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 September 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.
1,628,371 shares of Common Stock, $5 par value per share, were outstanding as of
October 31, 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
September 30, December 31,
Assets 1997 1996
------ ------------- ------------
(unaudited)
Cash and due from banks $ 9,635,413 $ 10,373,937
Federal funds sold 2,800,000 2,000,000
Interest-bearing deposits with other banks 318,656 108,490
Loans held for sale 5,544,180 10,117,718
Securities available for sale 70,818,804 45,917,686
Investment securities (approximate fair value of
$24,369,725 and $23,860,226) 24,029,386 24,042,079
Loans, less allowance for loan losses of
$3,049,716 and $2,100,301 164,117,064 156,689,585
Bank premises and equipment 8,279,893 8,435,314
Other real estate owned 209,803 655,684
Deferred income taxes 1,220,850 899,000
Accrued interest receivable 1,886,142 1,939,177
Other assets 1,529,282 1,836,207
------------ ------------
Total assets $290,389,473 $263,014,877
============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Non-interest bearing deposits $ 27,073,633 $ 24,001,887
Interest bearing deposits 202,475,184 201,037,216
------------ ------------
229,548,817 225,039,103
Federal funds purchased - -
Other borrowings 35,471,068 15,338,564
Accrued interest and other expenses payable 1,742,306 555,067
Dividends payable 178,819 146,859
Other liabilities 111,893 286,899
------------ ------------
Total liabilities 267,052,903 241,366,492
Stockholders' Equity:
Common stock 8,128,155 7,341,620
Common stock dividend to be distribute - 3,699,159
Surplus 11,812,938 9,145,192
Retained earnings 3,798,061 2,235,364
Net unrealized gain (loss) on
securities available for sale (402,584) (772,950)
------------ ------------
Total stockholders' equity 23,336,570 21,648,385
------------ ------------
Total liabilities and stockholders' equity $290,389,473 $263,014,877
============ ============
See the accompanying Notes to Consolidated Financial Statements.
1
<PAGE>
Monocacy Bancshares, Inc. and Subsidiary
Consolidated Income Statements
For the nine and three month periods ended September 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
1997 1996 1997 1996
----------- ----------- ---------- -----------
<S> <C>
Interest income:
Loans, including fees $11,907,477 $10,232,738 $3,906,875 $3,594,822
Interest-bearing deposits with other banks 15,626 45,000 5,056 2,661
Federal funds sold 69,785 136,893 33,637 961
Securities available for sale 2,411,151 3,310,492 906,880 1,093,378
Investment securities 866,531 851,548 288,777 222,464
----------- ----------- ---------- ----------
Total interest income 15,270,570 14,576,671 5,141,225 4,914,286
----------- ----------- ---------- ----------
Interest expense:
Deposits 7,135,553 6,976,809 2,430,684 2,258,407
Federal funds purchased 26,567 62,708 11,257 45,720
Other borrowings 578,360 814,323 263,871 305,794
----------- ----------- ---------- ----------
Total interest expense 7,740,480 7,853,840 2,705,812 2,609,921
----------- ----------- ---------- ----------
Net interest income 7,530,090 6,722,831 2,435,413 2,304,365
Provision for loan losses 1,060,000 225,000 400,000 75,000
----------- ----------- ---------- ----------
Net interest income after provision for
loan losses 6,470,090 6,497,831 2,035,413 2,229,365
----------- ----------- ---------- ----------
Noninterest income:
Service charges on deposit accounts 430,334 308,119 165,866 113,240
Loan service charges 495,492 492,154 171,461 154,739
Trust department fees 118,433 109,254 39,782 30,703
Gains and fees on sales of loans 877,310 644,412 246,061 364,478
Gains (losses) on sales of securities 9,189 18,286 11,739 (3,469)
Other 204,530 87,379 50,608 30,355
----------- ----------- ---------- ----------
Total noninterest income 2,135,288 1,659,604 685,517 690,046
----------- ----------- ---------- ----------
Noninterest expense:
Salaries & employee benefits 4,160,916 3,648,925 1,427,301 1,273,858
Occupancy 546,703 456,610 178,596 155,709
Equipment 578,149 528,593 191,080 177,406
Deposit insurance 45,000 369,705 15,000 310,716
Professional fees 384,639 251,178 177,815 83,180
Other 1,189,975 1,160,443 426,082 387,733
----------- ----------- ---------- ----------
Total noninterest expense 6,905,382 6,415,454 2,415,874 2,388,602
----------- ----------- ---------- ----------
Income before income taxes 1,699,996 1,741,981 305,056 530,809
Provision for income taxes (income tax benefit) 63,369 463,338 (85,907) 222,365
----------- ----------- ---------- ----------
Net income $ 1,636,627 $ 1,278,643 $ 390,963 $ 308,444
=========== =========== ========== ==========
Earnings per share $ 1.01 $ 0.80 $ 0.24 $ 0.19
=========== =========== ========== ==========
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
Monocacy Bancshares, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
(Information for the nine months ended September 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 -
Cash dividend - - - (585,020) - (585,020)
10% stock dividend to be distributed - 3,699,159 - (3,699,159) - -
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 nine months - - - 1,636,627 - 1,636,627
Issuance of shares of common stock
in connection with employee benefit
and dividend reinvestment plans 52,400 - 171,687 - - 224,087
Issuance of 10% common stock dividend 734,135 (3,699,159) 2,496,059 461,483 - (7,482)
Cash dividend - - - (535,413) - (535,413)
Increase in fair value of securities
available for sale - - - - 370,366 370,366
---------- -------------- ----------- ----------- --------- -----------
Balance at September 30, 1997 $8,128,155 $ - $11,812,938 $ 3,798,061 $(402,584) $23,336,570
========== ============== =========== =========== ========= ===========
</TABLE>
3
<PAGE>
MONOCACY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine and three month periods ended September 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S><C>
Cash flows from operating activities:
Net income $ 1,636,627 $ 1,278,643 $ 390,963 $ 308,444
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 585,231 1,038,777 192,824 1,014,810
Provision for loan losses 1,060,000 225,000 400,000 75,000
Deferred income taxes (512,645) (1,195,593) (194,052) (1,203,025)
(Gains)losses on sales of securities available for sale (9,189) (18,286) (11,739) 3,469
Proceeds from sales of loans originated for sale 22,273,155 29,926,111 3,626,800 20,909,991
Disbursements for loans originated for sale (16,822,307) (29,281,699) (6,028,539) (20,545,513)
Gains on sale of loans (877,310) (644,412) (246,061) (364,478)
Increase in unearned income,
net of origination costs 167,067 667,522 256,286 352,112
Gain on sale of other real estate owned (5,483) - (5,483) -
Writdeown of other real estate owned 5,500 - -
(Increase)decrease in accrued interest receivable 53,035 (310,661) 203,658 271,886
Increase in accrued interest and other
expenses payable 1,187,239 571,054 697,365 341,121
Other, net 131,919 216,461 (56,006) 343,829
------------- ------------- ------------- -------------
Net cash provided by (used in)
operating activities 8,872,839 2,472,917 (773,984) 1,507,646
------------- ------------- ------------- -------------
Cash flows from investing activities:
Net (increase)decrease in interest-bearing
deposits with other banks (210,166) 227,583 (314,744) (329,337)
Proceeds from maturities of investment securities 12,693 6,999,448 4,397 4,216
Proceeds from sales of securities available for sale 6,008,036 14,253,496 4,624,487 4,928,535
Proceeds from maturities of securities available for sale 4,449,152 2,719,845 2,857,736 -
Purchases of securities available for sale (34,787,956) (29,613,572) (20,936,875) -
Purchases of investment securities - (15,521,461) - -
Loan originations, net of principal repayments (8,727,546) (14,866,941) (900,013) (4,759,602)
Purchases of bank premises and equipment (429,810) (2,120,676) (35,671) (860,842)
Additions to real estate owned - (68,163) - (51,931)
Proceeds from real estate owned 518,864 58,705 499,979 38,431
------------- ------------- ------------- -------------
Net cash used in
investing activities (33,166,733) (37,931,736) (14,200,704) (1,030,530)
------------- ------------- ------------- -------------
Cash flows from financing activities:
Net increase(decrease) in deposits 4,509,714 (4,137,381) 1,683,423 1,551,769
Proceeds from issuance of other borrowings 26,966,119 23,167,000 17,350,000 -
Repayments of other borrowings (6,833,615) (25,866,624) (201,726) (3,813,110)
Issuance of common stock 248,565 67,386 90,532 53,727
Dividends paid on common stock (535,413) (291,881) (178,823) (69,649)
------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities 24,355,370 (7,061,500) 18,743,406 (2,277,263)
------------- ------------- ------------- -------------
Net decrease in cash and cash equivalents 61,476 (42,520,319) 3,768,718 (1,800,147)
Cash and cash equivalents at beginning of period 12,373,937 47,143,615 8,666,695 6,423,443
------------- ------------- ------------- -------------
Cash and cash equivalents at end of period $ 12,435,413 $ 4,623,296 $ 12,435,413 $ 4,623,296
============= ============= ============= =============
Supplemental disclosures of cash flow information:
Interest paid on deposits and borrowings $ 6,777,241 $ 6,959,495 $ 2,416,268 $ 2,323,423
Income taxes paid 671,601 319,334 31,767 150,700
Transfers of loans to other real estate owned 73,000 114,000 73,000 114,000
</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 nine and three months
ended September 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 September 30, 1997, and for the nine
and three month periods ended September 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 nine and three months ended September 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 September 30, 1997, were $290,389 a 10.4% or $27,374 increase
from December 31, 1996. The increase in assets from December 31, 1996 occurred
primarily in the loan and securities portfolios. Net loans at September 30, 1997
were $164,117, 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
$94,848 at September 30, 1997 from $69,960 at December 31, 1996. Deposits
increased $4,510 or 2.0% from December 31, 1996, primarily in the non-interest
bearing deposit category, which increased $3,072 from December 31, 1996. The
Company had $35,471 outstanding in borrowings at September 30, 1997 compared to
$15,339 at December 31, 1996.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses was $3,050 at September 30, 1997, which was 1.82%
of loans. During the first nine months of 1997, Monocacy had a $1,060 provision
for loan losses and had net charge-offs of $110. 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 $3,619 at September 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 September 30, 1997, a $1.7 million was taken out by a
third party in October. 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 89.47% of non-accrual loans and 84.28% of
non-performing assets at September 30, 1997.
Table 2, "Changes in the Allowance for Loan Losses" shows the activity in the
allowance for loan losses for the nine and three month periods ended September
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 $223,118 or 97.2% of total deposits at September 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 $89,417 or 30.8% of total assets at September 30, 1997.
In addition, the Bank has established lines of credit totaling $45,000 with the
Federal Home Loan Bank of Atlanta (the "FHLB") as an additional source of
liquidity. At September 30, 1997, the Bank had $34,660 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 September 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 nine months 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 September 30, 1997.
<TABLE>
<CAPTION> Minimum
Monocacy Bancshares, Inc. Regulatory
September 30, 1997 Requirements
------------------------- ------------
<S><C>
Risk-based capital ratios
Tier I capital 10.34% 4.00%
Total capital 11.59% 8.00%
Leverage capital ratio 7.08% 3.00%
</TABLE>
RESULTS OF OPERATIONS
Net income was $1,637 for the first nine months of 1997, up from $1,279 or 28.0%
for the same period last year. Net interest income was up by $807 for the first
nine months of 1997, a result of the higher net interest margin because of the
increased volume of loans and investment securities as well as the changing mix
of earning assets and interest-bearing liabilities and the interest rate
environment. The provision for loan losses was $1,060 for the first nine months
of 1997 and $225 for the same period last year. The provision for loan losses
was increased due to an intense credit effort in 1997 dealing with the
recognition and disposition of loan relationships that management has concluded
no longer fit our long term objectives. These relationships generally involve
credit quality and service quality. Accordingly, reserves have been increased to
a level that reflects a more conservative philosophy. Net income, net interest
income and the provision for loan losses were $391, $2,435 and $400,
respectively for the three month period ended September 30, 1997
Non-interest income increased by $475 or 28.6% for the first nine 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 nine month period
ended September 30, 1997, as evidenced by a 8.5% increase in servicing fees and
a 7.0% 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 gains on sales of securities available for sale of $9 for
the nine months ended September 30, 1997 as compared to gains of $18 for the
same period in 1996.
Non-interest income was $686 for the three months ended September 30, 1997, as
compared to $690 for the same period in 1996.
Non-interest expenses grew by $490 or 7.6% for the nine month period ended
September 30, 1997, with higher staff levels and related costs and the
additional investments in other resources made in late 1996. Deposit insurance
was down 87.8% from 1996 due to the more favorable rate structure in effect
since the recapitalization of the FDIC funds. Professional fees are up 53.4%
primarily due to the expenses related to workouts of credits and 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
$2,416 for the three months ended September 30, 1997, as compared to $2,389 for
the same period in 1996.
7
<PAGE>
Income taxes were $63 in the first nine months of 1997 as compared to $463 for
the first nine months of 1996. 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 began marketing and selling
insurance on September 1, 1997.
On September 2, 1997, Taneytown Bank and Trust Company (the "Bank") entered into
a service agreement with Trust Company of America, Inc. (The "Trust Company")
for the Trust Company to provide trust services to the Bank's existing trust
customers as successor fiduciary and to provide ongoing service through
operation of a referral program for future trust business.
8
<PAGE>
Table 1
MONOCACY BANCSHARES, INC.
NON-PERFORMING ASSETS AND PAST DUE LOANS
September 30, September 30, December 31,
1997 1996 1996
------------- ------------- ------------
Non-accrual loans:
Real Estate
Commercial mortgage $ 2,652 $ 968 $ 735
Residential mortgage 425 - -
Commercial 305 329 52
Consumer 27 3 6
-------- -------- --------
Total non-accrual loans 3,409 1,300 793
Foreclosed properties 210 1,320 656
======== ======== ========
Total non-performing assets $ 3,619 $ 2,620 $ 1,449
======== ======== ========
Allowance for loan losses to:
Non-accrual loans 89.47% 164.85% 264.82%
======== ======== ========
Non-performing assets 84.28% 81.79% 144.93%
======== ======== ========
Accruing loans past due
90 days or more $ 2,099 $ 257 $ 757
======== ======== ========
Allowance for loan losses $ 3,050 $ 2,143 $ 2,100
======== ======== ========
9
<PAGE>
Table 2
MONOCACY BANCSHARES, INC.
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Nine months ended September 30, Three months ended September 30,
1997 1996 1997 1996
-------- ---------- -------- ---------
<S><C>
Allowance for loan losses
at beginning of period $ 2,100 $ 1,904 $ 2,679 $ 2,031
Provision for loan losses 1,060 225 400 75
Charge-offs (128) (32) (41) (6)
Recoveries 18 46 12 43
======== ======== ======== ========
Allowance for loan losses
at end of period $ 3,050 $ 2,143 $ 3,050 $ 2,143
======== ======== ======== ========
Allowance for loan losses
as a percentage of loans
receivable, net of
unearned income 1.82% 1.40%
======== ========
</TABLE>
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.
Although the Court has denied a Motion to Dismiss the lawsuit,
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 September 30, 1997, the Board of Directors of the Company declared
an $.11 per share cash dividend to common stockholders of record on
October 14, 1997, payable October 28, 1997.
On September 2, 1997, Taneytown Bank and Trust Company (the "Bank")
entered into a service agreement with Trust Company of America, Inc.
(The "Trust Company") for the Trust Company to provide trust services
to the Bank's existing trust customers as successor fiduciary and to
provide ongoing service through operation of a referral program for
future trust business.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
-----------
10.0 Trust Service Agreement Page 15
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: /s/ Frank W. Neubauer
---------------------
Frank W. Neubauer, President/CEO
Date: October 31, 1997
Principal Financial and Accounting Officer:
By: /s/ Michael K. Walsch
----------------------
Michael K. Walsch, Executive Vice President
Date: October 31, 1997
12
Exhibit 10.0
SERVICE AGREEMENT
-----------------
AGREEMENT made this 2nd day of September, 1997, between TANEYTOWN BANK
& TRUST COMPANY, a Maryland bank and trust company (the "Bank") and TRUST
COMPANY OF AMERICA, INC., a District of Columbia corporation and trust company
(the "Trust Company"), doing business as Trust Corp. America.
WHEREAS, the Bank desires to transfer its trust business and the
fiduciary duties and responsibilities with respect thereto to a third party
provider of such services; and
WHEREAS, the Bank desires to have trust services provided to its
customers on a continuing basis through a referral program whereby the Bank
refers customers to a third party provider of trust services; and
WHEREAS, the Trust Company, a provider of trust services, desires to
provide such services to customers of the Bank through assumption of the Bank's
fiduciary duties and responsibilities relating to the Bank's existing trust
accounts and through operation of a continuing referral program for future trust
business; and
WHEREAS, the Bank and the Trust Company desire to establish the terms
and conditions of (i) an arrangement whereby the Trust Company, as successor
trustee, will assume the fiduciary responsibilities and duties with respect to
the Bank's existing trust accounts and (ii) a referral program for future trust
business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and intending to be legally bound, the Bank and the Trust
Company agree as follows:
1. Appointment of Successor Trustee. The Bank agrees to send notice of
the Bank's resignation as trustee and of the appointment of the Trust Company as
successor trustee to all current interested parties, including, but not limited
to, income beneficiaries and remaindermen, with respect to each trust listed on
Exhibit A, attached hereto; except, however, that, with respect to any trust the
documents relating to which do not provide for the Bank to appoint the Trust
Company as successor trustee and which trust is so designated on Exhibit A, the
Bank shall use its best efforts to cooperate with the Trust Company to, if
permissible under the terms of the trust, petition the court having jurisdiction
over the subject trust to appoint the Trust Company as successor trustee, as may
be required pursuant to law, including, but not limited to Section 15-1A-01 et.
seq. of the Annotated Code of Maryland. The costs associated with the
appointment of the Trust Company as successor trustee such as the legal expenses
and the mailing of required notices shall be born by the Trust Company. The Bank
shall cooperate with Trust Company to provide reasonably requested information.
75446
9/18/97
15
<PAGE>
2. Services to be Provided. The Trust Company agrees to provide trust
services to customers of the Bank, including but not limited to, those services
set forth on Exhibit B, attached hereto and made a part hereof. The Trust
Company will provide trust services to customers of the Bank, who are currently
provided such services by the Bank and to customers of the Bank, who are
referred to the Trust Company by the Bank and who choose to accept provision of
trust services by the Trust Company. The Bank and the Trust Company may mutually
agree on additional trust services to be provided from time to time, which
services the parties shall add to Exhibit B.
The Trust Company agrees to meet with customers of the Bank and to
discuss the provision of trust services with such customers. The Trust Company
agrees to meet with such customers at its own offices, at the branch offices of
the Bank, or such other locations as may be convenient for Bank customers, in
order to assist the Bank customers in establishing such trust relationships as
they desire in accordance with each Bank customer's particular needs.
The Trust Company agrees to provide forms of trust agreements to the
Bank and to Bank customers. Customers of the Trust Company may use the Trust
Company's forms, as provided, or may use such other documents as may be prepared
by the customer's own legal counsel, which documents are acceptable to the Trust
Company. In addition, at the Bank's option, the Trust Company will make
appropriate computer software available to the Bank and to Bank customers to
permit access to information in a read only basis with respect to the trust
services provided by the Trust Company. The Bank agrees to reimburse the Trust
Company for the reasonable cost of such software and for the expenses related
thereto. The Trust Company agrees to provide information with respect to the
trust services by telephone or by facsimile, at no cost, to the Bank and to Bank
customers.
3. Schedule of Trust Service Fees. The Trust Company agrees to charge
fees to the Bank customers for the trust services, as set forth in Exhibit C to
this Agreement. The fees set forth in Exhibit C are the Trust Company's fees as
of the date hereof. The Trust Company reserves the right to adjust, from time to
time, the fees set forth in Exhibit C. Any updated fee schedule shall be
provided by the Trust Company to the Bank, in writing at least 30 days before
the effective date of such updated fee schedule, and shall, without further
action by the parties, amend Exhibit C, effective as of the date set forth on
such updated fee schedule, and shall be considered a part of this Agreement.
However, the fees charged to Bank customers, to whom the Bank currently provides
trust services and for whom the Trust Company shall be successor trustee, shall
continue at the rates such fees were charged by the Bank on the date of Closing,
as defined in paragraph 10, for a period of at least one year from the date of
Closing unless mutually agreed to.
4. Referral Services. The Bank agrees to refer potential trust service
customers, identified by the Bank, to the Trust Company and to make certain
facilities at Bank branches available to the Trust Company for meeting with Bank
trust clients. The Trust Company agrees that
75446
9/18/97
16
<PAGE>
marketing of trust services to the Bank's customers shall be at the discretion
of the Bank. No financial information of Bank customers shall be disclosed to
the Trust Company without the consent of such customers.
5. Schedule of Referral Fees. In consideration for the services
rendered by the Bank in referring customers to the Trust Company and for making
certain services and facilities available to the Trust Company, the Trust
Company hereby agrees to pay certain referral fees to the Bank all in accordance
with the schedule attached as Exhibit D hereto and incorporated herein in its
entirety. The Trust Company shall also pay referral fees to the Bank for
referrals made by persons or entities contained on the Referral List as listed
on Exhibit E and Bank employees, directors or advisory board members. The Bank
shall promptly notify Trust Company of any additions or deletions to the Exhibit
E. In the event that the Trust Company does not have a previous commercial
relationship with the proposed addition, such addition shall be effective
immediately.
6. Services to be Provided by the Bank. The Bank agrees to (i) refer
customers of the Bank to the Trust Company, (ii) to distribute Trust Company
marketing materials to Bank customers, (iii) to provide space at the offices of
the Bank for meetings between trust service customers or prospective customers,
as the case may be, and a trust officer of the Trust Company and (iv) to provide
an administrative assistant, in the employ of the Bank, who shall dedicate up to
20 hours per week to serving as a liaison between the Bank's existing and
potential trust customers and the Trust Company. Commencing on the Closing Date,
the Trust Company agrees to compensate the Bank in the amount of $3,500.00 per
quarter for, among other things, the continuing assistance of the administrative
assistant. The Trust Company shall have the right to terminate this arrangement
upon 30 days' notice at any time commencing two years after the date of this
Agreement.
7. Representations and Warranties of the Trust Company. The Trust
Company represents and warrants to the Bank as follows:
(i) The Trust Company has all requisite corporate power and authority
to enter into and perform all of the obligations under this Agreement.
The execution and delivery of this Agreement and the performance of the
transactions contemplated herein have been duly and validly authorized
by the Board of Directors of the Trust Company and, the Trust Company
has taken all corporate action necessary on its part to authorize this
Agreement and the performance of the transactions contemplated herein.
This Agreement has been duly executed and delivered by the Trust
Company and assuming due authorization, execution and delivery by the
Bank, constitutes a valid and binding obligation of the Trust Company,
enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, and other laws of general applicability
relating to or affecting creditors' rights and general equity
principles. Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby nor compliance
with any of the provisions hereof shall (a) conflict with or result in
a breach of any provisions of the Article of Incorporation or Bylaws
75446
9/18/97
17
<PAGE>
of the Trust Company, (b) constitute or result in a material breach of
any term, condition or provisions of, or constitute a default under or
give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or
encumbrance upon any property or asset of the Trust Company pursuant to
any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation, or (c) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Trust Company.
(ii) The Trust Company is a duly organized District of Columbia Trust
Company, validly existing and in good standing under the laws of the
District of Columbia. The Trust Company (a) has full power and
authority to carry out its business as now conducted and (b) is duly
qualified to do business in the states of the United States and foreign
jurisdictions where the conduct of its business requires such
qualification and where failure to so qualify would have a material
adverse effect on the financial condition, results of operations,
business or prospects of the Trust Company.
(iii) The Trust Company owns no subsidiaries directly or indirectly.
(iv) Except where noncompliance would not have a material adverse
effect upon the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of the Trust
Company: (a) the Trust Company is in compliance with all statutes,
laws, ordinances, rules, regulations, judgments, orders, decrees,
directives, consent agreements, memoranda of understanding, permits,
concessions, grants, franchises, licenses, and other governmental
authorizations or approvals applicable to the Trust Company or any of
its properties; and (b) all permits, concessions, grants, franchises,
licenses and other governmental authorizations and approvals necessary
for the conduct of the business of the Trust Company, as presently
conducted have been duly obtained and are in full force and effect and
there are no proceedings pending, or to the knowledge of the Trust
Company threatened, which may result in the revocation, cancellation,
suspension or materially adverse modification of any such permits,
concessions, grants, franchises, licenses and other governmental
authorizations and approvals.
8. Representations and Warranties of the Bank. The Bank represents and
warrants to the Trust Company as follows:
(i) The Bank has all requisite corporate power and authority to enter
into and perform all of the obligations under this Agreement. The
execution and delivery of this Agreement and the performance of the
transactions contemplated herein have been duly and validly authorized
by the Board of Directors of the Bank and, the Bank has taken all
corporate action necessary on its part to authorize this Agreement and
the performance of the transactions contemplated herein. This Agreement
has been duly executed and delivered by the Bank and assuming due
authorization, execution and delivery by the Trust Company, constitutes
a
75446
9/18/97
18
<PAGE>
valid and binding obligation of the Bank, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, and other
laws of general applicability relating to or affecting creditors'
rights and general equity principles. Neither the execution and
delivery of this Agreement nor consummation of the transactions
contemplated hereby nor compliance with any of the provisions hereof
shall (a) conflict with or result in a breach of any provisions of the
Article of Incorporation or Bylaws of the Bank, (b) constitute or
result in a material breach of any term, condition or provisions of, or
constitute a default under or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation
of any lien, charge or encumbrance upon any property or asset of the
Bank pursuant to any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, or (c) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the
Bank.
(ii) The Bank is a duly organized Maryland Bank, validly existing and
in good standing under the laws of the State of Maryland. The Bank (a)
has full power and authority to carry out its business as now conducted
and (b) is duly qualified to do business in the states of the United
States and foreign jurisdictions where its business requires such
qualification and where the failure to so qualify would have a material
adverse effect on the financial condition, results of operations,
business or prospects of the Bank.
(iv) Except where noncompliance would not have a material adverse
effect upon the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of the Bank: (a)
the Bank is in compliance with all statutes, laws, ordinances, rules,
regulations, judgments, orders, decrees, directives, consent
agreements, memoranda of understanding, permits, concessions, grants,
franchises, licenses, and other governmental authorizations or
approvals applicable to the Bank or any of its properties; and (b) all
permits, concessions, grants, franchises, licenses and other
governmental authorizations and approvals necessary for the conduct of
the business of the Bank, as presently conducted have been duly
obtained and are in full force and effect and there are no proceedings
pending, or to the knowledge of the Bank threatened, which may result
in the revocation, cancellation, suspension or materially adverse
modification of any such permits, concessions, grants, franchises,
licenses and other governmental authorizations and approvals.
9. Conditions Precedent. The obligation of the parties to consummate
the transactions contemplated hereunder is subject to the satisfaction of each
of the following conditions prior to or as of the Closing, except to the extent
that any such conditions shall have been waived by the parties in writing:
(i) The parties hereto shall have received all regulatory and judicial
approvals required in connection with the transactions contemplated by
this Agreement and all notice periods,
75446
9/18/97
19
<PAGE>
if any and waiting periods, if any, required after the granting of such
approval shall have passed;
(ii) No action, suit or proceeding shall be pending or threatened
before any federal, state or local court or governmental authority or
before any arbitration tribunal that seeks to modify, enjoin or
prohibit or otherwise adversely and materially affect the transactions
contemplated by this Agreement;
(iii) All the representations and warranties of each of the Bank and
the Trust Company, as set forth in this Agreement, shall be true and
correct in all material respects as of the Closing, as if made on such
date (or on the date to which it relates in the case of any
representation or warranty that expressly relates to an earlier date);
(iv) Opinion of special counsel for the Trust Company that the Trust
Company is chartered under the laws of the District of Columbia and is
authorized to do business under the terms of this Agreement; and
(v) Each of the Bank and Trust Company shall have delivered to the
other party a certificate, signed by an authorized executive officer of
such entity, verifying that, to the best of their knowledge after
reasonable investigation, all of the representations and warranties of
the respective entity, set forth in this Agreement, are true and
correct in all material respects as of the Closing and that the
respective company has performed in all material respects each of the
covenants required to be performed by it under this Agreement and that
all consents and authorizations necessary to permit this Agreement to
be consummated have been received.
10. Closing. Provided that all conditions precedent set forth in this
Agreement shall have been satisfied or shall have been waived in accordance with
the terms of this Agreement, the parties shall hold a closing (the "Closing") on
September 30, 1997.
11. Expenses. Except as set forth in paragraph 6 of this Agreement,
each party shall pay its own expenses incurred in connection with this Agreement
and the consummation of the transactions contemplated herein.
12. Confidentiality of Records. The Trust Company agrees and
acknowledges that all information and material pertaining to the Bank's
customers and clients to which the Trust Company may, in a performance of its
duties hereunder, have access, shall be considered strictly confidential. The
Trust Company agrees further: (i) to keep strictly confidential and hold in
trust any and all such information and not to disclose such information to any
third party, including any of its affiliates, without the express prior written
consent of the Bank or the customer; as the case may be, and (ii) to use the
information provided by the Bank only for purposes of performing its duties and
75446
9/18/97
20
<PAGE>
obligations under this Agreement. The Trust Company acknowledges that the
disclosure of any confidential information to it by the Bank is made in reliance
upon the Trust Company's representations and covenants in this Agreement. This
paragraph 12 of the Agreement shall survive the expiration, termination or
non-renewal of this Agreement by either party for any reason whatsoever.
13. Indemnification.
(i) The Trust Company agrees to indemnify and save harmless the Bank,
its officers, directors, agents, successors, affiliates and assigns
from any and all liabilities related to or arising from the Trust
Company's acts or failure to act in connection with trust services
provided to customers of the Bank, including, but not limited to, any
amounts claimed due under any federal or state laws, and any costs,
expenses or damages sustained by the Bank by reason of any such claims,
including amounts paid by the Bank and any successors thereto as
attorneys fees, fines, penalties, interest or otherwise;
(ii) The Trust Company, for itself and its successors and assigns,
hereby agrees to indemnify and save harmless the Bank, its officers,
directors, agents, successors, affiliates and assigns, separately and
collectively, from any and all manner of actions, claims, causes of
action, suits, demands, accounts, damages, and judgements, whether
known or unknown, liquidated or unliquidated, fixed or contingent,
direct or indirect, by reason of the Trust Company's actions as trustee
and or in connection with the provision or prospective provision of
trust services hereunder.
(iii) The Bank agrees to indemnify and save harmless the Trust Company,
its officers, directors, agents, successors, affiliates and assigns
from any and all liabilities related to or arising from the Bank's acts
or failure to act in connection with trust services provided to
customers of the Bank, including, but not limited to, any amounts
claimed due under any federal or state laws, and any costs, expenses or
damages sustained by the Trust Company by reason of any such claims,
including amounts paid by the Trust Company and any successors thereto
as attorneys fees, fines, penalties, interest or otherwise; and
(iv) The Bank, for itself and its successors and assigns, hereby agrees
to indemnify and save harmless the Trust Company, its officers,
directors, agents, successors, affiliates and assigns, separately and
collectively, from any and all manner of actions, claims, causes of
action, suits, demands, accounts, damages, and judgements, whether
known or unknown, liquidated or unliquidated, fixed or contingent,
direct or indirect, by reason of the Bank's actions as trustee.
75446
9/18/97
21
<PAGE>
14. Not a Joint Venture. The parties hereto agree that they are not
engaged in a joint venture. The use of Bank employees to assist in the
introduction of the Bank's customer to the Trust Company is not to be construed
to create a joint venture.
15. Term. This Agreement shall remain in effect for one (1) year from
the date hereof, unless further extended or sooner terminated as herein
provided. Subject to the subsequent provisions, upon expiration of the term
hereof, the term shall be automatically extended for another twelve (12) full
calender months, and upon expiration of each subsequent twelve (12) full
calender months thereafter the term of this Agreement shall be likewise extended
for an additional twelve (12) full calender months. Such extension of this
Agreement's term shall be automatic unless either the Bank or the Trust Company
provides the other party with written notice of its intention not to extend this
Agreement, which written notice shall be given by the respective party not less
than ninety (90) days before the expiration of the current twelve (12) month
term. The termination of this Agreement shall not affect (i) the
responsibilities of the parties under this Agreement up to and until the date of
termination, or (ii) the responsibility of the Trust Company to continue to pay
the appropriate successor trustee fee or referral fee, as set forth on Exhibit
D, to the Bank for trust services and referrals, as the case may be, transferred
to the Trust Company during the term of this Agreement; provided, however, in
the event the Trust Company ceases to provide Trust Services to those certain
Trust accounts as successor trustee, Trust Company shall pay Bank an amount
equal to the first year's trust services fees minus any fee paid pursuant to
Schedule D.
16. Remedy for Breach. In the event of a breach or a threatened breach
by Trust Company of any provision of this Agreement, Trust Company recognizes
the substantial and immediate harm that a breach or threatened breach will
impose upon the Bank and further recognizes that in such event monetary damages
will be inadequate to fully protect The Bank. Accordingly, in the event of a
breach or threatened breach of this Agreement, Trust Company consents to The
Bank's entitlement to such ex parte, preliminary, interlocutory, temporary or
permanent injunctive, or any other equitable relief, protecting and fully
enforcing The Bank's rights hereunder and preventing Trust Company from further
breaching any of Trust Company's obligations set forth herein. Trust Company
expressly waives any requirement based on any statute, rule of procedure, or
other source, that The Bank post a bond as a condition of obtaining any of the
above-described remedies. Nothing herein shall be construed as prohibiting The
Bank from pursuing any other remedies available to The Bank at law or in equity
for such breach or threatened breach, including the recovery of damages from
Trust Company.
17. Whole Agreement; Modification. There are no other agreements or
understandings, written or oral, between the parties regarding this Agreement,
the Exhibits and the Schedules, other than as set forth herein. This Agreement
shall not be modified or amended except by a written document executed by both
parties to this Agreement, and such written modification(s) shall be attached
hereto.
75446
9/18/97
22
<PAGE>
18. Assignment. Neither party may assign this Agreement or the rights
and responsibilities hereunder, except with the consent of the other party which
shall not be unreasonably withheld. Any assignment in contravention of this
paragraph shall be null and void.
19. Notices. All notices required or permitted by this Agreement shall
be in written form and shall be sent by registered or certified mail, return
receipt requested, as follows:
To The Bank: Taneytown Bank & Trust Company
222 East Baltimore Street
Taneytown, Maryland 21787
Attention: Michael K. Walsch,
Executive Vice President
and Chief Operating Officer
with copies to: Paul A. Adams, Esquire
Shumaker Williams, P.C.
P. O. Box 88
Harrisburg, PA 17108
To Trust Company: Trust Company of America, Inc.
Suite 450
5301 Wisconsin Avenue
Chevy Chase, MD 20815
Attention: William T. Russell, President
with copies to: Edward L. Lublin, Esquire
Manatt, Phelps & Phillips, LLP
1501 M Street, N.W.
Suite 700
Washington, DC 20005-1702
20. Waiver of provisions. Any waiver of any terms and conditions hereof
must be in writing, and signed by the parties hereto. The waiver of any of the
terms and conditions of this Agreement shall not be construed as a waiver of any
other terms and conditions hereof.
21. Governing Law. The validity, interpretation and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of Maryland.
22. Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be deemed
invalid, void or unenforceable, such provision or such application, as the case
may be, shall be treated as severable from the remainder
75446
9/18/97
23
<PAGE>
of this Agreement, and the remaining provisions of this Agreement shall not be
affected thereby, and each other term and provision of this Agreement shall
remain in full force and effect.
23. Attorney Fees. If any arbitration, legal action or other proceeding
is commenced regarding this Agreement, the losing party shall pay to the
prevailing party the prevailing party's actual attorneys' fees and expenses
incurred in the preparation for conduct of or appeal or enforcement of judgment
from the proceeding. The phrase "prevailing party" shall mean the party who is
determined in the proceeding to have prevailed or who prevails by dismissal,
default, settlement or otherwise.
24. Advice of Counsel. Both parties acknowledge that they have had an
opportunity to review this Agreement with counsel of their respective choice and
that an interpretation or ambiguity contained herein shall not be interpreted or
clarified against the party drafting this Agreement.
25. Headings. The headings used in this Agreement are for convenience
only and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
ATTEST: TANEYTOWN BANK & TRUST COMPANY
/s/ Kathleen A. Ford /s/ Michael K. Walsch
- ---------------------------- ------------------------------
Assistant Secretary Michael K. Walsch, Executive Vice President/CFO
ATTEST: THE TRUST COMPANY OF AMERICA, INC.
/s/ Michael C. Morgan /s/ William T. Russell
- ---------------------------- ------------------------------
William T. Russell, President
EXHIBITS:
A Taneytown Bank & Trust Company Trust Service Customers.
B Schedule of Trust Services.
C Schedule of Trust Service Fees.
D Schedule of Referral Fees.
E Referral List
75446
9/18/97
24
<PAGE>
EXHIBIT A
---------
David M. Abramson Self-Directed IRA
Angela B. Shaeffer Trust U/W
David A. Akehurst Self-Directed IRA
American Textile Manufacturers Institute Inc. SERP
E. Elwood Baumgardner Trust U/W
E. Elwood Baumgardner Trust U/A
Barbara E. Crapster Investment Management
Charles E. Bode Self-Directed IRA
E. Sterling Brown Trust U/W
Albert Z. Buchen Trust U/W
Mark J. Case Trust U/A
Elizabeth S. Clopper Custody
Richard R. Clopper Custody
Carroll Lutheran Village Custody
Frank C. & Norma W. Cobourn Irrev. Trust U/A
Norma W. Cobourn Self-Directed IRA
Louis R. Crapster Trust U/W
Leah S. Crouse Trust U/W
Robert V. Deltuva Self-Directed IRA
Harvey B. Dickinson Trust U/W
Raymond W. & Helen W. Dixon Trust U/A
James W. Duke Grandchildren's Trust U/W
James W. Duke GST-Exempt Marital Trust U/W
Diane Zell Custody
Florence A. Currey Trust U/W
Nina M. Fuhrman Self-Directed IRA
Alice C. Fuss Trust
Merwyn C. Fuss Trust U/W
S. Viola Trust U/A
Larry R. Garber Self-Directed IRA
Shirley I. Garber Self-Directed IRA
Roy E. Garner Trust U/A
E. Preston Green Trust U/A
Jeanne E. Green Trust U/A
Gerald E. Griffin Trust U/A
Hubert H. Harker Trust U/W
Mildred Price Harris Trust U/A
Helen K. Hively Trust U/W FBO Mary V. McLatchey
Helen K. Hively Trust U/W FBO J. Phillips King, Jr.
Russell H. Hoover Trust U/A
Frances Hueg Revocable Trust U/A
Julia C. Ingram Self-Directed IRA
Joseph T. Harris Trust U/W FBO Marie G. Harris
Joseph T. Harris Trust U/W FBO Marie S.A.F. Smith
Marguerite A. Leppo Trust U/A
S. Estella Leppo Trust U/W
Gladys D. Logan Trust U/W
Reynaldo P. Madrinan, M.D. Self-Directed IRA
Howard S. Maxwell Self-Directed IRA
Martha I. Reed Trust U/W
Catherine S. Myers GST Exempt Trust U/W
(3 Shares-A,B,C)
Homer Y. Myers 2nd Trust U/W
Francis W. Neubauer Self-Directed IRA
Laura M. Neubauer Self-Directed IRA
James C. & Larue S. Parrish Trust U/A
Elizabeth F. C. Pearson Trust U/W
Stephen Pipkin Trust
Richard R. Bennett Trust U/W FBO John S. Bennett
Richard R. Bennett Trust U/W FBO Lou S.B. Hoover
Matilda A. Rohrbaugh Trust U/W
Robert R. Cox Trust U/A
Norris L. Sandridge Self-Directed IRA
Francis E. Shaum Trust
William J. Singleton Guardianship Agency
Samuel E. Stambaugh Trust U/W
Russell O. Snyder Trust U/W
John J. Stammero Self-Directed IRA
Summit Electric Co. Profit Sharing Trust Agency
Peter C. Taylor Self-Directed IRA
Paul Bennett Thomas Trust U/A
Trinity Evangelical Lutheran Church - Cemetery Trust
Trinity Evangelical Lutheran Church - General Trust
Taylor Manor Hospital Savings Plan
Balanced Fund
Fixed Income Fund
Growth Stock Fund
June C. & David J. Toth Investment Agency
Troy Thomas Meyer Trust U/A
Union Cemetery Association of Keysville, Inc.
Mary Louise Wareheim Trust U/A
Eric B. Waskey Self-Directed IRA
Wilhelmina A.E. Stiegler Trust U/A
Webster Cash Smith, Jr. Trust U/A
W. Edgar Fink Trust U/W
Elmer G. & Jean R. Worthley Trust U/A
Estella M. Yingling Trust U/A
Bryce Zell Self-Directed IRA
Diane Zell Self-Directed IRA
Mae H. Zentz Revocable Trust U/A
Robert L. Zentz Revocable Trust U/A
25
<PAGE>
LETTER OF UNDERSTANDING
EXHIBIT B
SERVICES
- --------------------------------------------------------------------------------
AGENT FOR FIDUCIARIES
Investment, administrative and accounting services for personal representatives
and trustees.
ASSET ALLOCATION ACCOUNTS
Custom-tailored portfolios; investments in no-load mutual funds and annuities.
CORPORATE AND INSTITUTIONAL TRUSTS, CHARITABLE REMAINDER & ANNUITY TRUSTS
Management and administration of foundations, charitable trusts and bequests.
ESTATE PLANNING AND SETTLEMENT
Planning with your attorney or accountant for disposition of assets at death;
protect, manage and distribute assets according to a will or trust.
INVESTMENT MANAGEMENT
Professional management of the investment portfolio, including custody and
record keeping.
IRA / PENSION ROLLOVERS, ESOPs
Help defer income taxes related to distributions, manage employee benefit plans.
LIVING TRUSTS
Professional management of property, record keeping and protection of assets.
TRUSTS UNDER WILL
Expert long-term management of your estate and continuity of service for your
beneficiaries.
CUSTODY ACCOUNTS, LIFE INSURANCE TRUSTS
Financial administration, safekeeping, record keeping, accounting, income
collection, execution of trades, securities clearing.
TRUSTS OF REAL ESTATE
Professional management of trusts holding real estate.
26
<PAGE>
LETTER OF UNDERSTANDING
EXHIBIT C
Annual fee on market value of assets:
Custody Accounts ($500.00 minimum fee) 0.15%
Unbundled Services(1)--includes investment
management oversight and Corporate
fiduciary services in conjunction with
a customer designated investment advisor 0.50%
(other customer specified services individually priced)
Standard Document Fee--includes basic forms of Will,
Revocable Trust, Life Insurance Trust,
Educational Trust, Charitable Remainder Trust $500.
Initial Setup Fee--applies to all funded accounts $250.
Annual Maintenance Fee--Life Insurance Trusts only $150.
Annual Income Tax Service--where elected $250.
Transaction Fees--where applicable(2)(3) $ 25.
Miscellaneous Expenses--Trust Company will pass through
to customer account all out of pocket charges
incurred in handling administrative manners
Account Termination Fee(4) 2.00%
- ----------
(1) Separate fee pass through/a la carte money manager not included/will vary
depending on independent money manager fee schedule.
(2) Applies to Custody Accounts, Life Insurance Trusts and Dormant Trusts.
(3) Plus out-of-pocket expense for Custody Accounts.
(4) Based on market value of assets: minimum - $1,000.00.
27
<PAGE>
EXHIBIT D
1. Calculation and Payment of Successor Trustee Fees - Trust Company will
pay the Bank fees for all assets transferred by the Bank to the Trust
Company as follows:
(a) 60% of the fees earned on the transferred assets placed into a
trust account determined as for the calendar quarters ended
March 31, June 30, September 30, and December 31 prorated over
the twelve-month period which begins with the inception of the
trust plus
(b) 10% of the fees earned per year thereafter.
2. Calculation and Payment of Referral Fees - Trust Company will pay the
Bank referral fees for all assets referred by the Bank to the Trust
Company as follows:
(a) 40% of the fees earned on the referred assets placed into a
trust account determined as for the calendar quarters ended
March 31, June 30, September 30, and December 31 prorated over
the twelve-month period which begins with the inception of the
trust plus
(b) 10% of the fees earned per year thereafter.
28
<PAGE>
EXHIBIT E
REFERRAL LIST
-------------
William B. Dulany, Esquire Charles O. Fisher, Esquire
Amber Dahlgreen Curtis, Esquire Richard C. Murray, Esquire
DULANY & LEAHY WALSH & FISHER
127 East Main Street 179 East Main Street
Westminster, MD 21157 Westminster, MD 21157
James W. Davis, Esquire Courtney A. Blair
Daniel Murphy, Esquire MILES & STOCKBRIDGE
DAVIS & MURPHY 9881 Broken Land Parkway
237 East Main Street Suite 400
Westminster, MD 21157 Columbia, MD 21046-1153
Robin L. Weiss, Esquire David Eberhardt
5238 Stone Bridge Way MILES & STOCKBRIDGE
Sykesville, MD 21787 9881 Broken Land Parkway
Suite 400
Jeffrey D. Scott, Esquire Columbia, MD 21046-1153
239 East Main Street
Westminster, MD 21157 Ellen Kaplow
MILES & STOCKBRIDGE
William J. Nicholas 9881 Broken Land Parkway
NICHOLAS & ASSOCIATES, INC. Suite 400
3440 Ellicott Center Drive Columbia, MD 21046-1153
Suite 203
Ellicott City, MD 21043
Harvey Steinman
R. Neal Hoffman MILES & STOCKBRIDGE
E. Ronald Comfort, Esquire 9881 Broken Land Parkway
HOFFMAN & COMFORT Suite 400
24 North Court Street Columbia, MD 21046-1153
Westminster, MD 21157
Bruce Taub
Richard V. Boswell, Esquire SHAPIRO & O'LANDER
Charles E. Stoner 10320 Little Patuxent Parkway
Charles M. Preston, Esquire Suite 608
David H. Pratt Columbia, MD 21044
Michael G. Ritchey
STONER, PRESTON & BOSWELL
188 East Main Street
Westminster, MD 21157
29
<PAGE>
John Baum Marvin Hurwitz
SHAPIRO & O'LANDER INVESTORS MARKETPLACE
36 South Charles Street TANEYTOWN BANK & TRUST COMPANY
Baltimore, MD 21201-3147 222 East Baltimore Street
Taneytown, MD 21787-0491
Lee Riley
SHAPIRO & O'LANDER Taneytown Bank & Trust Insurance Center
36 South Charles Street FRANEY, PARR & ASSOCIATES
Baltimore, MD 21201-3147 9901 Business Parkway
Lanham, MD 20706
Jay Gullo
NEW WINDSOR Wesley D. Blakeslee
105 Green Valley Road 104 East Main Street
P.O. Box 299 Westminister, MD 21157
New Windsor, MD 21776
Jeff Griffith
Rich Davis 147 East Main Street
OBER, KALER, GRIMES Westminister, MD 21157
120 East Baltimore Street
Baltimore, MD 21202-1643 Robert H. Lennon
6 East Main Street
Darlene Margolies Westminister, MD 21157
OBER, KALER, GRIMES
120 East Baltimore Street Marker J. Lovell
Baltimore, MD 21202-1643 6 North Court Street
Westminister, MD 21157
Chip Mathieson
MATHIESON, GARRISON, Thomas F. Stansfield
COSGRAY & FALK 1 Court Place
6310 Stevens Forest Road Westminister, MD 21157
Columbia, MD 21045-1069
Jack Stammero
BERMAN, GOLDMAN & RIBAKOW
6910 Little Patuxent Parkway
Columbia, MD 21044-3198
Maurice Whalen
WHALEN, BARSKY & GRAHAM
7700 Wisconsin Avenue, Suite 410
Bethesda, MD 20814-3578
30
Exhibit 11.0
MONOCACY BANCSHARES, INC. AND SUBSIDIARY
Information used in the computation
of net income per common share
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S><C>
Net income $1.636,627 $1,278,643 $ 390,963 $ 308,444
========== ========== ========== ==========
Weighted average common shares outstanding 1,621,319 1,606,785 1,624,677 1,609,561
========= ========== ========== ==========
Earnings per common share $1.01 $.80 $.24 $.19
===== ==== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 9,635 9,635
<INT-BEARING-DEPOSITS> 319 319
<FED-FUNDS-SOLD> 2,800 2,800
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 70,819 70,819
<INVESTMENTS-CARRYING> 24,029 24,029
<INVESTMENTS-MARKET> 24,370 24,370
<LOANS> 167,167 167,167
<ALLOWANCE> 3,050 3,050
<TOTAL-ASSETS> 290,389 290,389
<DEPOSITS> 229,549 229,549
<SHORT-TERM> 14,823 14,823
<LIABILITIES-OTHER> 2,033 2,033
<LONG-TERM> 20,648 20,648
0 0
0 0
<COMMON> 8,128 8,128
<OTHER-SE> 15,209 15,209
<TOTAL-LIABILITIES-AND-EQUITY> 290,389 290,389
<INTEREST-LOAN> 11,907 3,907
<INTEREST-INVEST> 3,364 1,234
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 15,271 5,141
<INTEREST-DEPOSIT> 7,136 2,431
<INTEREST-EXPENSE> 7,741 2,706
<INTEREST-INCOME-NET> 7,530 2,435
<LOAN-LOSSES> 1,060 400
<SECURITIES-GAINS> 9 12
<EXPENSE-OTHER> 6,905 2,415
<INCOME-PRETAX> 1,700 305
<INCOME-PRE-EXTRAORDINARY> 1,700 305
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,637 391
<EPS-PRIMARY> 1.01 0.24
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 8.24 8.12
<LOANS-NON> 3,409 3,409
<LOANS-PAST> 2,099 2,099
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 2,100 2,679
<CHARGE-OFFS> 128 41
<RECOVERIES> 18 12
<ALLOWANCE-CLOSE> 3,050 3,050
<ALLOWANCE-DOMESTIC> 3,050 3,050
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
