SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 12 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 0-22536
Monocacy Bancshares, Inc.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Maryland 52-1824297
- --------------------------------- -------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
222 E. Baltimore Street
Taneytown, Maryland 21787
- ------------------------------- ------------
(Address of Principal Executive (Zip Code)
Offices)
(410) 756-2655
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
--- ---
Indicate the number of shares outstanding of each of the classes of common
stock, as of the latest practical date.
1,625,575 shares of Common Stock, $5 par value per share, were outstanding as of
August 8, 1997.
<PAGE>
MONOCACY BANCSHARES, INC.
Index to Form 10-QSB Report
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets........................1
Consolidated Income Statements.....................2
Consolidated Statements of Stockholders' Equity....3
Consolidated Statements of Cash Flows..............4
Notes to Consolidated Financial Statements.........5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .........................................11
Item 2. Changes in Securities......................................11
Item 3. Defaults Upon Senior Securities............................11
Item 4. Submission of Matters to a Vote of Security Holders........11
Item 5. Other Information..........................................11
Item 6. Exhibits and Reports on Form 8-K...........................11
Signatures..........................................................12
<PAGE>
Part I
Item 1. Financial Statements
Monocacy Bancshares, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1997 1996
------ ------------ --------------
(unaudited)
<S><C>
Cash and due from banks $ 8,666,695 $ 10,373,937
Federal funds sold - 2,000,000
Interest-bearing deposits with other banks 3,912 108,490
Loans held for sale 3,444,885 10,117,718
Securities available for sale 56,878,527 45,917,686
Investment securities (approximate fair value of
$24,189,994 and $23,860,226) 24,033,783 24,042,079
Loans, less allowance for loan losses of
$2,678,690 and $2,100,301 163,397,832 156,689,585
Bank premises and equipment 8,437,046 8,435,314
Other real estate owned 631,299 655,684
Deferred income taxes 1,217,593 899,000
Accrued interest receivable 2,089,800 1,939,177
Other assets 1,672,413 1,836,207
------------ ------------
Total assets $270,473,785 $263,014,877
============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Non-interest bearing deposits $ 26,895,609 $ 24,001,887
Interest bearing deposits 200,969,785 201,037,216
------------ ------------
227,865,394 225,039,103
Federal funds purchased 2,650,00 -
Other borrowings 15,672,794 15,338,564
Accrued interest and other expenses payable 1,312,098 555,067
Dividends payable 178,472 146,859
Other liabilities 19,742 286,899
------------ ------------
Total liabilities 247,698,500 241,366,492
Stockholders' Equity:
Common stock 8,112,370 7,341,620
Common stock dividend to be distributed - 3,699,159
Surplus 11,762,669 9,145,192
Retained earnings 3,585,921 2,235,364
Net unrealized gain (loss) on
securities available for sale (685,675) (772,950)
------------ ------------
Total stockholders' equity 22,775,285 21,648,385
------------ ------------
Total liabilities and stockholders' equity $270,473,785 $263,014,877
============ ============
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
1
<PAGE>
Monocacy Bancshares, Inc. and Subsidiary
Consolidated Income Statements
For the six and three month periods ended June 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
1997 1996 1997 1996
----------- ---------- ---------- ----------
<S><C>
Interest income:
Loans, including fees $ 8,000,602 $6,637,916 $3,999,634 $3,367,649
Interest-bearing deposits with other banks 10,570 42,339 4,017 10,586
Federal funds sold 36,148 135,932 9,007 10,132
Securities available for sale 1,504,271 2,217,114 789,974 1,080,657
Investment securities 577,754 554,878 289,071 368,719
----------- ---------- ---------- ----------
Total interest income 10,129,345 9,588,179 5,091,703 4,837,743
----------- ---------- ---------- ----------
Interest expense:
Deposits 4,704,869 4,718,402 2,374,249 2,311,443
Federal funds purchased 15,310 16,988 9,681 16,988
Other borrowings 314,489 508,529 136,290 232,424
----------- ---------- ---------- ----------
Total interest expense 5,034,668 5,243,919 2,520,220 2,560,855
----------- ---------- ---------- ----------
Net interest income 5,094,677 4,344,260 2,571,483 2,276,888
Provision for loan losses 660,000 150,000 480,000 75,000
----------- ---------- ---------- ----------
Net interest income after provision for loan losses 4,434,677 4,194,260 2,091,483 2,201,888
----------- ---------- ---------- ----------
Noninterest income:
Service charges on deposit accounts 264,468 194,879 158,062 110,038
Loan service charges 324,031 337,415 169,016 169,629
Trust department fees 78,651 78,551 40,276 44,286
Gains and fees on sales of loans 631,249 279,934 277,849 220,911
Gains (losses) on sales of securities (2,550) 21,755 - (11,940)
Other 153,922 131,231 27,574 71,840
----------- ---------- ---------- ----------
Total noninterest income 1,449,771 1,043,765 672,777 604,764
----------- ---------- ---------- ----------
Noninterest expense:
Salaries & employee benefits 2,733,615 2,375,067 1,372,960 1,289,393
Occupancy 368,107 300,901 167,273 152,726
Equipment 387,069 351,187 200,247 175,786
Deposit insurance 30,000 58,989 15,000 34,526
Professional fees 206,824 167,998 112,322 101,097
Other 763,893 772,711 318,935 434,738
----------- ---------- ---------- ----------
Total noninterest expense 4,489,508 4,026,853 2,186,737 2,188,266
----------- ---------- ---------- ----------
Income before income taxes 1,394,940 1,211,172 577,523 618,386
Provision for income taxes 149,276 240,973 (900) 116,413
----------- ---------- ---------- ----------
Net income $ 1,245,664 $ 970,199 $ 578,423 $ 501,973
=========== ========== ========== ==========
Earnings per share $ 0.77 $ 0.60 $ 0.36 $ 0.31
=========== ========== ========== ==========
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
MONOCACY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Information for the six months ended June 30, 1997 is unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Common Stock Gain(Loss) on Total
Common Dividend to be Retained Securities Stockholders'
Stock Distributed Surplus Earnings Available for Sale Equity
------ -------------- ------- -------- ------------------ -------------
<S><C>
Balance at December 31, 1994 $6,574,145 $ - $ 6,610,009 $ 5,931,893 $(506,364) $18,609,683
Net income - - - 2,350,776 - 2,350,776
Issuance of shares of common stock
in connection with employee benefit
and dividend reinvestment plans 43,630 - 167,167 - - 210,797
Cash dividend - - - (528,287) - (528,287)
10% stock dividend to be distributed - 2,845,643 - (2,845,643) - -
Increase in fair value of securities
available for sale - - - - 525,112 525,112
---------- ----------- ----------- ----------- --------- -----------
Balance at December 31, 1995 6,617,775 2,845,643 6,777,176 4,908,739 18,748 21,168,081
Net income - - - 1,610,804 - 1,610,804
Issuance of shares of common stock
in connection with employee benefit
and dividend reinvestment plans 63,440 - 182,778 - - 246,218
Issuance of 10% common stock dividend 660,405 (2,845,643) 2,185,238 0
Cash dividend - - - (585,020) - (585,020)
10% stock dividend to be distributed - 3,699,159 - (3,699,159) - 0
Decrease in fair value of securities
available for sale - - - - (791,698) (791,698)
---------- ----------- ----------- ----------- --------- -----------
Balance at December 31, 1996 7,341,620 3,699,159 9,145,192 2,235,364 (772,950) 21,648,385
Net income for six months - - - 1,245,664 - 1,245,664
Issuance of shares of common stock
in connection with employee benefit
and dividend reinvestment plans 36,615 - 121,418 - - 158,033
Issuance of 10% common stock dividend 734,135 (3,699,159) 2,496,059 461,483 - (7,482)
Cash dividend - - - (356,590) - (356,590)
Increase in fair value of securities
available for sale - - - - 87,275 87,275
========== =========== =========== =========== ========= ===========
Balance at June 30, 1997 $8,112,370 $ - $11,762,669 $ 3,585,921 $(685,675) $22,775,285
========== =========== =========== =========== ========= ===========
</TABLE>
3
<PAGE>
MONOCACY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six and three month periods ended June 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S><C>
Cash flows from operating activities:
Net income $ 1,245,664 $ 970,199 $ 578,423 $ 501,973
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 392,407 23,967 187,799 8,670
Provision for loan losses 660,000 150,000 480,000 75,000
Deferred income taxes (318,593) 7,432 (127,513) (193,139)
(Gains)losses on sales of securities available for sale 2,550 (21,755) - 11,940
Proceeds from sales of loans originated for sale 18,646,355 9,016,120 5,801,733 5,785,090
Disbursements for loans originated for sale (10,793,768) (8,736,186) (5,631,673) (5,564,179)
Gains on sale of loans (631,249) (279,934) (281,054) (220,911)
Increase in unearned income,
net of origination costs (89,219) 315,410 (13,712) 510,455
Gain on sale of other real estate owned - - - -
Writdeown of other real estate owned 5,500 - -
Increase in accrued interest receivable (150,623) (582,547) (227,378) (40,779)
Increase(decrease) in accrued interest and other
expenses payable 489,874 229,933 (280,746) (66,127)
Other, net 187,925 (127,368) 253,647 (776,545)
Net cash provided by
------------ ------------ ------------ ------------
operating activities 9,646,823 965,271 739,526 31,448
------------ ------------ ------------ ------------
Cash flows from investing activities:
Net decrease in interest-bearing
deposits with other banks 104,578 556,920 406,339 168,027
Proceeds from maturities of investment securities 8,296 6,995,232 3,992 1,758,239
Proceeds from sales of securities available for sale 1,383,549 9,324,961 - 5,876,484
Proceeds from maturities of securities available for sale 1,591,416 2,719,845 - 1,897,366
Purchases of securities available for sale (13,851,081) (29,613,572) (9,442,167) -
Purchases of investment securities - (15,521,461) - -
Sales of loan participations - - - -
Loan originations, net of principal repayments (7,827,533) (10,107,339) (3,473,542) (10,282,782)
Purchases of bank premises and equipment (394,139) (1,259,834) (187,527) (164,649)
Additions to real estate owned - (16,232) - (7,800)
Proceeds from real estate owned 18,885 20,274 18,885 12,774
Net cash used in
------------ ------------ ------------ ------------
investing activities (18,966,029) (36,901,206) (12,674,020) (742,341)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Net increase(decrease) in deposits 2,826,291 (5,689,150) 2,111,266 (7,991,865)
Proceeds from issuance of other borrowings 9,616,119 23,167,000 9,616,119 3,780,486
Repayments of other borrowings (6,631,889) (22,053,514) - (453,890)
Issuance of common stock 158,033 13,659 67,285 4,850
Dividends paid on common stock (356,590) (222,232) (202,285) (97,380)
Net cash provided by (used in)
------------ ------------ ------------ ------------
financing activities 5,611,964 (4,784,237) 11,592,385 (4,757,799)
------------ ------------ ------------ ------------
Net decrease in cash and cash equivalents (3,707,242) (40,720,172) (342,109) (5,468,692)
Cash and cash equivalents at beginning of period 12,373,937 47,143,615 9,008,804 11,892,135
============ ============ ============ ============
Cash and cash equivalents at end of period $ 8,666,695 $ 6,423,443 $ 8,666,695 $ 6,423,443
============ ============ ============ ============
Supplemental disclosures of cash flow information:
Interest paid on deposits and borrowings $ 4,360,973 $ 4,636,072 $ 2,193,644 $ 2,269,349
Income taxes paid 639,834 168,634 639,834 167,700
Transfers of loans to other real estate owned - - - -
Securitization of residential mortgage loans - - - -
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
MONOCACY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Information as of and for the six and three months
ended June 30, 1997 is unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with the instructions for Form 10-QSB and, therefore, do not include
all information and notes necessary for a fair presentation of financial
condition, results of operations and cash flows in conformity with generally
accepted accounting principles. The consolidated financial statements should be
read in conjunction with the audited financial statements included in the
Monocacy Bancshares, Inc., (the "Company") 1997 Annual Report on Form 10-KSB.
The consolidated financial statements include the accounts of the Company's
subsidiary, Taneytown Bank & Trust Company (the "Bank). All significant
intercompany balances and transactions have been eliminated.
The consolidated financial statements as of June 30, 1997, and for the six and
three month periods ended June 30, 1997 and 1996 are unaudited but include all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair presentation of financial position and results of
operations for those periods. The Consolidated Statements of Income for the six
and three months ended June 30, 1997 are not necessarily indicative of the
results that will be achieved for the entire year.
NOTE 2 - EARNINGS PER COMMON SHARE
Earnings per common share are based upon the weighted average number of common
shares outstanding during the periods, adjusted by any common stock equivalents
and giving retroactive effect to stock dividends.
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
The Allowance for Loan Losses is established through a provision for loan losses
charged to expenses. Loans are charged against the allowance when management
believes that the collectibility of the principal is unlikely. The allowance is
an amount that management believes will be adequate to absorb possible losses on
existing loans that may become uncollectible, based on evaluations of the
collectibility of loans and prior loan loss experience. While management uses
available information to recognize losses on loans, future additions to the
allowance may be necessary based on changes in economic conditions. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. Such agencies may
require the Bank to recognize additions to the allowance based on their
judgments about information available to them at the time of their examinations.
NOTE 4 - ACQUISITIONS
On April 19, 1996, Royal Oak Savings Bank ("the Savings Bank"), a separate
subsidiary of Monocacy Bancshares, Inc., was merged into the operations of the
Bank, with the Savings Bank's branches becoming branches of the Bank. The two
(2) new branch offices are located in Eldersburg, Maryland and Randallstown,
Maryland. As of the date of the merger, the Savings Bank had total assets of
approximately $46 million and total deposits of approximately $38 million.
On April 1, 1996, the Bank acquired Classic Mortgage Company, a mortgage-banking
operation. The mortgage company is being operated as a division of the Bank.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)
FINANCIAL CONDITION
Total assets at June 30, 1997, were $270,474 a 2.8% or $7,459 increase from
December 31, 1996. The increase in assets from December 31, 1996 occurred
primarily in the loan and securities portfolios. Net loans at June 30, 1997 were
$163,398, compared to $156,690 at December 31, 1996. The majority of the loan
increase was a result of growth in the commercial real estate, residential
construction and residential mortgage portfolios. The securities portfolios,
including investment securities and securities available for sale increased to
$80,913 at June 30, 1997 from $69,960 at December 31, 1996. Deposits increased
$2,826 or 1.3% from December 31, 1996, primarily in the non-interest bearing
deposit category, which increased $2,894 from December 31, 1996.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses was $2,679 at June 30, 1997, which was 1.61% of
loans. During the first six months of 1997, Monocacy had a $660 provision for
loan losses and had net charge-offs of $81. At December 31, 1996, the allowance
for loan losses was $2,100 or 1.32% of loans.
Table 1, "Non-Performing Assets and Past Due Loans" for Monocacy shows total
non-performing assets of $3,988 at June 30, 1997. The increase in non-performing
assets was due primarily to the addition of two commercial mortgage loan
relationships to the non-accrual category. Of the total non-performing assets at
June 30, 1997, a $65,000 piece of property was sold in July, an additional
$390,000 is under contract of sale and $1.7 million is under a verbal commitment
(awaiting a formal commitment letter) to be taken out by another institution.
Based on this information and upon the latest quarterly analysis of the loan
portfolio, Management considers the allowance for loan losses to be adequate to
absorb any reasonable, foreseeable loan losses. The allowance for loan losses is
79.80% of non-accrual loans and 67.18% of non-performing assets at June 30,
1997.
Table 2, "Changes in the Allowance for Loan Losses" shows the activity in the
allowance for loan losses for the six and three month periods ended June 30,
1997 and 1996.
LIQUIDITY
Liquidity describes the ability of the Company to meet financial obligations,
including lending commitments and contingencies, that arise during the normal
course of business. Liquidity is primarily needed to meet the borrowing and
deposit withdrawal requirements of the customers of the Company, as well as to
meet current and planned expenditures.
The Company's liquidity is derived primarily from its deposit base and equity
capital. Core deposits, defined as all deposits except certificates of deposit
of $100 or more, totaled $221,113 or 97.0% of total deposits at June 30, 1997.
Liquidity is also provided through the Company's portfolios of cash and interest
bearing deposits in other banks, federal funds sold, loans held for sale,
investment securities due within one year and securities available for sale.
Such assets totaled $69,293 or 25.6% of total assets at June 30, 1997.
In addition, the Bank has established lines of credit totaling $30,000 with the
Federal Home Loan Bank of Atlanta (the "FHLB") as an additional source of
liquidity. At June 30, 1997, the Bank had $14,673 outstanding with the FHLB and
had sufficient collateral necessary to borrow the full amount available under
the lines of credit.
CAPITAL RESOURCES
The Federal Reserve Board has adopted risk-based capital guidelines for bank
holding companies. As of June 30, 1997, the required minimum ratio of capital to
risk-adjusted assets (including certain off-balance sheet items, such as standby
letters of credit) was 8%. At least half of the total capital must be comprised
of common equity, retained earnings and a limited amount of perpetual preferred
stock, after subtracting goodwill and making certain other adjustments ("Tier I
capital").
6
<PAGE>
The remainder may consist of perpetual debt, mandatory convertible debt
securities, a limited amount of subordinated debt, remaining preferred stock and
a limited amount of loan loss reserves ("Tier 2 capital"). The maximum amount of
supplementary capital elements that qualify as Tier 2 capital is limited to 100%
of Tier 1 capital net of goodwill and certain other intangible assets. The
Federal Reserve Board also has adopted a minimum leverage ratio (Tier 1 capital
to assets) of 3% for bank holding companies that meet certain specified
criteria, including having the highest regulatory rating. The rule indicates
that the minimum leverage ratio should be at least 1.0% to 2.0% higher for
holding companies that do not have the highest rating or that are undertaking
major expansion programs. Failure to meet the capital guidelines could subject a
banking institution to a variety of enforcement remedies available to federal
regulatory authorities.
The table below presents the Company's capital position relative to its various
minimum statutory and regulatory capital requirements at June 30, 1997.
Minimum
Monocacy Bancshares, Inc. Regulatory
June 30, 1997 Requirements
------------------------- ------------
Risk-based capital ratios
Tier I capital 10.60% 4.00%
Total capital 11.80% 8.00%
Leverage capital ratio 7.37% 3.00%
RESULTS OF OPERATIONS
Net income was $1,246 for the first six months of 1997, up from $970 or 28.5%
for the same period last year. Net interest income was up by $751 for the first
six months of 1997, a result of the higher net interest margin because of the
changing mix of earning assets and interest-bearing liabilities and the interest
rate environment. The provision for loan losses was $660 for the first six
months of 1997 and $150 for the same period last year. Net income, net interest
income and the provision for loan losses were $578, $2,572 and $480,
respectively for the three month period ended June 30, 1997.
Non-interest income increased by $406 or 38.9% for the first six months of 1997
with higher deposit service charges, loan servicing fees and more gains realized
on the sales of loans. In addition, a gain of $100,000 was realized on the sale
of a lease purchase option during January of 1997.
Mortgage-banking activities were more profitable during the six month period
ended June 30, 1997, as evidenced by a 3.3% increase in servicing fees and a
58.2% increase in gains on sales of loans for that period over the same period
in 1996. This increase is attributable to the operations of Classic Mortgage
Company, which the Company acquired in April, 1996. In addition to the increase
in normal operating gains on sales of loans, the Company realized a $188 gain on
a bulk sale of residential mortgage loans in the first quarter of 1997.
The Company realized losses on sales of securities available for sale of $3 for
the six months ended June 30, 1997 as compared to gains of $22 for the same
period in 1996.
Non-interest income was $673 for the three months ended June 30, 1997, as
compared to $605 for the same period in 1996.
Non-interest expenses grew by $463 or 11.5% for the six month period ended June
30, 1997, with higher staff levels and related costs and the additional
investments in other resources made in late 1996. Deposit insurance was down
49.1% from 1996 due to the more favorable rate structure in effect since the
recapitalization of the FDIC funds. Professional fees are up 23.2% primarily due
to the ongoing litigation noted in Note 13 to the Company's Consolidated
Financial Statements in the Company's 1996 Annual Report to Shareholders.
Non-interest expenses were $2,187 for the three months ended June 30, 1997, as
compared to $2,188 for the same period in 1996.
7
<PAGE>
Income taxes were $149 for an effective tax rate of 10.7% in the first six
months of 1997. The effective tax rate for the first six months of 1996 was
19.9%. Income taxes were $(1) for an effective tax rate of (.2%) for the three
months ended June 30, 1997. The decreased effective tax rate is due primarily to
the increased investment in tax-exempt municipal securities by the Company.
OTHER MATTERS
On May 15, 1997, the Bank signed a management agreement with Franey, Parr &
Associates, Inc. for the purpose of managing the Bank's newly formed insurance
center ("Taneytown Bank Insurance Center), which will be marketing and selling
insurance.
8
<PAGE>
Table 1
Monocacy Bancshares, Inc.
Non-Performing Assets and Past Due Loans
June 30, June 30, December 31,
1997 1996 1996
-------- -------- ------------
Non-accrual loans:
Real Estate
Commercial mortgage $2,961 $ 994 $ 735
Residential mortgage 205 - -
Commercial 189 210 52
Consumer 2 4 6
------ ------ ------
Total non-accrual loans 3,357 1,208 793
Foreclosed properties 631 1,307 656
------ ------ ------
Total non-performing assets $3,988 $2,515 $1,449
====== ====== ======
Allowance for loan losses to:
Non-accrual loans 79.80% 168.13% 264.82%
====== ====== ======
Non-performing assets 67.18% 80.76% 144.93%
====== ====== ======
Accruing loans past due
90 days or more $ 677 $ 34 $ 757
====== ====== ======
Allowance for loan losses $2,679 $2,031 $2,100
====== ====== ======
9
<PAGE>
Table 2
Monocacy Bancshares, Inc.
Allowance For Loan Losses
Six months ended June 30, Three months ended June 30,
1997 1996 1997 1996
------ ------ ------ ------
Allowance for loan losses
at beginning of period $2,100 $1,904 $2,250 $1,970
Provision for loan losses 660 150 480 75
Charge-offs (86) (26) (53) (16)
Recoveries 5 3 2 2
Allowance for loan losses ------ ------ ------ ------
at end of period $2,679 $2,031 $2,679 $2,031
====== ====== ====== ======
Allowance for loan losses
as a percentage of loans
receivable, net of
unearned income 1.61% 1.36%
====== ======
10
<PAGE>
PART II
Item 1. Legal Proceedings
As previously reported, the Bank has been named as a defendant in a
legal proceeding in the Circuit Court for Baltimore City wherein it is
alleged that the Bank permitted the improper withdrawal or transfer of
funds from a deposit account containing escrow monies at the Bank. It
is also alleged that the Bank misapplied certain sums of money by
depositing them in an unrelated account holder's deposit account. The
complaint seeks recovery against the Bank in the amount of $482,000.
Management, after consultation with the legal counsel, believes that it
has defenses available and intends to vigorously defend against the
claims. Although the amount of any ultimate liability with respect to
these claims cannot be determined, management is of the opinion that
any losses resulting form the disposition of these matters will not
have a material adverse effect on the financial condition of the
Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On June 30, 1997, the Board of Directors of the Company declared an
$.11 per share cash dividend to common stockholders of record on July
14, 1997, payable July 28, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
-----------
11.0 Information used in the computation Page 13
of earnings per share
27.0 Financial Data Schedule Page 14
(b) Reports on Form 8-K
None.
* Exhibits incorporated by reference
11
<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.
MONOCACY BANCSHARES, INC.
Registrant
Principal Executive Officer:
By:
--------------------------------
Frank W. Neubauer, President/CEO
Date: August 8, 1997
Principal Financial and Accounting Officer:
By:
-------------------------------------------
Michael K. Walsch, Executive Vice President
Date: August 8, 1997
12
MONOCACY BANCSHARES, INC. AND SUBSIDIARY EXHIBIT 11.0
Information used in the computation
of net income per common share
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
<S><C>
Net income $1.245,664 $ 970,199 $ 578,423 $ 501,973
========== ========== ========== ==========
Weighted average common shares outstanding 1,619,611 1,605,697 1,621,463 1,606,551
========== ========== ========== ==========
Earnings per common share $.77 $.60 $.36 $.31
==== ==== ==== ====
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 8,667 8,667
<INT-BEARING-DEPOSITS> 4 4
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 56,879 56,879
<INVESTMENTS-CARRYING> 24,034 24,034
<INVESTMENTS-MARKET> 24,190 24,190
<LOANS> 166,077 166,077
<ALLOWANCE> 2,679 2,679
<TOTAL-ASSETS> 270,474 270,474
<DEPOSITS> 227,865 227,865
<SHORT-TERM> 11,840 11,840
<LIABILITIES-OTHER> 1,510 1,510
<LONG-TERM> 6,483 6,483
0 0
0 0
<COMMON> 8,112 8,112
<OTHER-SE> 14,663 14,663
<TOTAL-LIABILITIES-AND-EQUITY> 270,474 270,474
<INTEREST-LOAN> 8,001 4,000
<INTEREST-INVEST> 2,082 1,079
<INTEREST-OTHER> 46 13
<INTEREST-TOTAL> 10,129 5,092
<INTEREST-DEPOSIT> 4,705 2,374
<INTEREST-EXPENSE> 5,034 2,520
<INTEREST-INCOME-NET> 5,095 2,572
<LOAN-LOSSES> 660 480
<SECURITIES-GAINS> (3) 0
<EXPENSE-OTHER> 4,490 2,187
<INCOME-PRETAX> 1,395 578
<INCOME-PRE-EXTRAORDINARY> 1,395 578
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,246 578
<EPS-PRIMARY> 0.77 0.36
<EPS-DILUTED> 0.76 0.35
<YIELD-ACTUAL> 4.49 4.54
<LOANS-NON> 3,357 3,357
<LOANS-PAST> 677 677
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 2,100 2,250
<CHARGE-OFFS> 86 53
<RECOVERIES> 5 2
<ALLOWANCE-CLOSE> 2,679 2,679
<ALLOWANCE-DOMESTIC> 2,604 2,604
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 75 75
</TABLE>
