30,127,073
Accrued expenses and other liabilities 2,259,167 1,492,127
------------- -------------
Total liabilities 322,145,472 286,259,086
------------- -------------
Stockholders' Equity:
Common stock, $.01 par value per share; authorized 9,550,000 shares;
outstanding 2,159,937 and 2,148,004 shares, respectively 21,599 21,480
Additional paid in capital 22,671,689 22,598,578
Retained earnings 9,817,507 8,363,390
Net unrealized loss on securities
available-for-sale (3,460) (8,609)
------------- -------------
Total stockholders' equity 32,507,335 30,974,839
------------- -------------
Total liabilities and
stockholders' equity $ 354,652,807 $ 317,233,925
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
(3)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Six Months and Three Months Ended June 30,
1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------------------------- -------------------------------
1997 1996 1997 1996
--------------- --------------- ------------- -------------
<S> <C>
Interest income:
Loans $ 12,853,002 $ 11,249,465 $ 6,678,236 $ 5,755,948
Investment securities 1,433,368 883,437 770,960 432,367
Federal funds sold 109,452 246,639 58,367 134,190
--------------- --------------- ------------- -------------
Total interest income 14,395,822 12,379,541 7,507,563 6,322,505
--------------- --------------- ------------- -------------
Interest expense:
Deposits 4,692,364 3,880,750 2,449,249 1,925,562
Short-term borrowings 607,029 233,877 314,525 117,508
--------------- --------------- ------------- -------------
Total interest expense 5,299,393 4,114,627 2,763,774 2,043,070
--------------- --------------- ------------- -------------
Net interest income 9,096,429 8,264,914 4,743,789 4,279,435
Provision for credit losses 395,000 360,000 185,000 175,400
--------------- --------------- ------------- -------------
Net interest income after
provision for credit losses 8,701,429 7,904,914 4,558,789 4,104,035
--------------- --------------- ------------- -------------
Noninterest income:
Gains and fees on sales of mortgage loans 280,944 371,356 155,456 194,335
Fees charged for services 588,506 454,730 312,603 236,726
Gain on sale of mortgage servicing 19,744 -- 19,744 --
Other 287,976 164,012 126,376 67,656
--------------- --------------- ------------- -------------
Total noninterest income 1,177,170 990,098 614,179 498,717
--------------- --------------- ------------- -------------
Noninterest expense:
Salaries and employee benefits 3,346,462 2,842,102 1,743,590 1,452,305
Occupancy, net 662,646 396,662 341,897 208,671
Equipment 484,539 383,122 248,245 197,989
Marketing 350,759 258,519 191,087 118,527
Data processing 273,663 284,412 140,934 190,551
Cash management services 211,669 222,626 120,219 123,874
Professional fees 179,214 90,877 127,976 42,319
Deposit insurance premiums and assessments 52,324 130,314 27,286 71,537
Net expense (income) on other real estate
owned 19,096 14,839 (4,590) 1,971
Other 1,073,908 946,897 602,659 544,383
--------------- --------------- ------------- -------------
Total noninterest expense 6,654,280 5,570,370 3,539,303 2,952,127
--------------- --------------- ------------- -------------
Income before income taxes 3,224,319 3,324,642 1,633,665 1,650,625
Income tax expense 1,253,600 1,292,000 634,500 641,000
--------------- --------------- ============= =============
Net income $ 1,970,719 $ 2,032,642 $ 999,165 $ 1,009,625
=============== =============== ============= =============
Per share data:
Net income $ .87 $ .90 $ .44 $ .45
Cash dividends declared on common stock .24 .20 .12 .10
=============== =============== ============= =============
</TABLE>
See 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, 1997 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, 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 fracional 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
common stock - - - (902,413) - (902,413)
Stock options exercised - 23 21,640 - - 21,663
Net income - - - 3,751,882 - 3,751,882
Change in net unrealized
loss on securities
available-for-sale - - - - 40,153 40,153
----------------------------------------------------------------------------------------------
Balance at December 31, 1996 - 21,480 22,598,578 8,363,390 (8,609) 30,974,839
Cash dividends declared on
common stock - - - (516,602) - (516,602)
Stock options exercised - 114 104,429 - - 104,543
Warrants exercised - 33 29,964 - - 29,997
Purchase of 2,755 shares of
common stock - (28) (61,282) - - (61,310)
Net income - - - 1,970,719 - 1,970,719
Change in net unrealized
loss on securities
available-for-sale - - - - 5,149 5,149
----------------------------------------------------------------------------------------------
Balance at June 30, 1997 $ - $ 21,599 $ 22,671,689 $ 9,817,507 $ (3,460) $ 32,507,335
==============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
(5)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------------------
1997 1996
---------------- ------------------
(unaudited)
<S> <C>
Cash flows from operating activities:
Net income $ 1,970,719 $ 2,032,642
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 492,219 373,751
Proceeds from the sales of residential
mortgage loans originated-for-sale 18,605,298 24,912,535
Disbursements for residential mortgage loans
originated-for-sale (19,739,661) (25,141,820)
Provision for credit losses 395,000 360,000
Provision for losses on other real estate owned -- 9,000
Increase (decrease) in unearned income, net of
origination costs (257,096) 148,190
Equity in net loss of limited partnerships -- 48,000
Increase in prepaid expenses and other assets (1,164,340) (759,283)
Increase in accrued expenses and other liabilities 767,040 289,337
------------ ------------
Net cash provided by operating activities 1,069,179 2,272,352
------------ ------------
Cash flows provided by (used in) investing activities:
Loan disbursements in excess of principal repayments (21,175,235) (26,394,183)
Loan purchases (642,725) (3,261,304)
Loan sales 1,527,829 2,555,792
Purchases of investment securities (17,981,700) (10,488,855)
Proceeds from maturities and principal repayments
of investment securities 3,378,188 9,452,572
Proceeds from maturities and principal repayments of
securities available-for-sale 1,159,289 4,173,048
Additions to other real estate owned (90,080) --
Sales of other real estate owned 160,782 80,145
Purchases of property and equipment (1,575,749) (817,657)
Sales of property and equipment -- 15,582
Proceeds from investments in limited partnerships -- 160,692
Increase in cash surrender value of life insurance (971,476) --
Other, net (17,600) --
------------ ------------
Net cash used in investing activities (36,228,477) (24,524,168)
------------ ------------
Cash flows provided by (used in) financing activities:
Net increase in deposits 34,070,804 15,483,252
Increase (decrease) in short-term borrowings 1,048,542 (1,600,500)
Cash dividend distributed on common stock (516,602) (429,275)
Proceeds from exercise of stock options and warrants 134,540 12,063
Purchase of common stock (61,310) --
------------ ------------
Net cash provided by financing activities 34,675,974 13,465,540
------------ ------------
Net decrease in cash and cash equivalents (483,324) (8,786,276)
Cash and cash equivalents at beginning of period 21,230,610 28,092,049
------------ ------------
Cash and cash equivalents at end of period $ 20,747,286 $ 19,305,773
============ ============
Supplemental information:
Interest paid on deposits and short-term borrowings $ 5,281,712 $ 4,227,013
Income taxes paid 1,275,000 1,513,750
Transfer of loans to other real estate owned 942,130 20,387
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
(6)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of and for the six months
ended June 30, 1997 and 1996 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-Q 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 1996 Annual Report on Form 10-K.
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, 1997 and for the
six months ended June 30, 1997 and 1996 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, 1997 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, 1997 whose contract amounts represent
potential credit risk is as follows:
June 30, 1997
- ----------------------------------------------------------------------------
(in thousands)
Commitments to extend credit(1) $122,882
Standby letters of credit 12,990
Limited recourse on mortgage
loans sold 3,328
- ----------
(1) Includes unused lines of credit totaling $121.3 million regardless of
whether fee paid and whether adverse change clauses exist. The amount also
includes commitments to extend new credit totaling $1.6 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, 1997, total deposits were $288.7 million.
Core deposits, defined as all deposits except certificates of deposit of
$100,000 or more, totaled $271.3 million or 94.2% of total deposits.
Stockholders' equity totaled $32.5 million at June 30, 1997. 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, 1997, outstanding advances from
the FHLB totaled $9.3 million. Collateral must be pledged to the FHLB before
advances can be obtained. At June 30, 1997 the Company's approved credit limit
with the FHLB was $32.0 million. However, the Company had collateral sufficient
to borrow up to $52.7 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 $20.7 million or 5.8% of total assets at
June 30, 1997.
Capital Resources
-----------------
The Federal Reserve Board has adopted risk-based guidelines for bank
holding companies. As of June 30, 1997, the minimum ratio of capital to
risk-weighted assets (including certain off-balance-sheet items, such as standby
letters of credit) was 8.0%. At least half of the total capital must be
comprised of common equity, retained earnings and a limited amount of perpetual
preferred stock, after subtracting goodwill and making certain other adjustments
("Tier 1 capital"). The remainder may consist of perpetual debt, mandatory
convertible debt securities, a limited amount of subordinated debt, other
preferred stock and limited amounts of credit loss reserves ("Tier 2 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. The Federal Reserve Board also has adopted a minimum leverage
ratio (Tier 1 capital to assets) of 3% for bank holding companies that meet
certain specified criteria, including having the highest regulatory rating. The
rule indicates that the minimum leverage ratio should be at least 1.0% to 2.0%
higher for holding companies that do not have the highest rating or that are
undertaking major expansion programs. Failure to meet the capital guidelines
could subject a banking institution to a variety of enforcement remedies
available to federal bank regulatory agencies.
The following table summarizes the Company's capital ratios:
Minimum
Columbia Bancorp Regulatory
June 30, 1997 Requirements
-----------------------------------------------------------------------
Risk-based capital ratios:
Tier 1 capital 11.46% 4.00%
Total capital 12.70 8.00
Tier 1 capital leverage ratios 9.49 3.00
(8)
<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, 1997, the Company's loan portfolio, net of unearned income,
totaled $257.3 million, or 72.5% of its total assets of $354.7 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, accounting for $121.5 million or
47.1% of the total loan portfolio. Since December 31, 1996, real estate
development and construction loans have accounted for $8.6 million or 45.1% of
the $19.1 million increase in total loans. An increase in retail loans of $6.4
million, representing principally residential equity lines of credit and second
mortgages, accounted for most of the remainder of the growth. The real estate
development and construction portfolio consisted of the following at June 30,
1997:
Amount Percent
- ----------------------------------------------------------------------------
(dollars in thousands)
Residential construction (1) $ 59,110 48.6 %
Commercial construction 1,787 1.5
Residential land development 51,592 42.5
Residential land acquisition (2) 8,982 7.4
---------- -----------
$ 121,471 100.0 %
========== ===========
- ----------
(1) Includes $14.6 million of loans to individuals for construction of their
primary personal residence.
(2) Includes $2.2 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,
1997, loans to individuals for the construction of their primary personal
residences accounted for $14.6 million of the $59.1 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 $44.5 million of residential construction loans
represented loans to residential builders and developers. Approximately 55% 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.
Loans for the development of residential land represented the second
largest component of the real estate development and construction loan portfolio
at June 30, 1997. Generally, development loans are extended only when evidence
is provided that the lots under development will be sold to builders
satisfactory to the Company.
(9)
<PAGE>
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 limited losses in this area of lending through the
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 or 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 sales information.
The following table provides information concerning nonperforming
assets and past-due loans.
June 30, December 31, June 30,
1997 1996 1996
- --------------------------------------------------------------------------------
(dollars in thousands)
Nonaccrual loans (1) $3,431 $3,851 $718
Other real estate owned 1,319 448 -
------ ------ ----
Total nonperforming assets $4,750 $4,299 $718
====== ====== ====
Loans past-due 90 days or more $ 102 $ 59 $498
====== ====== ====
- ----------
(1) Loans are placed in nonaccrual status when they are past due 90 days as to
either principal or interest or when, in the opinion of management, the
collection of all principal and interest is in doubt. Management may grant
a waiver from nonaccrual status for a 90-day past-due loan which is both
well secured and in the process of collection. A loan remains in nonaccrual
status until the loan is current as to payment of both principal and
interest and the borrower demonstrates the ability to pay and remain
current.
The largest component of nonperforming assets at June 30, 1997 was the
Company's portfolio of nonaccrual loans totaling $3.4 million. At June 30, 1997,
nonaccrual loans consisted primarily of one residential development loan
totaling $3.0 million for the development of 84 single family detached building
lots and 67 townhouse building lots located in Calvert County, Maryland. Of the
remaining $400,000 in nonaccrual loans, $320,000 is also secured by residential
real estate.
At June 30, 1997, other real estate owned consisted of a partially
completed condominium building containing 24 residential condominium units with
a carrying value of $690,000, four commercial condominium units with a carrying
value of $279,000, and two unimproved building pad sites for the construction of
residential condominium units with a carrying value of $350,000. All properties
are currently being marketed for sale.
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS No. 114") and
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan--Income
Recognition Disclosures" ("SFAS No. 118"), a loan is determined to be impaired
when, based on current information and events, it is probable that the Company
will be unable to collect all amounts due according to the contractual terms of
the loan agreement. A loan is not considered impaired during a period of delay
in payment if the Company expects to collect all amounts due, including interest
past-due. The Company generally considers a period of delay in payment to
include delinquency up to 90 days.
(10)
<PAGE>
SFAS No. 114 does not apply to larger groups of smaller-balance
homogeneous loans such as consumer installment, residential first and second
mortgage loans and credit card loans. These loans are collectively evaluated for
impairment. The Company's impaired loans are therefore comprised primarily of
commercial loans, including commercial mortgage loans, and real estate
development and construction loans. In addition, impaired loans are generally
loans which management has placed in nonaccrual status since loans are generally
placed in nonaccrual status on the earlier of the date that management
determines that the collection of principal and/or interest is in doubt or the
date that principal or interest is 90 days or more past-due. A loan may be
removed from impaired status if it has a demonstrated period of performance of
at least six months and if management believes that it is probable that all
amounts will be collected in accordance with the contractual terms of the loan
agreement.
Impaired loans at June 30, 1997 totaled $4.1 million and were all
collateral dependent loans. Collateral dependent loans are measured based on the
fair value of the collateral. There were no impaired loans at June 30, 1997 with
an allocated valuation allowance. An impaired loan is charged-off when the loan,
or a portion thereof, is considered uncollectible.
At June 30, 1997, management had identified four loans totaling
approximately $2.4 million which, while not adversely classified, had exhibited
potential weaknesses. These weaknesses may at some future date result in a
reduced likelihood of repayment. Three of the four loans, totaling $2.3 million,
are secured by residential real estate. These loans are subject to an increased
level of monitoring by management in accordance with the Company's established
credit policies and procedures.
(11)
<PAGE>
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 nonperforming 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, 1997 the Allowance was 1.37%
of total loans, net of unearned income. The Allowance at June 30, 1997 is
considered by management to be sufficient to address the possible risks in the
loan portfolio given current conditions and information.
The changes in the Allowance are presented in the following table.
Six months ended June 30,
-------------------------
1997 1996
- --------------------------------------------------------------------------------
(dollars in thousands)
Allowance for credit losses -
beginning of period $3,293 $ 2,929
Provision for credit losses 395 360
Charge-offs (188) (27)
Recoveries 14 25
------ -------
Allowance for credit losses -
end of period $3,514 $ 3,287
====== =======
Allowance as a percentage of loans
receivable, net of unearned income 1.37% 1.51%
Allowance as a percentage of nonperforming
loans and loans past-due 90 days or more (1) 99.46% 270.31%
====== =======
- ----------
(1) There is no direct relationship between the size of the Allowance and the
related provision for credit losses, and the nonperforming and past-due
loans. Accordingly, the ratio of Allowance to nonperforming 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 months and six months ended June 30, 1997, representing net income per
share of $.44 and $.87, respectively. Net income was $1.0 million and $2.0
million for the corresponding periods in 1996, representing net income per share
of $.45 and $.90, respectively.
Net Interest Income
- -------------------
Net interest income totaled $9.1 million for the six months ended June
30, 1997, as compared to $8.3 million for the same period in 1996. Improvement
in net interest income was primarily the result of continued growth in the loan
portfolio, as average loans, net of unearned income, increased $43.0 million, or
21.1%, during the six months ended June 30, 1997 as compared to the same period
in 1996. This growth was mitigated by a decrease in the net interest margin from
6.72% for the six months ended June 30, 1996 to 6.09% for the six months ended
June 30, 1997. This fluctuation in net interest margin was consistent in the
three months ended June 30, 1997.
The following table provides further analysis of the increase in net
interest income:
<TABLE>
<CAPTION>
Six months ended June 30, 1997
compared to the six months ended
June 30, 1996
- ----------------------------------------------------------------------------------------------------
Increase/(Decrease)
due to (1):
Increase ----------------------------
(Decrease) Rate Volume
-----------------------------------------------
(in thousands)
<S> <C>
Interest
income:
Loans $1,603 $(649) $2,252
Investment securities and
securities available-for-sale 550 49 501
Federal funds sold (137) (1) (136)
----- ---- -----
Total interest income 2,016 (601) 2,617
----- ---- -----
Interest expense:
Deposits 812 68 744
Short-term borrowings 373 21 352
----- ---- -----
Total interest expense 1,185 89 1,096
----- ---- -----
Net interest income $ 831 $(690) $1,521
===== ==== =====
</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 $614,000 for the three months ended June 30,
1997 as compared to $499,000 for the corresponding period in 1996, and $1.2
million for the six months ended June 30, 1997 as compared to $990,000 for the
same periods in 1996. Growth in noninterest income during 1997 primarily
reflected increases in fees charged for services of $76,000 and $134,000 for the
three months and six months ended June 30, 1997 as compared to the same period
in 1996. The increase resulted from an increasing deposit account base as well
as improved business activity associated with the Company's cash management
services. A second component of the growth in noninterest income was an increase
in the cash surrender value of life insurance policies taken on key officers
(excluding insurance purchases) of $59,000 and $124,000 for the three months and
six months ended June 30, 1997. These increases in noninterest income were
mitigated by decreases in fees on sales of mortgage loans of $39,000 and $90,000
for the three months and six months ended June 30, 1997, as compared to the same
periods in 1996. Such decreases were the result of a corresponding decline in
the volume of loans sold of $6.3 million, or 25%, for the six months ended June
30, 1997, as compared to the same period in 1996.
Noninterest Expense
- -------------------
Noninterest expense for the three months and six months ended June 30,
1997 increased $587,000 or 19.9% and $1.1 million or 19.5% over the
corresponding periods in 1996. The increase in noninterest expense corresponded
with increased business activity, including related expansion. Specifically,
salaries and employee benefits increased $291,000 and $504,000 during the three
month and six month periods ended June 30, 1997 as compared to the same periods
in 1996 and primarily represented the net addition of 26 employees since June
30, 1996. Growth in the employee base has been necessary to accommodate
increased business activity, including the addition of two full-service branch
facilities. Occupancy costs increased $133,000 and $266,000 during the three
months and six months ended June 30, 1997 as compared to 1996 as a result of
these expansion efforts. In addition, equipment costs increased $50,000 and
$101,000 and marketing costs increased $73,000 and $92,000 during the three
months and six months ended June 30, 1997 as compared to 1996, also reflecting
general expansion. Professional fees increased $86,000 and $88,000 for the three
months and six months ended June 30, 1997, as compared to the same period in
1996, reflecting legal fees and collection efforts related primarily to
nonaccrual loans.
The increase in noninterest expense during 1997 was mitigated by
decreases of $44,000 or 62% and $78,000 or 60% in deposit insurance premiums and
assessments for the three months and six months ended June 30, 1997. This
decrease was primarily the result of the reduction in the Company's FDIC
insurance premium associated with deposits insured by the SAIF from 23 cents per
$100 of deposits to zero as of October 1, 1996.
(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 June 24, 1997, the Board of Directors of the Company declared
a $.12 per share cash dividend to common stockholders of record
on July 15, 1997, payable July 25, 1997.
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 OFFICER:
August 14, 1997 John M. Bond, Jr.
________________________ _________________
Date President and
Chief Executive Officer
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER:
August 14, 1997 John A. Scaldara, Jr.
________________________ _____________________
Date Executive Vice President,
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 Six Months Ended June 30, 1997 and 1996
1997 1996
---------- ----------
Net income $1,970,719 2,032,642
========== ==========
Weighted average common shares
outstanding 2,149,772 2,146,735
Effect of dilutive stock options and
warrants 121,374 110,147
---------- ----------
Total weighted average shares
outstanding 2,271,146 2,256,882
========== ==========
Net income per common share $ 0.87 0.90
========== ==========
(17)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> $15,966,069
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,781,217
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,220,610
<INVESTMENTS-CARRYING> 54,412,355
<INVESTMENTS-MARKET> 54,471,141
<LOANS> 259,967,027
<ALLOWANCE> (3,514,334)
<TOTAL-ASSETS> 354,652,807
<DEPOSITS> 288,710,690
<SHORT-TERM> 31,175,615
<LIABILITIES-OTHER> 2,259,167
<LONG-TERM> 0
<COMMON> 21,599
0
0
<OTHER-SE> 32,507,335
<TOTAL-LIABILITIES-AND-EQUITY> 354,652,807
<INTEREST-LOAN> 12,853,002
<INTEREST-INVEST> 1,433,368
<INTEREST-OTHER> 109,452
<INTEREST-TOTAL> 14,395,822
<INTEREST-DEPOSIT> 4,692,364
<INTEREST-EXPENSE> 5,299,393
<INTEREST-INCOME-NET> 9,096,429
<LOAN-LOSSES> 395,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,654,280
<INCOME-PRETAX> 3,224,319
<INCOME-PRE-EXTRAORDINARY> 3,224,319
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,970,719
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
<YIELD-ACTUAL> 6.09
<LOANS-NON> 3,431,573
<LOANS-PAST> 101,926
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,371,149
<ALLOWANCE-OPEN> (3,292,754)
<CHARGE-OFFS> 188,402
<RECOVERIES> 14,981
<ALLOWANCE-CLOSE> (3,514,333)
<ALLOWANCE-DOMESTIC> (3,514,333)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
