<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 March 31, 1998
[ ] 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.)
344 North Charles Street, Suite 300, Baltimore, Maryland 21201
---------------------------------------------------------------
(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:
1,452,689 common shares outstanding at May 9, 1998
- --------------------------------------------------
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
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Assets
Cash and due from banks $ 28,770,895 $ 25,063,180
Federal funds sold -- --
Investment securities:
Available for sale 67,836,239 71,782,023
Held to maturity 10,173,685 11,825,605
(approximate market value of $10,454,830 and $12,092,724)
Loans, less allowance for loan losses of 182,888,709 168,531,267
$2,169,290 and $2,302,981
Bank premises and equipment 6,885,578 5,973,203
Deferred income taxes -- --
Accrued interest receivable 2,088,546 2,147,801
Other assets 2,886,499 2,584,313
------------ ------------
$301,530,151 $287,907,392
------------ ------------
------------ ------------
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing $ 38,566,621 $ 33,426,327
Interest-bearing 198,529,035 201,044,078
------------ ------------
Total deposits 237,095,656 234,470,405
Federal funds purchased and securities
sold under agreements to repurchase 14,459,740 11,024,441
Advances from the Federal Home Loan Bank 17,000,000 9,000,000
Notes payable - U. S. Treasury 761,038 2,706,255
Accrued interest payable 207,653 204,617
Deferred income taxes 228,369 92,105
Other liabilities 1,549,892 617,335
------------ ------------
271,302,348 258,115,158
------------ ------------
Shareholders' equity
Common stock, par value $10.00 per share;
authorized 5,000,000 shares; issued
and outstanding 1,452,689 and 1,454,275 shares 14,526,890 14,542,750
Surplus 8,552,563 8,593,801
Net unrealized holding gains on
available for sale securities 1,060,391 843,822
Retained earnings 6,087,959 5,811,861
------------ ------------
30,227,803 29,792,234
------------ ------------
$301,530,151 $287,907,392
------------ ------------
------------ ------------
</TABLE>
Note: Balances at December 31, 1997 are derived from audited financial
statements.
1
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Carrollton Bancorp
and Subsidiary
<TABLE>
<CAPTION>
Quarter Ended March 31,
1998 1997
-------- --------
<S> <C> <C>
Interest income
Interest and Fees on Loans $ 3,748,849 $ 3,277,053
Interest and Dividends on Securities:
Taxable interest income 863,228 1,008,902
Nontaxable interest income 282,978 239,978
Dividends 14,322 18,256
Interest on Federal funds sold and
other interest income 50,583 58,711
---------- ----------
Total interest income 4,959,960 4,602,900
---------- ----------
Interest expense
Deposits 2,012,985 1,991,519
Other 317,611 120,326
---------- ----------
Total interest expense 2,330,596 2,111,845
---------- ----------
Net interest income 2,629,364 2,491,055
Provision for loan losses 75,000 60,000
---------- ----------
Net interest income after provision for loan losses 2,554,364 2,431,055
---------- ----------
Other operating income
Service charges on deposit accounts 325,510 317,469
Brokerage commissions 208,719 213,360
Other fees and commissions 927,560 655,692
Gains (losses) on security sales 88,514 28,885
---------- ----------
Total other income 1,550,303 1,215,406
---------- ----------
Other expenses
Salaries 1,259,155 1,086,511
Employee benefits 307,447 268,931
Occupancy 388,758 349,960
Furniture and equipment 265,295 213,880
Other operating expenses 1,288,929 1,062,297
---------- ----------
Total other expenses 3,509,584 2,981,579
---------- ----------
Income before income taxes 595,083 664,882
Income taxes 115,575 161,882
---------- ----------
Net income $ 479,508 $ 503,000
---------- ----------
---------- ----------
Earnings per common share
Net income - basic $ 0.33 $ 0.34
---------- ----------
---------- ----------
</TABLE>
2
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Carrollton Bancorp
and Subsidiary
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities
Interest received $ 5,038,298 $ 4,576,020
Fees and commissions received 1,324,355 1,257,318
Interest paid (2,327,560) (2,095,720)
Cash paid to suppliers and employees (2,478,701) (2,088,914)
Income taxes paid (115,576) (10,905)
------------ ------------
1,440,816 1,637,799
------------ ------------
Cash Flows from investing activities
Proceeds from maturities of securities held to maturity 1,649,135 1,200,000
Proceeds from sales of securities available for sale 150,914 1,772,766
Proceeds from maturities of securities available for sale 5,644,706 1,370,646
Purchases of securities available for sale (1,424,787) (2,650,075)
Loans made, net of principal collected (15,789,164) 6,772,257
Purchase of loans 1,356,722 (8,075,060)
Purchases of premises and equipment (1,206,248) (149,356)
------------ ------------
(9,618,722) 241,178
------------ ------------
Cash flows from financing activities
Net (decrease) increase in deposits 2,656,046 2,213,065
Net increase (decrease) in other borrowed funds 9,490,082 (2,291,741)
Dividends paid (203,411) (178,242)
Common stock repurchased (57,096) 0
------------ ------------
11,885,621 (256,918)
------------ ------------
Net increase (decrease) in cash and cash equivalents 3,707,715 1,622,059
Cash and cash equivalents at beginning of year 25,063,180 21,091,197
------------ ------------
Cash and cash equivalents at March 31st $ 28,770,895 $ 22,713,256
------------ ------------
------------ ------------
Reconciliation of net income to net cash
provided by operating activities
Net income $ 479,508 $ 503,000
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses 75,000 60,000
Depreciation and amortization 265,808 232,810
Amortization of premiums and discounts 19,083 7,326
Gain on disposal of securities (88,514) (28,885)
(Increase) decrease in
Accrued interest receivable 59,255 (34,206)
Other assets (304,916) 353,407
Increase (decrease) in
Accrued interest payable 3,036 16,125
Income taxes payable 108,596 150,977
Other liabilities 823,960 377,245
------------ ------------
$ 1,440,816 $ 1,637,799
------------ ------------
------------ ------------
</TABLE>
3
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CARROLLTON BANCORP
Quarter ended March 31, 1998
The accompanying unaudited consolidated financial statements prepared as of and
for the quarter ended March 31, 1998 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, 1998.
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 1998 of
$480,000, or $.33 on a per share basis. For the same period of 1997, net income
amounted to $503,000, or $.34 on a per share basis. As a result of loan
portfolio growth, net interest income increased $138,000, or 6%, in the first
quarter of 1998 over 1997. Non-interest income increased 28% from continued
expansion of the merchant services business and point of sale business.
Offsetting some of these income gains were increased expenses related to the
start of Carrollton Mortgages Services, Inc., a residential mortgage operation,
in November, 1997, and a new branch opened in February, 1998.
Net Interest Income
Net interest income for the Company on a tax equivalent basis increased
by $172,000 to $2.8 million for the first quarter in 1998 from the first quarter
of 1997. The net yield on average earning assets stayed level at 4.36%. The
increase in net interest income therefore came principally from a higher level
of earning assets.
Interest income on loans increased 14% in the first quarter of 1998 as
compared to the first quarter of 1997 due to a 21% 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 8% for the first
quarter of 1998 as compared to 1997.
Interest expense increased $219,000 to $2.3 million in 1998 from $2.1
million in 1996. Interest expense increased primarily because a large portion of
the asset growth was funded with borrowings. Deposits grew on average about 3%
since March, 1997. In addition, the cost of interest bearing funds increased
from 4.09% in the first quarter of 1997 to 4.20% in the first quarter of 1998.
This increase is attributable to deposit disintermediation and to greater use of
borrowed funds more than to changes in market rates.
Provision for Loan Losses
The provision for loan losses during the first quarter of 1998 was
$75,000. 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 .61% in the first quarter of 1998 from
.70% in the same period of 1997. Net loan losses to average loans increased from
.07% to .48% for the same periods.
5
<PAGE>
Non-interest Income
Non-interest income, excluding securities gains, increased 23% in the
first quarter of 1998 over the first quarter of 1997. This increase is derived
solely from other fees and commissions, and is principally due to an increase in
the merchant service and point of sale business. The rate of growth in ATM fee
income was marginal. Brokerage commissions and service charges on deposit
accounts were about level with the prior year quarter.
The sales of equity securities classified as available for sale
resulted in a gain of $88,000 in the first quarter of 1998. The transaction was
undertaken because there was judged to be limited further appreciation potential
for this issue.
Non-Interest Expenses
In the first quarter 1998, non-interest expenses increased 18% over the
same period in 1997. Expense increases in all categories related to the overall
growth of the Company's assets, operations and lines of business. In particular,
the newest branch opened in February, 1998, and the mortgage subsidiary started
in November, 1997, did not have equivalent expenses in the first quarter of
1997. Other operating expenses increased $227,000, or 21%, and relates in large
measure to the direct variable cost of fee based income such as merchant
services and ATM fees.
Income Tax Provision
The effective tax rate for the Company was 19.3% for the first quarter
of 1998 as compared to 24.3% for the first quarter of 1997. 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. In addition,
the amount of federally tax free municipal bond income increased as the
municipal bond portfolio grew. 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 $13.6 million to $301.5 million at March 31, 1998
compared to $287.9 million at the end of 1997. Loans increased by $14.4 million
or 9%, while most other asset categories changed only marginally. Deposits grew
by 1% to $237.1 million and borrowed funds grew by $9.5 million to support the
loan portfolio growth.
Investment Securities
Investment securities decreased $5.6 million or 6.7% from December 31,
1997 to March 31, 1998. This was planned and helped fund a portion of the loan
growth.
6
<PAGE>
Loans
Total loans increased $14.2 million or 8.3% to $185.1 million at March
31, 1998 from the end of 1997. The growth in the first quarter was primarily in
consumer loans with residential mortgage loans showing the most significant
increase. This was partially the result of starting Carrollton Mortgage
Services, Inc. in late 1997 to focus on residential mortgage lending, and
partially due to a very soft commercial loan market.
Allowance for Loan Losses
The allowance for loan losses decreased slightly from the end of 1997
as losses increased in the first quarter. The allowance was $2.3 million at
December 31, 1997 and $2.2 million at March 31, 1998. The ratio of the allowance
to total loans was 1.35% at year end 1997 and 1.17% at the end of the first
quarter of 1998. The ratio of net loan losses to average loans outstanding
increased to .48% for the first quarter of 1998 from .11% for the year ended
December 31, 1997. The ratio of nonaccrual loans, restructured loans, plus loans
delinquent more than 90 days to total loans stayed level at .61% for both March
31, 1998 and December 31, 1997.
Funding Sources
Total deposits at March 31, 1998 increased by $2.6 million to $237.1
million from December 31, 1997. Interest-bearing accounts decreased by $2.6
million while non-interest bearing accounts increased by $5.1 million.
Other borrowings increased significantly to fund loan growth, and were
$32.2 million at March 31, 1998 compared to $22.7 million at the end of 1997.
The Company has additional borrowing capacity to be able to fund continued loan
growth.
Capital
For the first quarter of 1998, shareholders' equity increased by
$436,000 compared to December 31, 1997. This resulted from earnings during the
quarter in excess of dividends, and from an increase of unrealized gains, net of
tax, on securities classified as available for sale. The company paid
shareholders a dividend totalling $203,000 for the first three months of 1998.
Net income for the first quarter of 1998 was $480,000. Shareholders' equity to
total assets remained strong at 10.0% at March 31, 1998. Tier 1 (Core) and Tier
2 (Total) capital to risk-adjusted assets ratios decreased modestly as a result
of asset growth to 15.3% and 16.5%, respectively, at March 31, 1998. The
Company's leverage ratio for the first three months of 1998 was 9.6%. These
ratios exceed regulatory minimums.
7
<PAGE>
Liquidity
At March 31, 1998, outstanding loan commitments and unused lines of
credit for the Company totalled $65.9 million. Of this total, management places
a high probability of required funding within one year on approximately $15.2
million. The amount remaining is unused home equity lines and other consumer
lines on which management places a low probability for required funding. At
March 31, 1998, the Company's liquidity position continues to be strong. The
Company also had additional borrowing capacity of approximately $35 million at
March 31, 1998.
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, 1998, the Company's liability sensitive position
increased modestly from December 31, 1997 due to the increase in residential
mortgage loans and higher short term 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 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 fell in the first quarter of
1998 to 4.36% from 4.52% in the fourth quarter of 1997. 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, 1998.
Item 2. Changes in Securities
There is no information to be reported under this item for the quarter ended
March 31, 1998.
Item 3. Defaults Upon Senior Securities
There is no information to be reported under this item for the quarter ended
March 31, 1998.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on April 28, 1998. 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
2001:
Dallas R. Arthur; Votes for- 1,219,834
Votes withheld- 8,726
C. Edward Hoerichs; Votes for- 1,225,620
Votes withheld- 2,940
Allen Quille; Votes for- 1,227,702
Votes withheld- 858
John Paul Rogers; Votes for- 1,228,535
Votes withheld- 535
9
<PAGE>
The following remaining directors terms of office continue to
the next annual meeting of shareholders indicated.
Continuing until the 1999 Annual Meeting:
Steven K. Breeden
David L. Costello III
Samuel M. Dell, Jr.
Leo A. O'Dea
Continuing until the 2000 Annual Meeting:
Albert R. Counselman
John P. Hauswald
Samuel D. Miller
William C. Rogers, Jr.
2. Election of Director Emeritus
On nomination from the floor, Mr. William McCallister was
reelected Director Emeritus of the Company:
Votes for- 1,228,560
Votes withheld- 0
3. Vote to Approve the Carrollton Bancorp 1998 Long-Term
Incentive Plan:
Votes for- 1,098,867
Votes withheld- 33,101
4. Vote to Approve and Ratify the Acts of Officers & Directors
for the past year:
Votes for- 1,228,560
Votes withheld- 0
Item 5. Other Information
There is no information to be reported under this item for the quarter ended
March 31, 1998.
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 12, 1998 /s/ Dallas R. Arthur
------------ --------------------
Dallas R. Arthur
President and Chief Executive
Officer
Date May 12, 1998 /s/ David L. Costello III
------------ -------------------------
David L. Costello III
Treasurer and Chief Financial
Officer
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ------------ ------------
<S> <C> <C>
11 Statement Re: Computation of
Per Share Earnings 13
27 Financial Data Schedule 14
</TABLE>
12
<PAGE>
EXHIBIT 11- Statement Re: Computation of Per Share Earnings
CARROLLTON BANCORP
<TABLE>
<CAPTION>
Quarter Ended Three Months Ended
March 31 March 31
----------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average Shares
Outstanding (A) 1,453,869 1,463,738 1,453,869 1,463,738
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income $ 479,508 $ 503,000 $ 479,508 $ 503,000
Divide by average
shares
outstanding 1,453,869 1,463,738 1,453,869 1,463,738
---------- ---------- ---------- ----------
Earnings
per share--Basic $ 0.33 $ 0.34 $ 0.33 $ 0.34
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
(A) Adjusted to reflect the effect of a 5% stock dividend declared January 22,
1998.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARROLLTON
BANCORP'S FORM 10-QSB FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 28,770,895
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,836,239
<INVESTMENTS-CARRYING> 10,173,685
<INVESTMENTS-MARKET> 10,454,830
<LOANS> 185,057,999
<ALLOWANCE> 2,169,290
<TOTAL-ASSETS> 301,530,151
<DEPOSITS> 237,095,656
<SHORT-TERM> 32,220,778
<LIABILITIES-OTHER> 1,985,914
<LONG-TERM> 0
0
0
<COMMON> 14,526,890
<OTHER-SE> 15,700,913
<TOTAL-LIABILITIES-AND-EQUITY> 301,530,151
<INTEREST-LOAN> 3,748,849
<INTEREST-INVEST> 1,160,528
<INTEREST-OTHER> 50,583
<INTEREST-TOTAL> 4,959,960
<INTEREST-DEPOSIT> 2,012,985
<INTEREST-EXPENSE> 2,330,596
<INTEREST-INCOME-NET> 2,629,364
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 88,514
<EXPENSE-OTHER> 3,509,584
<INCOME-PRETAX> 595,083
<INCOME-PRE-EXTRAORDINARY> 595,083
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 479,508
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
<YIELD-ACTUAL> 4.36
<LOANS-NON> 507,050
<LOANS-PAST> 211,147
<LOANS-TROUBLED> 408,565
<LOANS-PROBLEM> 788,000
<ALLOWANCE-OPEN> 2,302,981
<CHARGE-OFFS> 235,588
<RECOVERIES> 26,897
<ALLOWANCE-CLOSE> 2,169,290
<ALLOWANCE-DOMESTIC> 1,945,234
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 224,056
</TABLE>
