<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
[ ] 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
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
344 NORTH CHARLES STREET, SUITE 300, BALTIMORE, MARYLAND 21201
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(Address of principal executive offices)
(410) 536-4600
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(Issuer's telephone number)
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(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:
2,746,567 common shares outstanding at May 8, 2000
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<PAGE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Carrollton Bancorp
and Subsidiary
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
----------------- -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 17,350,764 $ 24,795,534
Federal funds sold 660,959 2,840,365
Investment securities:
Available for sale 74,345,101 75,747,478
Held to maturity 50,000 50,000
(approximate market value of $50,000;
and $50,000)
Loans held for sale 2,968,931 2,557,922
Loans, less allowance for loan losses of 267,748,611 254,611,044
$2,893,416 and $2,836,291
Premises and equipment 8,602,330 8,456,257
Deferred income taxes 1,065,156 880,010
Prepaid income taxes 453,149 525,627
Accrued interest receivable 2,722,131 2,381,008
Other assets 2,909,038 2,773,956
----------------- -----------------
$ 378,876,170 $ 375,619,201
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest bearing $ 43,424,593 $ 41,957,674
Interest-bearing 222,625,240 220,492,191
----------------- -----------------
Total deposits 266,049,833 262,449,865
Federal funds purchased and securities
sold under agreement to repurchase 20,116,442 13,650,176
Advances from the Federal Home Loan Bank 61,000,000 66,000,000
Notes payable - U.S. Treasury 509,782 1,830,856
Accrued Interest payable 744,021 491,728
Other liabilities 1,035,672 1,311,999
----------------- -----------------
349,455,750 345,734,624
----------------- -----------------
SHAREHOLDERS' EQUITY
Common stock, par $1.00 per share; 2,752,595 2,776,904
authorized 10,000,000 shares; issued and outstanding
2,752,595 and 2,776,904 shares
Surplus 17,680,561 18,016,419
Accumulated other comprehensive income (1,148,951) (854,693)
Retained earnings 10,136,215 9,945,947
----------------- -----------------
29,420,420 29,884,577
----------------- -----------------
$ 378,876,170 $ 375,619,201
================= =================
</TABLE>
Note: Balances at December 31, 1999 are derived from audited financial
statements.
Page 1
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Carrollton Bancorp
and Subsidiary
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31
2000 1999
--------------- ---------------
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 5,291,124 $ 4,024,912
Interest and Dividends on Securities:
Taxable interest income 763,337 447,394
Nontaxable interest income 255,293 318,277
Dividends 55,086 17,446
Interest on federal funds sold and
other interest income 92,196 53,204
------------------- -------------------
Total interest income 6,457,036 4,861,233
------------------- -------------------
INTEREST EXPENSE
Deposits 2,501,871 1,829,664
Borrowings 1,114,480 428,514
------------------- -------------------
Total interest expense 3,616,351 2,258,178
------------------- -------------------
Net interest income 2,840,685 2,603,055
Provision for loan losses 112,000 144,900
------------------- -------------------
Net interest income after provision for loan losses 2,728,685 2,458,155
------------------- -------------------
OTHER OPERATING INCOME
Service charges on deposit accounts 312,001 342,693
Brokerage commissions 308,966 239,417
Other fees and commissions 1,180,632 1,474,421
Security gains, net 53,959 41,780
Gains on loan sales, net 15,621 249,939
------------------- -------------------
Total other income 1,871,179 2,348,250
------------------- -------------------
OTHER EXPENSES
Salaries 1,491,428 1,447,057
Employee benefits 354,217 333,331
Occupancy 361,193 445,744
Furniture and equipment 409,786 350,171
Other operating expenses 1,485,186 1,598,647
------------------- -------------------
Total other expenses 4,101,810 4,174,950
------------------- -------------------
Income before income taxes 498,054 631,455
Income taxes 72,492 124,038
------------------- -------------------
Net income $ 425,562 $ 507,417
=================== ===================
EARNINGS PER COMMON SHARE
Net income - basic and diluted $ 0.15 $ 0.18
=================== ===================
</TABLE>
Page 2
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Carrollton Bancorp
and Subsidiary
<TABLE>
<CAPTION>
Three Months Ended March 31
2000 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Interest received $ 6,129,733 $ 5,115,022
Fees and commissions received 1,710,327 2,062,491
Interest paid (3,364,059) (2,321,675)
Origination of loans held for sale (6,223,959) (8,369,805)
Proceeds from sale of loans held for sale 5,828,571 9,111,230
Cash paid to suppliers and employees (4,062,957) (3,896,339)
Income taxes paid (72,492) (163,154)
--------------- ---------------
(54,836) 1,537,770
--------------- ---------------
Cash flows from investing activities
Proceeds from maturities of securities held to maturity 0 570,000
Proceeds from sales of securities available for sale 492,239 1,367,282
Proceeds from maturities of securities available for sale 600,000 7,619,799
Purchase of securities available for sale (129,127) (9,630,744)
Loans made, net of principal collected (9,568,766) 6,491,290
Purchase of loans (3,650,238) 713,591
Purchase of premises and equipment (463,147) (1,362,113)
--------------- ---------------
(12,719,039) 5,769,105
--------------- ---------------
Cash flows from financing activities
Net increase (decrease) in time deposits 1,278,950 4,445,134
Net increase (decrease) in other deposits 2,321,018 (1,837,667)
Net increase (decrease) in other borrowed funds 145,192 (16,987,525)
Dividends paid (235,293) (204,820)
Common stock repurchase and retirement (360,168) (175,797)
--------------- ---------------
3,149,699 (14,760,675)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents (9,624,176) (7,453,800)
Cash and cash equivalents at beginning of year 27,635,899 32,546,465
--------------- ---------------
Cash and cash equivalents at March 31 $ 18,011,723 $ 25,092,665
=============== ===============
Reconciliation of net income to net cash
provided by operating activities
Net income $ 425,562 $ 507,417
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses 112,000 144,900
Depreciation and amortization 349,664 345,155
Amortization of premiums and discounts 13,820 17,182
Gains on disposal of securities (53,959) (41,780)
Loans held for sale made, net of principal sold (425,952) 741,425
Gains on loans held for sale (15,621) (249,939)
(Increase) decrease in:
Accrued interest receivable (341,123) 236,607
Prepaid income taxes 72,478 (39,116)
Other assets (167,671) (248,155)
Increase (decrease) in:
Accrued interest payable 252,293 (63,497)
Other liabilities (276,327) 187,571
--------------- ---------------
$ (54,836) $ 1,537,770
=============== ===============
</TABLE>
Page 3
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CARROLLTON BANCORP
Quarter ended March 31, 2000
The accompanying unaudited consolidated financial statements prepared as of and
for the quarter ended March 31, 2000 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, 2000.
Note A -- Comprehensive Income
In June, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE
INCOME ("SFAS NO. 130"). SFAS No. 130 establishes requirements for the
disclosure of comprehensive income in interim financial statements.
Comprehensive income is defined as net income plus transactions and other
occurrences which are the result of nonowner changes in equity. For the Company,
nonowner equity changes are comprised of unrealized gains or losses on debt
securities that will be accumulated with net income in determining comprehensive
income. This statement is effective for years beginning after December 15, 1997.
Adoption of this standard did not have an impact on the Company's historical
results of operations. Presented below is a reconcilement of net income to
comprehensive income indicating the components of other comprehensive income.
<TABLE>
<CAPTION>
For the Three Month Periods Ended: 3/31/2000 3/31/1999
- ------------------------------------------------------------ ------------- ------------
<S> <C> <C>
Net Income $ 425,562 $ 507,417
Other comprehensive income:
Unrealized gains (losses)during the period (425,446) (54,067)
Less: Adjustment for security gains (losses) (53,959) (41,780)
------------- ------------
Other comprehensive income, before taxes (479,405) (95,847)
Income taxes on comprehensive income (185,147) (37,016)
------------- ------------
Other comprehensive income, after tax (294,258) (58,831)
------------- ------------
Comprehensive income 131,304 448,586
============= ============
</TABLE>
<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 2000 of
$426,000, or $.15 on a per share basis. For the same period of 1999, net income
amounted to $507,000, or $.18 on a per share basis. Interest and fee income on
loans increased 31% as a result of loan portfolio growth, with total interest
income increasing 33%, and net interest income increasing 9%. Other operating
income, excluding gains on loan and security sales, decreased 12% compared to
first quarter of 1999, due to the Company's sale of its merchant services unit
in late 1999. Offsetting the overall increase in income were increased expenses
related to fee business lines which have a variable cost component, and accrual
of severance benefits of $110,000.
Net Interest Income
Net interest income for the Company on a tax equivalent basis was
increased $0.2 million for the first quarter of 2000 compared to 1999 at $3.0
million. The net yield on average earning assets declined from 4.16% in the
first quarter of 1999 to 3.61% in 2000. The decrease in the net yield came
principally from the rising funding costs associated with the increased
borrowing level and the rising interest rate environment.
Interest income on loans increased 31% in the first quarter of 2000 as
compared to the first quarter of 1999 due to an 35% increase in the loan
portfolio. Interest income from investment securities increased 37% as the
portfolio on average increased. The Company emphasized loan production which was
funded by Federal Home Loan Bank borrowings.
Interest expense increased $1.4 million over 1999 to $3.6 million in
2000. Interest expense on deposits increased primarily because of increases in
market interest rates. Deposits grew on average about 11% since March, 1999. As
rates on loans and securities increased, market pressure increased deposit
rates. Because a larger portion of the asset growth was funded with borrowings
in 2000 as compared to 1999, other interest expense likewise increased. The cost
of interest bearing funds increased to 4.82% in the first quarter of 2000 from
3.82% in the first quarter of 1999.
Provision for Loan Losses
The provision for loan losses during the first quarter of 2000 was
$112,000 compared to $145,000 in 1999. 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 .36%
in the first quarter of 2000 from .88% in the same period of 1999. Net loan
losses to average loans decreased from .02% to .14% for the same periods, but
the loan portfolio increased 35% as previously noted.
Non-interest Income
Non-interest income, excluding securities gains and loan sales,
decreased 12% in the first quarter of 2000 compared to 1999. This decrease was
largely due to the sale of merchant services in late 1999 which represented
income of $445,000 in the first quarter of 1999. Other components of other
income saw a 9% decrease in service charges on deposits, 29% increase in
brokerage commissions, and a 13% increase in ATM fee income.
<PAGE>
The sales of equity securities classified as available for sale
resulted in a gain of $54,000 in the first quarter of 2000. The transaction was
undertaken because there was judged to be limited further appreciation potential
for this issue.
Gains on loan sales amounted to $16,000 in the first quarter of 2000
compared to $250,000 for the same period in 1999, due to lower volumes of sales
in 2000 and lower premiums realized.
Non-Interest Expenses
In the first quarter 2000, non-interest expenses decreased 2% compared
to the same period in 1999. Included in the expenses for the first quarter of
2000 and 1999 were severance accruals of $110,000 and $83,000 respectively for
reductions in staff. Without the expenses related to merchant services, which
totaled $126,000 for the first first quarter of 1999, non-interest expense would
have remained flat. Most increases in expenses related to the overall growth of
the Company's assets, operations and transactional lines of business and the
direct variable cost of fee based income such as ATM fees.
Income Tax Provision
The effective tax rate for the Company decreased to 14.6% for the first
quarter of 2000 compared to 19.6% for the first quarter of 1999.
Financial Condition
Summary
Total assets increased $3.3 million to $378.9 million at March 31, 2000
compared to $375.6 million at the end of 1999. Loans increased by $13.2 million
or 5%, net of loan sales. Cash also decreased as the ATM network reduced cash
levels after the holiday shopping period in December. Most other asset
categories changed only marginally. Deposits grew by 1% to $266.0 million and
borrowed funds remained flat at $81 million. The Company used the proceeds of
the loan sale to pay down FHLB borrowings.
Investment Securities
Investment securities decreased $1.4 million from December 31, 1999 to
March 31, 2000. The Company sold equity securities it deemed to have limited
further potential for appreciation.
Loans
Total gross loans increased $13.6 million or 5% to $273.6 million at
March 31, 2000 from the end of 1999. The commercial loan portfolio increased
$3.8 million net of significant payoffs. The commercial market was very
competitive during the period, and certain payoffs were the result of customers
refinancing at a lower rate. In addition, draws on existing equity lines and
equity line purchases resulted in an $8.9 million increase to the portfolio. The
Company had made a decision to inactivate the Mortgage subsidiary which resulted
in lower mortgage production.
Allowance for Loan Losses
The allowance for loan losses increased slightly from the end of 1999.
The allowance was $2.8 million at December 31, 1999 and $2.9 million at March
31, 2000. The ratio of the allowance to total loans was 1.10% at year end 1999
and 1.07% at the end of the first quarter of 2000. The ratio of net loan losses
to average loans outstanding decreased to .02% for the first quarter of 2000
from .07% for the year ended December 31, 1999. The ratio of nonaccrual loans,
restructured loans, plus loans delinquent more than 90 days to total loans
decreased to .36% for March 31, 2000 compared to 0.41% at year end 1999.
<PAGE>
Funding Sources
Total deposits at March 31, 2000 increased by $3.6 million to $266.0
million from December 31, 1999. Interest-bearing accounts increased by $2.1
million while non-interest bearing accounts increased by $1.5 million.
Federal Home Loan Bank borrowings decreased as the proceeds of the loan
sales were used to pay down debt. Total borrowings remained level at $81.6
million at March 31, 2000 compared to $81.5 million at the end of 1999.
Capital
For the first quarter of 2000, shareholders' equity decreased by
$464,000 compared to December 31, 1999. While earnings for the quarter were in
excess of dividends, they were overshadowed by the combination of a net increase
in unrealized losses net of tax, on securities classified as available for sale
and common stock repurchases. The company paid shareholders a dividend totaling
$235,000 for the first three months of 2000. Net income for the first quarter of
2000 was $426,000. Shareholders' equity to total assets remained strong at 10.2%
at March 31, 2000. Tier 1 (Core) and Tier 2 (Total) capital to risk-adjusted
assets ratios decreased as a result of changes in the asset mix to 13.95% and
15.26%, respectively, at March 31, 2000. The Company's leverage ratio for the
first three months of 2000 was 7.89%. These ratios exceed regulatory minimums.
Liquidity
At March 31, 2000, outstanding loan commitments and unused lines of
credit for the Company totaled $103 million. Of this total, management places a
high probability of required funding within one year on approximately $41
million. The amount remaining is unused home equity lines and other consumer
lines on which management places a low probability of funding. At March 31, 2000
the Company's liquidity continues to decrease, with loan demand outpacing
deposit growth requiring the Company to borrow to fund loan demand. The Company,
to maintain liquidity, has begun to selectively sell securities and loans from
its portfolio to fund loan growth.
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, 2000, the Company's liability sensitive position
continues from December 31, 1999, however management is taking steps to lock in
funding with fixed rate instruments that better match repricings of assets. 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 2000 to 3.61% from 4.01% in the fourth quarter of
1999. Due to the Company's liability sensitive position, the recent rate changes
have caused funding costs to exceed the repricing of assets, which was a factor
in the decision to inactivate the mortgage subsidiary, thus minimizing further
interest rate risk. The Company constantly works to manage its exposure to
interest rate shifts, and minimize the effect on earnings.
<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, 2000.
Item 2. Changes in Securities
There is no information to be reported under this item for the quarter ended
March 31, 2000.
Item 3. Defaults Upon Senior Securities
There is no information to be reported under this item for the quarter ended
March 31, 2000.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on April 25, 2000. 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 2003:
<TABLE>
<S> <C> <C>
Albert R. Counselman Votes for 2,378,536
Votes withheld 22,512
John P. Hauswald Votes for 2,378,164
Votes withheld 22,884
David P. Hessler Votes for 2,378,536
Votes withheld 22,512
William C. Rodgers, Jr. Votes for 2,377,752
Votes withheld 23,296
</TABLE>
The following remaining directors terms of office continue to
the next annual meeting of shareholders indicated.
Continuing until the 2001 Annual Meeting:
Dallas R. Arthur
C. Edward Hoerichs
Allen Quille
John Paul Rodgers
Continuing until the 2002 Annual Meeting:
Steven K. Breeden
Thelma T. Daley
Howard S. Klein
Leo A. O'Dea
<PAGE>
2. Election of Director Emeritus
On nomination from the floor, Mr. William McCallister was
reelected Director Emeritus of the Company:
Votes for 2,401,048
Votes withheld 0
3. Vote to Approve and Ratify the Acts of Officers & Directors
for the past year:
Votes for 2,401,048
Votes withheld 0
Item 5. Other Information
There is no information to be reported under this item for the quarter ended
March 31, 2000.
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
<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, 2000 /s/ Dallas R. Arthur
----------- --------------------------------
Dallas R. Arthur
President and Chief Executive
Officer
Date May 9, 2000 /s/ Randall M. Robey
----------- --------------------------------
Randall M. Robey
Treasurer and Chief Financial
Officer
<PAGE>
EXHIBIT 11 - Statement Re: Computation of Per Share Earnings
CARROLLTON BANCORP
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Average shares outstanding 2,770,507 2,824,792
=========== ===========
Net income 425,562 507,417
Divide by average shares outstanding 2,770,507 2,824,792
----------- -----------
Earnings per share: basic and diluted $0.15 $0.18
=========== ===========
</TABLE>
Average shares outstanding for 1999 are adjusted for the 2 for 1 stock split
issued May, 1999.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 17,350,764
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 660,959
<TRADING-ASSETS> 2,968,931
<INVESTMENTS-HELD-FOR-SALE> 74,345,101
<INVESTMENTS-CARRYING> 50,000
<INVESTMENTS-MARKET> 50,000
<LOANS> 270,642,027
<ALLOWANCE> 2,893,416
<TOTAL-ASSETS> 378,876,170
<DEPOSITS> 266,049,833
<SHORT-TERM> 81,626,224
<LIABILITIES-OTHER> 1,779,693
<LONG-TERM> 0
0
0
<COMMON> 2,752,595
<OTHER-SE> 26,667,825
<TOTAL-LIABILITIES-AND-EQUITY> 378,876,170
<INTEREST-LOAN> 5,291,124
<INTEREST-INVEST> 1,073,716
<INTEREST-OTHER> 92,196
<INTEREST-TOTAL> 6,457,036
<INTEREST-DEPOSIT> 2,501,871
<INTEREST-EXPENSE> 3,616,351
<INTEREST-INCOME-NET> 2,840,685
<LOAN-LOSSES> 112,000
<SECURITIES-GAINS> 53,959
<EXPENSE-OTHER> 4,101,810
<INCOME-PRETAX> 498,054
<INCOME-PRE-EXTRAORDINARY> 498,054
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 498,054
<EPS-BASIC> 0.15
<EPS-DILUTED> 0.15
<YIELD-ACTUAL> 3.61
<LOANS-NON> 292,033
<LOANS-PAST> 15,021
<LOANS-TROUBLED> 330,987
<LOANS-PROBLEM> 2,547,690
<ALLOWANCE-OPEN> 2,836,291
<CHARGE-OFFS> 69,161
<RECOVERIES> 14,286
<ALLOWANCE-CLOSE> 2,893,416
<ALLOWANCE-DOMESTIC> 2,893,416
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,511,360
</TABLE>
