THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION
S-T.
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 March 31, 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 preceeding 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: 2,150,413 shares as of May
12, 1997.
<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
March 31, 1997 and December 31, 1996 3
Statements of Income for the Three Months
Ended March 31, 1997 and 1996 4
Statements of Stockholders' Equity for the Three
Months Ended March 31, 1997 and the Years
Ended December 31, 1996 and 1995 5
Statements of Cash Flows for the Three Months
Ended March 31, 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 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
(2)
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
(unaudited)
<S><C>
ASSETS
------
Cash and due from banks $ 16,479,274 $ 17,753,174
Federal funds sold 4,172,113 3,477,436
Investment securities ( fair value $47,005,049
in 1997 and $39,839,135 in 1996) 47,128,532 39,795,128
Securities available-for-sale 3,268,792 4,353,884
Residential mortgage loans originated-for-sale 1,546,315 1,551,408
Loans:
Commercial 30,788,389 30,517,140
Real estate development and construction 116,497,701 112,837,758
Real estate mortgage:
Residential 11,651,380 11,897,386
Commercial 14,316,889 14,470,139
Retail, principally residential equity
lines of credit 69,349,238 67,730,804
Credit card 1,544,868 1,543,175
---------------- -----------------
Total loans 244,148,465 238,996,402
Less: Unearned income, net of deferred
origination costs 839,947 1,121,326
Allowance for credit losses 3,388,024 3,292,754
---------------- -----------------
Loans, net 239,920,494 234,582,322
---------------- -----------------
Other real estate owned 1,389,680 447,550
Property and equipment, net 8,140,939 7,683,598
Prepaid expenses and other assets 6,973,375 7,589,425
---------------- -----------------
Total Assets $ 329,019,514 $ 317,233,925
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Noninterest-bearing demand deposits $ 49,636,717 $ 43,980,900
Interest-bearing deposits 229,392,702 210,658,986
---------------- -----------------
Total deposits 279,029,419 254,639,886
Short-term borrowings 17,149,839 30,127,073
Accrued expenses and other liabilities 1,145,704 1,492,127
---------------- -----------------
Total liabilities 297,324,962 286,259,086
---------------- -----------------
Stockholders' Equity:
Commonstock, $.01 par value per share;
authorized 9,550,000 shares; outstanding
2,148,345 and 2,148,004 shares, respectively 21,483 21,480
Additional paid in capital 22,601,674 22,598,578
Retained earnings 9,077,143 8,363,390
Net unrealized loss on investments
available-for-sale (5,748) (8,609)
---------------- -----------------
Total stockholders' equity 31,694,552 30,974,839
---------------- -----------------
Total liabilities and
stockholders' equity $ 329,019,514 $ 317,233,925
================ =================
</TABLE>
See accompanying notes to consolidated financial statements.
(3)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1997 1996
----------- -----------
<S><C>
Interest income:
Loans $ 6,174,766 $ 5,493,517
Investment securities 662,408 451,070
Federal funds sold 51,085 112,449
----------- -----------
Total interest income 6,888,259 6,057,036
----------- -----------
Interest expense:
Deposits 2,243,115 1,955,188
Short-term borrowings 292,504 116,369
----------- -----------
Total interest expense 2,535,619 2,071,557
----------- -----------
Net interest income 4,352,640 3,985,479
Provision for credit losses 210,000 184,600
----------- -----------
Net interest income after
provision for credit losses 4,142,640 3,800,879
----------- -----------
Noninterest income:
Gains and fees on sales of mortgage loans 125,488 177,021
Fees charged for services 275,903 218,004
Other 161,600 96,356
----------- -----------
Total noninterest income 562,991 491,381
----------- -----------
Noninterest expense:
Salaries and employee benefits 1,602,872 1,389,797
Occupancy, net 320,749 255,745
Equipment 236,294 185,133
Marketing 159,672 139,992
Data processing 132,729 93,861
Cash management services 91,450 98,752
Professional fees 51,238 48,558
Deposit insurance premiums and assessments 25,038 58,777
Net expense on other real estate owned 23,686 12,868
Other 471,249 334,760
----------- -----------
Total noninterest expense 3,114,977 2,618,243
----------- -----------
Income before income taxes 1,590,654 1,674,017
Income tax expense 619,100 651,000
----------- -----------
Net income $ 971,554 $ 1,023,017
=========== ===========
Per share data:
Net income $ .43 $ .45
Cash dividends declared on common stock .12 .10
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
(4)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Information for the three months
ended March 31, 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
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 - - - - 269,786.00 269,786.00
---------------------------------------------------------------------------------------
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 - - - - 40,153.00 40,153.00
---------------------------------------------------------------------------------------
Balance at December 31, 1996 - 21,480 22,598,578 8,363,390 (8,609) 30,974,839
Cash dividends declared on
common stock - - - (257,801) - (257,801)
Stock options exercised - 3 3,096 - - 3,099
Net income - - - 971,554 - 971,554
Change in net unrealized
loss on securities
available-for-sale - - - - 2,861.00 2,861.00
---------------------------------------------------------------------------------------
Balance at March 31, 1997 - 21,483 22,601,674 9,077,143 (5,748) 31,694,552
=======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
(5)
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
1997 1996
-------------- --------------
(unaudited)
<S><C>
Cash flows from operating activities:
Net income $ 971,554 $ 1,023,017
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 223,581 185,341
Proceeds from the sales of residential
mortgage loans originated-for-sale 8,567,185 10,894,500
Disbursements for residential mortgage loans
originated-for-sale (8,562,092) (11,889,496)
Provision for credit losses 210,000 184,600
Provision for losses on other real estate owned - 9,000
Increase (decrease) in unearned income, net of
origination costs (281,379) 70,912
Equity in net loss of limited partnerships - 24,000
Decrease (increase) in prepaid expenses and other assets 648,737 (29,134)
Increase (decrease) in accrued expenses and other liabilities (346,465) 451,090
----------------- -----------------
Net cash provided by operating activities 1,431,121 923,830
----------------- -----------------
Cash flow provided by (used in) investing activities:
Loan disbursements in excess of principal repayments (6,253,106) (8,569,823)
Loan purchases (547,797) (2,065,281)
Loan sales 582,980 873,120
Purchases of investment securities (8,992,230) (4,493,895)
Purchases of securities available-for-sale (17,600) -
Proceeds from maturities and principal repayments
of investment securities 1,665,327 8,000,000
Proceeds from maturities and principal repayments of
securities available-for-sale 1,107,362 3,102,497
Purchases of property and equipment (676,714) (516,379)
Sales of property and equipment - 19,958
Increase in cash surrender value of life insurance (36,205) -
----------------- -----------------
Net cash used in investing activities (13,167,983) (3,649,803)
----------------- -----------------
Cash flow provided by (used in) financing activities:
Net increase in deposits 24,389,533 7,234,090
Decrease in short-term borrowings (12,977,234) (2,873,742)
Cash dividend distributed on common stock (257,759) (214,575)
Proceeds from stock options exercised 3,099 12,063
----------------- -----------------
Net cash provided by financing activities 11,157,639 4,157,836
----------------- -----------------
Net increase (decrease) in cash and cash equivalents (579,223) 1,431,863
Cash and cash equivalents at beginning of period 21,230,610 28,092,049
----------------- -----------------
Cash and cash equivalents at end of period $ 20,651,387 $ 29,523,912
================= =================
Supplemental information:
Interest paid on deposits and short-term borrowings $ 2,620,545 $ 2,144,360
Income taxes paid 625,000 120,000
Transfer of loans to other real estate owned 942,130 -
================= =================
</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 three months
ended March 31, 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 March 31, 1997 and for the
three months ended March 31, 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 months ended March 31, 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 March 31, 1997 whose contract amounts represent
potential credit risk is as follows:
March 31, 1997
- ----------------------------------------------------------------------------
(in thousands)
Commitments to extend credit (1) $115,277
Standby letters of credit 13,283
Limited recourse on mortgage
loans sold 3,927
- -----------------------------------------
(1) Includes unused lines of credit totaling $112.7 million
regardless of whether fee paid and whether adverse change
clauses exist. The amount also includes commitments to extend
new credit totaling $2.6 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 March 31, 1997, total deposits were $279.0 million.
Core deposits, defined as all deposits except certificates of deposit of
$100,000 or more, totalled $263.9 million or 94.6% of total deposits.
Stockholders' equity totalled $31.7 million at March 31, 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 March 31, 1997, there were no
outstanding advances from the FHLB. Collateral must be pledged to the FHLB
before advances can be obtained. At March 31, 1997 the Company's approved credit
limit with the FHLB was $32.0 million. However, the Company had collateral
sufficient to borrow up to $55.8 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 totalled $20.7 million or 6.3% of total assets
at March 31, 1997.
Capital Resources
-----------------
The Federal Reserve Board has adopted risk-based guidelines for bank
holding companies. As of March 31, 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:
Minimun
Columbia Bancorp Regulatory
March 31, 1997 Requirements
---------------------------------------------------------------------
Risk-based capital ratios:
Tier 1 capital 12.01% 4.00%
Total capital 13.26 8.00
Tier 1 capital leverage ratios 9.88 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 March 31, 1997, the Company's loan portfolio, net of unearned
income, totalled $243.3 million, or 73.9% of its total assets of $329.0 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, accounting for $116.5 million or
47.7% of the total loan portfolio. Since December 31, 1996, real estate
development and construction loans have accounted for $3.7 million or 71.0% of
the $5.2 million increase in total loans. An increase in retail loans of $1.6
million, representing principally residential equity lines of credit, accounted
for the remainder of the growth. The real estate development and construction
portfolio consisted of the following at March 31, 1997:
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 March 31,
1997, loans to individuals for the construction of their primary personal
residences accounted for $11.7 million of the $57.9 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 $46.2 million of residential construction loans
represented loans to residential builders and developers. Approximately 43% 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 March 31, 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 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 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 sale information.
The following table provides information concerning nonperforming
assets and past-due loans.
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1997 1996 1996
- --------------------------------------------------------------------------------------------------
(dollars in thousands)
<S><C>
Nonaccrual loans (1) $ 3,867 $ 3,851 $ 1,070
Other real estate owned 1,390 448 80
-------------- ------------- -------------
Total nonperforming assets $ 5,257 $ 4,299 $ 1,150
============== ============= =============
Loans past-due 90 days or more $ 133 $ 59 $ 144
============== ============= =============
</TABLE>
- ------------------------------
(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 March 31, 1997 was the
Company's portfolio of nonaccrual loans totalling $3.9 million. At March 31,
1997, nonaccrual loans consisted primarily of one residential development loan
totalling $2.9 million for the development of 84 single family detached building
lots and 67 townhouse building lots located in Calvert County, Maryland. In
addition, nonaccrual loans included one residential construction loan totalling
$440,000, which was paid in full in April, 1997.
At March 31, 1997, other real estate owned consisted of a partially
completed (50%) condominium building containing 24 residential condominium units
with a carrying value of $613,000, four commercial condominium units with a
carrying value of $266,000, two unimproved building pad sites for the
construction of residential condominium units with a carrying value of $350,000,
and two residential properties with a carrying value of $161,000.
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 probably 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.
Impaired loans at March 31, 1997 totalled $4.6 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 March 31, 1997
with an allocated valuation allowance. An impaired loan is charged-off when the
loan, or a portion thereof, is considered uncollectible.
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 March 31, 1997 the Allowance was
1.39% of total loans, net of unearned income. The Allowance at March 31, 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.
<TABLE>
<CAPTION>
Three months ended March 31
--------------------------------
1997 1996
- ---------------------------------------------------------------------------------------------
(dollars in thousands)
<S><C>
Allowance for credit losses -
beginning of period $ 3,293 $ 2,929
Provision for credit losses 210 185
Charge-offs (123) (5)
Recoveries 8 6
--------- ----------
Allowance for credit losses -
end of period $ 3,388 $ 3,115
========= ==========
Allowance as a percentage of loans
receivable, net of unearned income 1.39% 1.55%
Allowance as a percentage of nonperforming
loans and loans past-due 90 days or more (1) 84.70% 256.68%
========= ==========
</TABLE>
- ----------------------------------
(1) There is no direct relationship between the size of the Allowance, the
related provision for credit losses, and the nonperforming and past-due
loans. Accordingly, the ratio of Allowance to non-performing and
past-due loans may tend to fluctuate significantly.
(11)
<PAGE>
Results of Operations
---------------------
The Company reported net income for the three months ended March 31,
1997 of $971,000 or $.43 per share compared to $1.0 million or $.45 per share
for the corresponding period in 1996.
Net Interest Income
- -------------------
Net interest income totalled $4.4 million for the three months ended
March 31, 1997, as compared to $4.0 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 $42.0
million, or 21.2%, during the three months ended March 31, 1997 as compared to
the same period in 1996. This growth was mitigated by a decrease in the net
interest margin from 6.61% for the three months ended March 31, 1996 to 6.05%
for the three months ended March 31, 1997.
The following table provides further analysis of the increase in net
interest income:
<TABLE>
<CAPTION>
Three months ended March 31, 1997
compared to the three months ended
March 31, 1997
- -------------------------------------------------------------------------------------------------
Increase/(Decrease)
due to: (1)
Increase --------------------------
(Decrease) Rate Volume
--------------------------------------------
(in thousands)
<S><C>
Interest income:
Loans $ 681 (1,013) 1,694
Investment securities and
securities available-for-sale 211 22 189
Federal funds sold (61) (5) (56)
------- --------- -------
Total interest income 831 (996) 1,827
------- --------- -------
Interest expense:
Deposits 288 (14) 302
Short-term borrowings 176 3 173
------- --------- -------
Total interest expense 464 (11) 475
------- --------- -------
Net interest income $ 367 (985) 1,352
======= ========= =======
</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.
Noninterest Income
- ------------------
Noninterest income totalled $563,000 for the three months ended March
31, 1997 as compared to $491,000 for the corresponding period in 1996. Growth in
noninterest income during 1997 primarily reflected increases in fees charged for
services of $58,000 for the three months ended March 31, 1997 over 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 a $36,000
increase in the cash surrender value of life insurance policies taken on key
officers.
(12)
<PAGE>
Noninterest Expense
- -------------------
Noninterest expense for the three months ended March 31, 1997 increased
$497,000 or 19.0% over the same period in 1996. The increase in noninterest
expense corresponded with increased business activity, including related
expansion, and the ongoing upgrade of data processing and management information
systems. Specifically, salaries and employee benefits increased $213,000 during
the three months ended March 31, 1997 as compared to the same period in 1996 and
primarily represented the addition of 30 additional employees since March 31,
1996. Growth in the employee base has been necessary to accommodate increased
business activity, including branch expansion. Occupancy costs increased $65,000
during the three months ended March 31, 1997 as compared to 1996 as a result of
branch expansion efforts. In addition, equipment and data processing costs
increased $51,000 and $39,000, respectively, during the three months ended March
31, 1997 as compared to 1996 and reflected the upgrade of data processing
systems as well as general expansion.
The increase in noninterest expense during 1997 was mitigated by a
decrease of $34,000, or 57%, in deposit insurance premiums and assessments. 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.
(13)
<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
At the Company's Annual Meeting of Stockholders held April 28,
1997, the following directors were elected based upon the identified voting
statistics to serve a three-year term expiring upon the date of the Company's
2000 Annual Meeting or until their respective successors are duly elected and
qualified.
<TABLE>
<CAPTION>
Votes Cast
------------------------------------------
For Against Withheld
--- ------- --------
<S><C>
Anand S. Bhasin 1,741,326 - 16,045
Garnett Y. Clark, Jr. 1,749,936 - 7,435
Robert J. Gaw 1,753,636 - 3,735
Maurice M. Simpkins 1,749,936 - 7,435
Robert N. Smelkinson 1,749,936 - 7,435
</TABLE>
The following are those directors of the Company who will
continue to serve as directors until the expiration of their terms upon the date
of the Company's annual meeting in their respective class years or until their
respective successors are duly elected and qualified.
Class of 1998 Class of 1999
------------- -------------
James Clark, Jr. John M. Bond, Jr.
Hugh F. Z. Cole, Jr. William L. Hermann
G. William Floyd Harry L. Lundy, Jr.
Herschel L. Langenthal Mary S. Scrivener
Richard E. McCready Theodore G. Venetoulis
James R. Moxley, Jr.
Patricia T. Rouse
In addition, shareholders voted in favor of adoption of the
Columbia Bancorp 1997 Stock Option Plan as follows:
Broker
For Against Withheld Non-votes
--- ------- -------- ---------
1,201,653 - 179,970 375,748
(14)
<PAGE>
ITEM 5. OTHER INFORMATION
On March 24, 1997, the Board of Directors of the Company declared
a $.12 per share cash dividend to common stockholders of record on April 14,
1997, payable April 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:
John M. Bond, Jr.
- ------------------------ -----------------
Date President and
Chief Executive Officer
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER:
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 Three Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S><C>
Net income $ 971,554 1,023,017
=========== ===========
Weighted average common shares
outstanding 2,148,218 2,146,467
Effect of dilutive stock options and
warrants 130,033 103,936
----------- -----------
Total weighted average shares
outstanding 2,278,251 2,250,403
=========== ===========
Net income per common share $ 0.43 0.45
=========== ===========
</TABLE>
(17)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> $16,479,274
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,172,113
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,268,792
<INVESTMENTS-CARRYING> 47,128,532
<INVESTMENTS-MARKET> 47,005,049
<LOANS> 244,854,833
<ALLOWANCE> (3,388,024)
<TOTAL-ASSETS> 329,019,514
<DEPOSITS> 279,029,419
<SHORT-TERM> 17,149,839
<LIABILITIES-OTHER> 1,145,704
<LONG-TERM> 0
0
0
<COMMON> 21,483
<OTHER-SE> 31,673,069
<TOTAL-LIABILITIES-AND-EQUITY> 329,019,514
<INTEREST-LOAN> 6,174,766
<INTEREST-INVEST> 662,408
<INTEREST-OTHER> 51,085
<INTEREST-TOTAL> 6,888,259
<INTEREST-DEPOSIT> 2,243,115
<INTEREST-EXPENSE> 2,535,619
<INTEREST-INCOME-NET> 4,352,640
<LOAN-LOSSES> 210,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,114,977
<INCOME-PRETAX> 1,590,654
<INCOME-PRE-EXTRAORDINARY> 971,554
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 971,554
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 3,866,990
<LOANS-PAST> 133,373
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,935,813
<ALLOWANCE-OPEN> (3,292,754)
<CHARGE-OFFS> 122,684
<RECOVERIES> 7,954
<ALLOWANCE-CLOSE> (3,388,024)
<ALLOWANCE-DOMESTIC> (3,388,024)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
