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 March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ___________ to ___________
Commission file number 0-23090
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
- - --------------------------------------------------------------------------------
(Address of principal executive offices)
(410) 536-4600
- - --------------------------------------------------------------------------------
(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: 1,394,758 common shares outstanding at May 9, 1997
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
Carrollton Bancorp
and Subsidiary
March 31, December 31,
1997 1996
------------- ------------
Assets (Unaudited)
Cash and due from banks $ 17,513,256 $ 20,391,197
Federal funds sold 5,200,000 700,000
Interest-bearing deposits with financial
institutions 0 0
Investment securities:
Available for sale 68,953,340 69,961,952
Held to maturity 15,023,480 16,315,816
(approximate market value of $15,134,939
and $16,537,179)
Loans, less allowance for loan losses of 150,995,807 149,753,004
$2,275,985 and $2,241,148
Bank premises and equipment 4,794,141 4,868,469
Deferred income taxes 767,425 524,439
Accrued interest receivable 1,990,880 1,956,674
Other assets 2,378,908 2,685,609
------------- ------------
$ 267,617,237 $267,157,160
============= ============
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing $ 29,636,293 $ 30,229,596
Interest-bearing 198,361,852 195,555,484
------------- ------------
Total deposits 227,998,145 225,785,080
Federal funds purchased and securities
sold under agreements to repurchase 5,230,990 5,296,743
Advances from the Federal Home Loan Bank 3,000,000 5,000,000
Notes payable - U. S. Treasury 1,420,490 1,646,478
Accrued interest payable 223,791 207,666
Other liabilities 1,734,797 1,150,743
------------- ------------
239,608,213 239,086,710
------------- ------------
Shareholders' equity
Common stock, par value $10.00 per share;
authorized 5,000,000 shares; issued
and outstanding 1,394,758 shares 13,947,580 13,947,580
Surplus 6,973,556 6,973,556
Net unrealized holding gains on
available for sale securities (178,237) 207,948
Retained earnings 7,266,125 6,941,366
------------- ------------
28,009,024 28,070,450
------------- ------------
$ 267,617,237 $267,157,160
============= ============
Note: Balances at December 31, 1996 are derived from audited financial
statements.
- 1 -
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Carrollton Bancorp
and Subsidiary
Quarter Ended March 31,
1997 1996
---------- ----------
Interest income
Interest and Fees on Loans $3,277,053 $3,066,939
Interest and Dividends on Securities:
Taxable interest income 1,008,902 1,111,891
Nontaxable interest income 239,978 176,826
Dividends 18,256 13,074
Interest on Federal funds sold and
other interest income 58,711 66,616
---------- ----------
Total interest income 4,602,900 4,435,346
---------- ----------
Interest expense
Deposits 1,991,519 1,983,241
Other 120,326 53,506
---------- ----------
Total interest expense 2,111,845 2,036,747
---------- ----------
Net interest income 2,491,055 2,398,599
Provision for loan losses 60,000 35,000
---------- ----------
Net interest income after provision for loan losses 2,431,055 2,363,599
---------- ----------
Other operating income
Service charges on deposit accounts 317,469 303,264
Brokerage commissions 213,360 166,884
Other fees and commissions 655,692 219,864
Gains (losses) on security sales 28,885 2,839
---------- ----------
Total other income 1,215,406 692,851
---------- ----------
Other expenses
Salaries 1,086,511 931,434
Employee benefits 268,931 231,266
Occupancy 349,960 314,578
Furniture and equipment 213,880 168,128
Other operating expenses 1,062,297 710,909
---------- ----------
Total other expenses 2,981,579 2,356,315
---------- ----------
Income before income taxes 664,882 700,135
Income taxes 161,882 214,861
---------- ----------
Net income $ 503,000 $ 485,274
========== ==========
Earnings per common share
Net income $ 0.36 $ 0.35
========== ==========
- 2 -
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Carrollton Bancorp
and Subsidiary
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Interest received $ 4,576,020 $ 4,553,700
Fees and commissions received 1,257,318 748,230
Interest paid (2,095,720) (2,032,001)
Cash paid to suppliers and employees (2,088,914) (1,903,671)
Income taxes paid (10,905) (159,506)
------------ ------------
1,637,799 1,206,752
------------ ------------
Cash Flows from investing activities
Proceeds from maturities of securities held to maturity 1,200,000 1,300,000
Purchases of securities held to maturity 0 0
Proceeds from sales of securities available for sale 1,772,766 459,500
Proceeds from maturities of securities available for sale 1,370,646 7,808,577
Purchases of securities available for sale (2,650,075) (12,858,635)
Loans made, net of principal collected 6,772,257 3,540,208
Purchase of loans (8,075,060) (7,203,150)
Purchases of premises and equipment (149,356) (251,124)
------------ ------------
241,178 (7,204,624)
------------ ------------
Cash flows from financing activities
Net (decrease) increase in deposits 2,213,065 3,687,667
Net increase (decrease) in other borrowed funds (2,291,741) (232,734)
Dividends paid (178,242) (136,789)
------------ ------------
(256,918) 3,318,144
------------ ------------
Net increase (decrease) in cash and cash equivalents 1,622,059 (2,679,728)
Cash and cash equivalents at beginning of year 21,091,197 19,903,646
------------ ------------
Cash and cash equivalents at March 31st $ 22,713,256 $ 17,223,918
============ ============
Reconciliation of net income to net cash
provided by operating activities
Net income $ 503,000 $ 485,274
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses 60,000 35,000
Depreciation and amortization 232,810 159,146
Amortization of premiums and discounts 7,326 5,373
Gain on disposal of securities (28,885) (2,839)
(Increase) decrease in
Accrued interest receivable (34,206) 112,981
Other assets 353,407 58,218
Increase (decrease) in
Accrued interest payable 16,125 4,746
Income taxes payable 150,977 55,355
Other liabilities 377,245 293,498
------------ ------------
$ 1,637,799 $ 1,206,752
============ ============
</TABLE>
- 3 -
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CARROLLTON BANCORP
Quarter ended March 31, 1997
The accompanying unaudited consolidated financial statements prepared as of and
for the quarter ended March 31, 1997 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,
but are necessary for a fair presentation. The results reflected by these
statements may not be indicative, however, of the results for the year ending
December 31, 1997.
4
<PAGE>
Item 2. Management's Discussion and Analysis
of Operating Results and Financial Condition
Earnings
Summary
Carrollton Bancorp reported net income for the first quarter of 1997 of
$503,000, or $.36 on a per share basis. For the same period of 1996, net income
amounted to $485,000, or $.35 on a per share basis. As a result of loan
portfolio growth, net interest income increased $92,000, or 4%, in the first
quarter of 1997 over 1996. Non-interest income increased 75% from continued
expansion of the off-site ATM network, and from strong commission growth in the
Company's brokerage subsidiary. Offsetting some of these income gains were
increased expenses related to the two additional branches opened in 1996, and to
the expansion of the ATM network.
Net Interest Income
Net interest income for the company on a tax equivalent basis increased by
$122,000 to $2.6 million for the first quarter in 1997 from the first quarter of
1996. The net yield on average earning assets increased to 4.35% in the first
quarter of 1997 from 4.34% for the same period in 1996. These increases occurred
from increased volume of earning assets.
Interest income on loans increased 6% in the first quarter of 1997 as
compared to the first quarter of 1996 due to the increase in the loan portfolio.
Interest income from investment securities declined as the portfolio on average
fell. The Company emphasized loan production which was funded by securities. The
result was that total interest income increased 4% for the first quarter of 1997
as compared to 1996.
Interest expense increased $75,000 to $2.1 million in 1997 from $2.0
million in 1996. Interest expense increased because of the growth in average
borrowings and deposits, and was offset by aggregate falling rates over the last
twelve months.
Provision for Loan Losses
The provision for loan losses during the first quarter of 1997 was
$60,000. The provision was determined based on management's review and analysis
of the allowance for loan losses. Nonaccrual, restructured, and delinquent loans
over 90 days to total loans decreased to .70% in the first quarter of 1997 from
.95% in the same period of 1996.
Non-interest Income
Non-interest income, excluding securities gains, increased 72% in the
first quarter of 1997 over the first quarter of 1996. This increase is
principally attributed to the $436,000 jump in other fees and commissions
because of an increase in ATM fee income due to surcharges and additional
machines placed in service, and by the increase in volume of merchants receiving
credit card deposit services. Brokerage commissions for the first three months
of 1997 increased 28% from the same period in 1996 because of strong sales
performance. Service charges on deposit accounts increased $14,000 or 5% due to
5
<PAGE>
commercial account activity.
The sales of mortgage-backed securities and equity securities classified
as available for sale resulted in a gain of $29,000 in the first quarter of
1997. The transactions were undertaken to enhance yield and shorten duration.
Non-Interest Expenses
In the first quarter 1997, non-interest expenses increased 27% over the
same period in 1996. The majority of the increases related to the latest branch
openings and ATM installations. The growth in staff, locations, and electronic
network resulted in increases in salaries and employee benefits, occupancy,
furniture and equipment, and other operating expenses. Other operating expenses
increased $351,000, or 49%, and principally was caused by increases in
marketing, data processing, and servicing related to the ATM network.
Income Tax Provision
The effective tax rate for the company was 24.3% for the first quarter of
1997 as compared to 30.1% for the first quarter of 1996. The effective tax rate
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 qualifying investments. The decrease in the
tax provision also was partially due to the decrease in the amount of income
before tax.
Financial Condition
Summary
Total assets grew $460,000 to $267.6 million at March 31, 1997 compared to
$267.2 million at the end of 1996. Federal funds sold increased $4.5 million to
$5.2 million while loans increased by .8% to $153.3 million. Deposits grew by 1%
to $228.0 million.
Short-Term Investments
In total, short-term investments increased $4.5 million from the end of
1996 to March 31, 1997. A portion of the growth derived from interest-bearing
deposits, investment securities maturities which were temporarily invested in
federal funds sold, and a reduction of cash in the ATM network at year end 1996
which had been increased for the holiday season.
Investment Securities
In aggregate, investment securities decreased $2.3 million or 2.7% at
March 31, 1997. A portion of the investment security maturities helped to fund
loan growth and the remainder was placed temporarily in federal funds sold.
6
<PAGE>
Loans
Total loans increased $1.3 million or .84% to $153.3 million at March 31,
1997 from the end of 1996. The Company continues to grow the commercial loan
portfolio due to its emphasis on services to small and medium sized businesses.
Approximately 60% of the growth in the loan portfolio was commercial loan
growth. In addition, consumer loan demand was strong in home equity loans.
In the first quarter of 1997 in the commercial loan portfolio, business
loans and lines of credit increased $625,000 and were $27.3 million at March 31,
1997. Commercial mortgages, in total, increased $705,000 in 1997 and amounted to
$34.4 million at March 31, 1997.
Meanwhile, home equity loans and residential mortgages increased by $1.2
million to $42.8 million at March 31, 1997. Installment loans and personal
lines, on the other hand, decreased by $1.2 million to $48.8 million.
Allowance for Loan Losses
The allowance for loan losses remained approximately the same from the end
of 1996 and amounted to $2.3 million at March 31, 1997. The ratio of the
allowance to total loans was 1.47% at year end 1996 and 1.48% at the end of the
first quarter of 1997. The ratio of net loan losses to average loans outstanding
decreased to .07% for the first quarter of 1997 from .13% for the year ended
December 31, 1996. In addition, the ratio of nonaccrual loans, restructured
loans, plus loans delinquent more than 90 days to total loans increased to .70%
at March 31, 1997 from .63% at December 31, 1996 as a result of higher
nonaccrual loans.
Funding Sources
Total deposits at March 31, 1997 increased by $2.2 million to $228.0
million from December 31, 1996. Interest-bearing accounts increased by $2.8
million while non-interest bearing accounts decreased by $0.6 million. This
increase was placed temporarily in federal funds sold.
Other borrowings were reduced by $2.2 million to $4.4 million from the end
of 1996 to March 31, 1997. Borrowings for federal funds purchased and securities
sold under agreements to repurchase decreased by $66,000 to $5.2 million.
Advances from the Federal Home Loan Bank were reduced by $2.0 million due to the
decreased cash needed in the ATM network from the end of 1996.
Capital
For the first quarter of 1997, shareholders' equity decreased by $61,000
compared to December 31, 1996. This resulted mainly from a $386,000 increase of
unrealized losses, net of tax, on securities classified as available for sale.
The company paid shareholders a dividend totalling $178,000 for the first three
months of 1997. This was offset by the net income for the first quarter of 1997
of $503,000. Shareholders' equity to total assets remained the same from the end
of 1996 to March 31, 1997 at 10.5%. Meanwhile, Tier
7
<PAGE>
1 (Core) and Tier 2 (Total) capital to risk-adjusted assets ratios increased
from the end of 1996 to 17.1% and 18.4%, respectively. In addition, the
Company's leverage ratio for the first three months of 1997 was 10.1% as
compared to 10.0% at December 31, 1996.
These ratios exceed regulatory minimums.
Liquidity
At March 31, 1997, outstanding loan commitments and unused lines of credit
for the Company totalled $63.6 million. Of this total, management places a high
probability of required funding within one year on approximately $13.4 million.
The amount remaining is mainly unused home equity lines and other consumer lines
on which management places a low probability for required funding. At March 31,
1997, the Company's liquidity position continues to be strong. The Company also
had additional borrowing capacity of approximately $29 million at March 31,
1997.
Interest Rate Risk
Due to changes in interest rates, the level of income for a financial
institution can be affected by the repricing characteristics of its assets and
liabilities. At March 31, 1997, the Company's liability sensitive position
decreased from December 31, 1996 due to the increase in variable rate earning
assets and decrease in other borrowings. A liability sensitive position,
theoretically, is favorable in a falling rate environment since more liabilities
than assets will reprice in a given time frame as interest rates fall.
Management works hard to maintain a consistent spread between yields on assets
and costs of deposits and borrowings, regardless of the direction of interest
rates. However, the net yield on interest earning assets of 4.35% for the first
quarter of 1997 was slightly below the 4.36% net interest margin achieved for
all of 1996. In an attempt to reduce its exposure to interest rate shifts, the
Company continues to investigate reasonable alternatives and adopt additional
measures.
8
<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
There is no information to be reported under this item for the quarter ended
March 31, 1997.
Item 2. Changes in Securities
There is no information to be reported under this item for the quarter ended
March 31, 1997.
Item 3. Defaults Upon Senior Securities
There is no information to be reported under this item for the quarter ended
March 31, 1997.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on April 29, 1997. At such
meeting, the following matters were addressed, and the related ballots were cast
as indicated:
1. Election of Directors
The following nominees were elected as directors of the Company for
a three year term expiring at the Annual Meeting of Shareholders in 2000:
Albert R. Counselman; Votes for- 992,933
Votes withheld- 102
John P. Hauswald; Votes for- 992,532
Votes withheld- 503
Samuel D. Miller; Votes for- 992,933
Votes withheld- 102
William C. Rogers, Jr.; Votes for- 992,532
Votes withheld- 503
9
<PAGE>
The following remaining directors terms of office continue to the
next annual meeting of shareholders indicated.
Continuing until the 1998 Annual Meeting:
Dallas R. Arthur
C. Edward Hoerichs
Allen Quille
John Paul Rogers
Continuing until the 1999 Annual Meeting:
Steven K. Breeden
David L. Costello III
Samuel M. Dell, Jr.
Leo A. O'Dea
2. Election of Director Emeritus
On nomination from the floor, Mr. William McCallister was reelected
Director Emeritus of the Company:
Votes for- 993,035
Votes withheld- 0
3. Vote to Approve and Ratify the Acts of Officers & Directors for the
past year:
Votes for- 993,035
Votes withheld- 0
Item 5. Other Information
There is no information to be reported under this item for the quarter ended
March 31, 1997.
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.
10
<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.
Carrollton Bancorp
-----------------------------
(Registrant)
Date May 9, 1997 /s/ Dallas R. Arthur
------------------ -----------------------------
Dallas R. Arthur
President and Chief Executive
Officer
Date May 9, 1997 /s/ David L. Costello III
------------------ -----------------------------
David L. Costello III
Treasurer and Chief Financial
Officer
11
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
- - ------ ------------------------ ----
11 Statement Re: Computation of
Per Share Earnings 13
27 Financial Data Schedule 14
12
EXHIBIT 11- Statement Re: Computation of Per Share Earnings
CARROLLTON BANCORP
Quarter Ended
March 31
------------------------------
1997 1996
---------- ----------
Average Shares
Outstanding (A) 1,394,758 1,394,758
========== ==========
Net income $ 503,000 $ 485,274
Divide by average
shares
outstanding 1,394,758 1,394,758
---------- ----------
Earnings
per share $ 0.36 $ 0.35
========== ==========
(A) Adjusted to reflect the effect of a 5% stock dividend declared January 24,
1997.
13
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Carrollton
Bancorp's Form 10-QSB for the three months ended March 31, 1997 and is qualified
in it's entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 17,513,256
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,200,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68,953,340
<INVESTMENTS-CARRYING> 15,023,480
<INVESTMENTS-MARKET> 15,134,939
<LOANS> 153,271,792
<ALLOWANCE> 2,275,985
<TOTAL-ASSETS> 267,617,237
<DEPOSITS> 227,998,145
<SHORT-TERM> 9,651,480
<LIABILITIES-OTHER> 1,958,588
<LONG-TERM> 0
0
0
<COMMON> 13,947,580
<OTHER-SE> 14,061,444
<TOTAL-LIABILITIES-AND-EQUITY> 267,617,237
<INTEREST-LOAN> 3,277,053
<INTEREST-INVEST> 1,267,136
<INTEREST-OTHER> 58,711
<INTEREST-TOTAL> 4,602,900
<INTEREST-DEPOSIT> 1,991,519
<INTEREST-EXPENSE> 2,111,845
<INTEREST-INCOME-NET> 2,491,055
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> 28,885
<EXPENSE-OTHER> 2,981,579
<INCOME-PRETAX> 664,882
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 503,000
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 4.35
<LOANS-NON> 202,092
<LOANS-PAST> 56,907
<LOANS-TROUBLED> 813,136
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,241,148
<CHARGE-OFFS> 47,636
<RECOVERIES> 22,473
<ALLOWANCE-CLOSE> 2,275,985
<ALLOWANCE-DOMESTIC> 1,823,981
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 452,004
</TABLE>
