<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[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 0-23090
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Carrollton Bancorp
- --------------------------------------------------------------------------------
(Exact name of small business issuer as
specified in its charter)
Maryland 52-1660951
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
15 Charles Plaza, Suite 200, Baltimore, Maryland 21201-3936
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(Address of principal executive offices)
(410) 536-4600
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(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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable
date: 1,328,565 common shares outstanding at July 31, 1996
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Transitional Small Business Disclosure Format (check one):
Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
Carrollton Bancorp
and Subsidiary
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
Assets (Unaudited)
Cash and due from banks $ 17,750,229 $ 16,203,646
Federal funds sold 0 3,700,000
Interest-bearing deposits with financial institutions 100,000 100,000
Investment securities:
Available for sale 71,976,985 62,320,889
Held to maturity 20,291,173 24,101,374
(approximate market value of $20,260,372
and $24,428,685)
Loans, less allowance for loan losses of 145,952,028 134,194,025
$2,264,795 and $2,243,472
Bank premises and equipment 4,253,016 4,051,205
Deferred income taxes 1,140,620 506,169
Accrued interest receivable 2,135,976 2,045,660
Other assets 2,439,720 2,530,956
------------ ------------
$ 266,039,747 $ 249,753,924
------------ ------------
------------ ------------
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing $ 26,519,593 $ 30,027,955
Interest-bearing 200,166,298 187,181,343
------------ ------------
Total deposits 226,685,891 217,209,298
Federal funds purchased and securities
sold under agreements to repurchase 8,223,382 3,203,849
Advances from the Federal Home Loan Bank 2,000,000 0
Notes payable - U. S. Treasury 1,445,608 1,387,611
Accrued interest payable 225,135 237,101
Other liabilities 957,521 898,038
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239,537,537 222,935,897
------------ ------------
Shareholders' equity
Common stock, par value $10.00 per share;
authorized 5,000,000 shares; issued
and outstanding 1,328,565 shares 13,285,650 13,285,650
Surplus 6,079,950 6,079,950
Net unrealized holding gains on
available for sale securities (612,371) 395,981
Retained earnings 7,748,981 7,056,446
------------ ------------
26,502,210 26,818,027
------------ ------------
$ 266,039,747 $ 249,753,924
------------ ------------
------------ ------------
Note: Balances at December 31, 1995 are derived from audited financial statements.
</TABLE>
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Carrollton Bancorp
and Subsidiary
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income
Interest and Fees on Loans $ 3,155,825 $ 3,000,361 6,222,763 $ 5,871,409
Interest and Dividends on Securities:
Taxable interest income 1,146,479 896,352 2,258,370 1,687,194
Nontaxable interest income 207,553 149,282 384,379 298,197
Dividends 10,399 20,784 23,473 27,755
Interest on Federal funds sold and
other interest income 53,759 101,483 120,375 228,932
------------ ------------ ------------ ------------
Total interest income 4,574,015 4,168,262 9,009,360 8,113,487
------------ ------------ ------------ ------------
Interest expense
Deposits 2,019,648 1,699,310 4,002,890 3,183,928
Other 63,503 197,520 117,009 458,858
------------ ------------ ------------ ------------
Total interest expense 2,083,151 1,896,830 4,119,899 3,642,786
------------ ------------ ------------ ------------
Net interest income 2,490,864 2,271,432 4,889,461 4,470,701
Provision for loan losses 37,500 0 72,500 0
------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 2,453,364 2,271,432 4,816,961 4,470,701
------------ ------------ ------------ ------------
Other operating income
Service charges on deposit accounts 316,829 267,468 620,093 520,852
Brokerage commissions 177,803 158,525 344,688 299,232
Other fees and commissions 266,964 179,587 486,828 324,164
Gains (losses) on security sales 14,688 (28,534) 17,526 (28,534)
------------ ------------ ------------ ------------
Total other income 776,284 577,046 1,469,135 1,115,714
------------ ------------ ------------ ------------
Other expenses
Salaries 924,759 776,807 1,856,192 1,582,036
Employee benefits 247,233 199,159 478,499 412,028
Occupancy 312,605 289,939 627,183 587,279
Furniture and equipment 190,762 143,902 358,890 289,218
Other operating expenses 895,857 778,155 1,606,765 1,508,601
------------ ------------ ------------ ------------
Total other expenses 2,571,216 2,187,962 4,927,529 4,379,162
------------ ------------ ------------ ------------
Income before income taxes 658,432 660,516 1,358,567 1,207,253
Income taxes 168,774 205,191 383,635 369,835
------------ ------------ ------------ ------------
Net income $ 489,658 $ 455,325 $ 974,932 $ 837,418
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per common share
Net income $ 0.37 $ 0.34 $ 0.73 $ 0.63
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Carrollton Bancorp
and Subsidiary
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities
Interest received $ 8,925,409 $ 8,002,725
Fees and commissions received 1,340,344 1,158,435
Interest paid (4,131,865) (3,548,913)
Cash paid to suppliers and employees (4,256,690) (4,271,086)
Income taxes paid (410,032) (331,720)
------------ ------------
1,467,166 1,009,441
------------ ------------
Cash Flows from investing activities
Proceeds from maturities of securities held to maturity 4,100,000 1,125,000
Purchases of securities held to maturity (298,688) (8,251,953)
Proceeds from sales of securities available for sale 2,474,187 2,415,256
Proceeds from maturities of securities available for sale 10,191,301 5,420,228
Purchases of securities available for sale (23,944,337) (21,442,119)
Net decrease in interest-bearing deposits 0 476,977
Loans made, net of principal collected (11,830,503) (2,269,862)
Purchases of premises and equipment (584,269) (1,377,530)
------------ ------------
(19,892,309) (23,904,003)
------------ ------------
Cash flows from financing activities
Net (decrease) increase in deposits 9,476,593 19,186,734
Acquired deposits 0 22,765,077
Premium on acquired deposits 0 (1,847,663)
Net increase (decrease) in other borrowed funds 7,077,530 (6,234,159)
Dividends paid (282,397) (269,150)
Common stock repurchase and retirement 0 (459,140)
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16,271,726 33,141,699
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Net increase (decrease) in cash and cash
equivalents (2,153,417) 10,247,137
Cash and cash equivalents at beginning of year 19,903,646 11,559,967
------------ ------------
Cash and cash equivalents at June 30th $ 17,750,229 $ 21,807,104
------------ ------------
------------ ------------
Reconciliation of net income to net cash
provided by operating activities
Net income $ 974,932 $ 837,418
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses 72,500 0
Depreciation and amortization 389,361 260,224
Amortization of premiums and discounts 6,365 (36,763)
Gain on disposal of securities (17,526) 28,534
(Increase) decrease in
Accrued interest receivable (90,316) (73,999)
Other assets 84,333 14,187
Increase (decrease) in
Accrued interest payable (11,966) 93,873
Income taxes payable (26,397) 38,115
Other liabilities 85,880 (152,148)
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$ 1,467,166 $ 1,009,441
------------ ------------
------------ ------------
</TABLE>
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NOTE TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CARROLLTON BANCORP
Period ended June 30, 1996
The accompanying unaudited consolidated financial statements prepared as of and
for the quarter ended June 30, 1996 reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal recurring
nature. The results reflected by these statements may not be indicative,
however, of the results for the year ending December 31, 1996.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATING RESULTS AND FINANCIAL CONDITION
Earnings
Summary
Carrollton Bancorp's net income for the first half of 1996 was $975,000, or
$.73 per share as compared to $837,000, or $.63 per share, for the same period
of 1995. Net income for the second quarter of 1996 was $490,000, or $.37 per
share, as compared to $455,000, or $.34 per share, for the second quarter of
1995. The increase in earnings was due to several major factors. Net interest
income increased as a result of growth in the loan and security portfolios,
while a significant portion of non-interest income growth resulted from fees
generated by the Company's expanding ATM network.
Net Interest Income
Because of volume growth in the loan and investment securities portfolios
since June, 1995, net interest income increased for the Company by 10% for the
second quarter and 9% for the first six months of 1996 as compared to the same
periods of 1995. Total interest income increased 11% for the first six months
of 1996 and increased 10% for the second quarter of 1996 as a result of volume
increases in the two portfolios as previously mentioned. Total assets grew by
8% for the first half of 1996 as compared to 1995, driven by 14% growth in the
loan portfolio and 6% growth in the securities portfolio.
An increase in deposits caused total interest expense to increase for the
first six months of 1996 as compared to 1995. The rate of interest expense to
interest-bearing liabilities was 4.17% for the first half of 1996 as compared to
4.32% for 1995. The rate of interest expense to interest-bearing liabilities
for the second quarter of 1996 was 4.14% compared to 4.41% for the same period
in 1995.
Due to the increase in earning assets, net interest income on a taxable
equivalent basis increased by 10% for the second quarter and first six months of
1996 as compared to the same periods of 1995. However, the net yield on average
earning assets decreased to 4.37% in the second quarter of 1996 from 4.51% for
the same period in 1995, and decreased to 4.35% in the first half of 1996 from
4.48% for the same period in 1995.
Provision for Loan Losses
During the first half of 1996, the provision for loan losses was $72,500.
The provision was made based on a thorough evaluation of the allowance for loan
losses. Nonaccrual, restructured, and delinquent loans over 90 days to total
loans increased to .68% in the first half of 1996 from .56% in the same period
of 1995. The main reason for this increase was one commercial real estate loan
for $829,000 which was restructured in late 1995.
Non-Interest Income
For the first six months of 1996, non-interest income, excluding securities
gains, increased 26.9% over the same period of 1995. The increase in service
charges on deposit
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accounts came mainly from the volume of deposit accounts acquired from a branch
acquisition in the second quarter of 1995. The continued surge in the stock
market and an increase in sales personnel has resulted in an increase of $45,000
in brokerage commissions in the first half of 1996 over the same period in 1995.
Other fees and commissions increased $163,000 principally due to increases in
ATM fee income generated by additional machines placed in service.
In the first six months of 1996, the sale of $2.5 million of available for
sale securities resulted in security gains of $17,500. This occurred
principally from a yield swap transaction.
Non-Interest Expenses
Non-interest expenses increased in both the second quarter and first six
months of 1996 as compared to the same periods of 1995 by 15.3% and 11.4%.
Increases in salaries, employee benefits, occupancy, furniture and equipment,
and other operating expenses were due to growth in staff, branches, new ATM
installations, and expenses related to additional card service capabilities.
Increases in expenses were offset by the reduction in the FDIC insurance
premium.
Income Tax Provision
For the first six months of 1996, the effective tax rate was 28.2% as
compared to 30.6% for the same period in 1995. The effective tax rate has
declined primarily as a result of a change in the state law, subject to a three
year phase in, which enables financial institutions to exclude from taxable
income interest earned on certain investment securities. In addition, the ratio
of federal tax free income to total income has increased as the municipal bond
portfolio has grown, thereby reducing the tax rate. The increase in the amount
of income tax during the first half of 1996 as compared to 1995 was due to the
increase in the amount of income before tax.
Financial Condition
Summary
Total assets for the Company were $266.0 million at June 30, 1996 as
compared to $249.8 million at the end of 1995. Loans increased by 8.6% while
investment securities increased by 6.5%. In addition, deposits grew by 4.4%
since December 31, 1995.
Short-Term Investments
In total, short-term investments decreased $3.7 million from December 31,
1995 to June 30, 1996. The majority of these funds were used for branch and ATM
operations and invested in investment securities for a better return.
Investment Securities
In the aggregate, investment securities increased $5.8 million or 6.5% at
June 30,
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1996. The additional investments were funded by the decrease in short-term
investments and additional deposits.
Loans
At June 30, 1996, total loans increased $11.8 million or 8.6% to $148.2
million from the end of 1995. Consumer loan growth in home equity loans and
residential real estate loans continued. In addition, the Company continues to
grow the commercial loan portfolio due to its emphasis on services to small to
medium sized businesses.
At June 30, 1996, home equity and residential real estate loans increased
by $6.3 million to $73.7 million. On the other hand, installment loans
decreased by $831,000 to $15.6 million for the same period.
In the commercial loan portfolio, business loans and lines of credit
increased $1.9 million to $26.3 million at June 30, 1996. Meanwhile, commercial
mortgage loans had an aggregate increase of $4.0 million and amounted to $32.5
million at June 30, 1996.
Allowance for Loan Losses
The allowance for loan losses increased $21,000 from December 31, 1995 and
amounted to $2.3 million at June 30, 1996. The ratio of the allowance to total
loans was 1.64% at December 31, 1995 and 1.53% at June 30, 1996. This ratio
fell due to loan growth. The ratio of net loan losses to average loans
outstanding increased to .07% for the first half of 1996. This ratio was below
0% at the end of 1995 due to a large recovery received in 1995. The ratio of
nonaccrual loans, restructured loans, plus loans delinquent more than 90 days to
total loans decreased to .68% at March 31, 1996 from .96% at December 31, 1995,
the improvement coming from a reduction in non-accrual loans.
Funding Sources
Total deposits increased by $9.5 million or 4.4% from the end of 1995 to
$226.7 million at June 30, 1996. Interest-bearing accounts increased by $13.0
million while non-interest bearing accounts decreased by $3.5 million. This
increase mainly helped to fund investment securities and new loans.
Other borrowings increased significantly by $7.1 million to $11.7 million
at June 30, 1996 from $4.6 million at December 31, 1995. Borrowings for federal
funds purchased and securities sold under agreements to repurchase increased to
$8.2 million at June 30, 1996 from $3.2 million at the end of 1995. Borrowings
from the FHLB increased from $0 at December 31, 1995 to $2.0 million at June 30,
1996. These borrowings helped to fund the increased lending activities.
Capital
Shareholders' equity decreased by $316,000 or 1.2% for the first six months
of 1996 compared to the end of 1995. This was primarily due to a $1.0 million
increase of unrealized losses since December 31, 1995, net of tax, on securities
classified as available for sale. Net income for the first half of 1996 was
$975,000. Shareholders were paid a
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dividend totalling $282,000 for the first six months of 1996. At June 30, 1996,
shareholders' equity amounted to 9.96% of total assets as compared to 10.7% at
December 31, 1995. Tier 1 (Core) and Tier 2 (Total) capital to risk-adjusted
assets ratios were 15.7% and 16.9%, respectively. The risked-based capital
ratios were slightly below levels at December 31, 1995; nevertheless, they still
far exceeded regulatory minimums. The Company's leverage ratio decreased
slightly to 9.90% at June 30,1996 from 9.95% at year end 1995.
Liquidity
As of June 30, 1996, outstanding loan commitments and unused lines of
credit for the Company totalled $53.5 million. Management places a high
probability for required funding within 1 year on approximately $11.7 million of
this total. The remaining amount is mainly unused home equity lines and credit
card lines on which management places a low probability for required funding.
At June 30, 1996, the Company's liquidity position continues to be solid. The
Company also had additional borrowing capacity of approximately $30 million at
June 30, 1996.
Interest Rate Risk
The level of income of a financial institution can be affected by the
repricing characteristics of its assets and liabilities due to changes in
interest rates. The Company's liability sensitive position at June 30, 1996 as
measured by the level of rate sensitive assets to rate sensitive liabilities
increased slightly from December 31, 1995. This position contributed somewhat
to a marginal decline in the net yield on interest earning assets of 4.35% for
the first half of 1996 from 4.39% at December 31, 1995. Theoretically, a
liability sensitive position is favorable in a falling interest rate environment
since more liabilities will reprice in a given time frame as interest rates fall
than assets. The Company was able to reduce interest rates on deposits in the
second quarter of 1996. Management continually seeks methods to reduce its
exposure to interest rate shifts.
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PART II--OTHER INFORMATION
Item 1. Legal Proceedings
There is no information to be reported under this item for the quarter ended
June 30, 1996.
Item 2. Changes in Securities
There is no information to be reported under this item for the quarter ended
June 30, 1996.
Item 3. Defaults Upon Senior Securities
There is no information to be reported under this item for the quarter ended
June 30, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
There is no information to be reported under this item for the quarter ended
June 30, 1996.
Item 5. Other Information
There is no information to be reported under this item for the quarter ended
June 30, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11- Statement re: Computation of per share
earnings
(b) There have been no Reports on Form 8-K filed by the
Company during the quarter for which this report is
filed.
9
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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.
Carrollton Bancorp
------------------
(Registrant)
Date 8/6/96 /s/ Dallas R. Arthur
--------------------
Dallas R. Arthur
President and Chief Executive
Officer
Date 8/6/96 /s/ David L. Costello III
-------------------------
David L. Costello III
Treasurer and Chief Financial
Officer
10
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EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
- ------ ------------------------- ----
11 Statement Re: Computation of
Per Share Earnings 12
11
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EXHIBIT 11- Statement Re: Computation of Per Share Earnings
CARROLLTON BANCORP
Quarter Ended Six Months Ended
June 30 June 30
---------------------- ------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
Average Shares
Outstanding (A) 1,328,565 1,339,000 1,328,565 1,343,472
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Net income $489,658 $455,325 $974,932 $837,418
Divide by average
shares
outstanding 1,328,565 1,339,000 1,328,565 1,343,472
---------- ---------- ----------- -----------
Earnings
per share $0.37 $0.34 $0.73 $0.63
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
(A) Adjusted to reflect the effect of a 2% stock dividend declared
January 17, 1996. Shares have decreased as a result of the
repurchase and retirement of 20,870 shares in May, 1995.
12
