Berlin, Maryland - (NewMediaWire) - July 21, 2020 - Calvin B. Taylor Bankshares, Inc. (the “Company”) (OTCQX: TYCB), parent company of Calvin B. Taylor Bank, today reported unaudited financial results for the second-quarter ending June 30, 2020. Net income was $2.03 million, or $0.73 per share, for the second-quarter ended June 30, 2020 (“2Q20”), as compared to $2.27 million, or $0.81 per share, for the second-quarter ended June 30, 2019 (“2Q19”) and $1.91 million, or $0.69 per share, for the first-quarter ended March 31, 2020 (“1Q20”). Additional highlights of the company’s financial results are included below.
|Calvin B. Taylor Bankshares, Inc. and Subsidiary|
|Financial Highlights - Unaudited|
|Three Months Ended||Six Months Ended|
|June 30,||%||June 30,||%|
|Results of Operations||2020||2019||Change||2020||2019||Change|
|Net interest income||$ 4,956,062||$ 4,962,764||-0.1%||$ 9,919,614||$ 9,762,347||1.6%|
|Provision for loan losses||$ 310,000||$ 80,000||287.5%||$ 530,000||$ 150,000||253.3%|
|Noninterest income||$ 755,726||$ 766,021||-1.3%||$ 1,360,876||$ 1,365,536||-0.3%|
|Noninterest expense||$ 2,690,146||$ 2,640,660||1.9%||$ 5,477,040||$ 5,309,188||3.2%|
|Net income||$ 2,031,642||$ 2,267,625||-10.4%||$ 3,942,950||$ 4,274,695||-7.8%|
|Net income per share||$ 0.73||$ 0.81||-9.9%||$ 1.42||$ 1.53||-7.3%|
|Dividend per share||$ 0.26||$ 0.25||4.0%||$ 0.52||$ 0.50||4.0%|
|Dividend payout ratio||35.50%||30.75%||36.59%||32.62%|
|Average assets||$ 596,984,036||$ 514,200,673||16.1%||$ 570,530,415||$ 516,074,902||10.6%|
|Average loans||$ 402,111,052||$ 352,569,867||14.1%||$ 386,009,179||$ 344,863,618||11.9%|
|Average deposits||$ 502,798,635||$ 425,473,017||18.2%||$ 476,895,909||$ 428,319,095||11.3%|
|Average loans to average deposits||79.97%||82.87%||80.94%||80.52%|
|Average stockholders' equity||$ 92,206,259||$ 87,469,175||5.4%||$ 91,614,947||$ 86,761,799||5.6%|
|Average stockholders' equity to average assets||15.45%||17.01%||16.06%||16.81%|
|Net interest margin||3.58%||4.17%||3.76%||4.11%|
|Return on average assets||1.36%||1.76%||1.38%||1.66%|
|Return on average stockholders' equity||8.81%||10.37%||8.61%||9.85%|
|Number of shares||914||-||0.0%||1,294||-||0.0%|
|Repurchase amount||$ 27,396||$ -||0.0%||$ 39,404||$ -||0.0%|
|Average price per share||$ 29.97||$ -||0.0%||$ 30.45||$ -||0.0%|
|June 30,||December 31,||%||June 30,||June 30,||%|
|Assets||$ 644,666,536||$ 548,004,110||17.6%||$ 644,666,536||$ 523,958,010||23.0%|
|Loans||$ 421,087,244||$ 363,242,332||15.9%||$ 421,087,244||$ 351,733,230||19.7%|
|Deposits||$ 548,275,849||$ 453,681,281||20.9%||$ 548,275,849||$ 434,309,020||26.2%|
|Stockholders' equity||$ 93,231,411||$ 89,992,560||3.6%||$ 93,231,411||$ 87,990,075||6.0%|
|Common stock - shares outstanding||2,773,632||2,774,926||0.0%||2,773,632||2,788,926||-0.5%|
|Book value per share||$ 33.61||$ 32.43||3.6%||$ 33.61||$ 31.55||6.5%|
|Loans to deposits||76.80%||80.07%||76.80%||80.99%|
|Equity to assets||14.46%||16.42%||14.46%||16.79%|
Results of Operations
Net interest income was $4.96 million in 2Q20, which remained unchanged as compared to 2Q19 and 1Q20. Continued organic loan growth contributed to higher net interest income but was partially offset by decreases in the target federal funds interest rate which began to decrease in August 2019 and is currently 0%-0.25%. Loan interest revenue was $4.64 million in 2Q20, as compared to $4.45 million in 2Q19 and $4.50 million in 1Q20. Net interest margin decreased to 3.58% in 2Q20, as compared to 4.17% in 2Q19 and 3.93% in 1Q20. Significant increases in average deposits in 2Q20, accompanied with decreases in the federal funds interest rate and lower yield on loans and investments, have resulted in a reduction to the net interest margin.
The provision for loan losses was $310 thousand in 2Q20, as compared to $80 thousand in 2Q19 and $220 thousand in 1Q20. The higher provision for loan losses in 2Q20 was primarily attributable to further adjustments to qualitative factors used to estimate the allowance for loan losses. Qualitative factors were adjusted due to the economic uncertainty associated with the COVID-19 pandemic. Net recoveries of $68 thousand were recorded in 2Q20, as compared to net charge-offs of $67 thousand and $29 thousand in 2Q19 and 1Q20, respectively. The allowance for loan losses represents 0.34% of gross loans as of June 30, 2020 as compared to 0.20% as of June 30, 2019 and 0.28% as of March 31, 2020.
Noninterest income in 2Q20 was $756 thousand, as compared to $766 thousand in 2Q19 and $605 thousand in 1Q20. Several sources of noninterest income have been negatively impacted by the COVID-19 pandemic including ATM and debit card fees, service charges on deposit accounts and merchant payment processing. Increases in noninterest income in 2Q20 related to gains on the disposition of investment securities and bank owned life insurance helped offset decreases in noninterest income related to the pandemic. Noninterest income in 2Q19 included a one-time loan swap referral fee of $86 thousand.
Noninterest expense increased modestly to $2.69 million in 2Q20, as compared to $2.64 million in 2Q19, and decreased as compared to $2.79 million in 1Q20. Salaries expense in 2Q20, as compared to 2Q19 and 1Q20, was lower due to increased loan origination activity in related primarily to Small Business Administration Paycheck Protection Program (“SBA PPP”) loans. Salaries expense directly attributable to loan originations is deferred and amortized over the life of the underlying loan and is recorded as a reduction to interest revenue. As of June 30, 2020, unamortized deferred loan origination costs related to SBA PPP loans was $323 thousand. The decrease in salaries expense in 2Q20, as compared to 2Q19 and 1Q20, was partially offset by an increase in employee benefits expense due to higher health insurance claims. Decreases in net interest income in 2Q20, as compared to 2Q19, resulted in an increased efficiency ratio of 48.23% for 2Q20, as compared to 46.09% for 2Q19. The efficiency ratio was lower in 2Q20, as compared to the 50.24% efficiency ratio in 1Q20, and is the result of higher noninterest income and a decrease in noninterest expense.
Net income in 2Q20 decreased to $2.03 million, as compared to $2.27 million in 2Q19, and is primarily attributable to the increase in provision for loan losses in 2Q20 associated with the COVID-19 pandemic. Net income in 2Q20 increased to $2.03 million, as compared to $1.91 million in 1Q20, and is related to increases in noninterest income and decreases in noninterest expense. A decrease in net income accompanied by a significant increase in average assets, as compared to 2Q19, resulted in a decrease in the Return on Average Assets (“ROA”) from 1.76% in 2Q19 to 1.36% in 2Q20. A decrease in net income accompanied by higher average equity in 2Q20, as compared to 2Q19, resulted in a reduction in Return on Average Stockholders’ Equity (“ROE”) from 10.37% in 2Q19 to 8.81% in 2Q20. Similarly, significant increases in average assets in 2Q20, as compared to 1Q20, resulted in a decrease in ROA from 1.41% in 1Q20 to 1.36% in 2Q20. Dividends declared in 2Q20 were $0.26, as compared to $0.25 per share in 2Q19 and $0.26 in 1Q20. Dividend payout ratios were 35.50% for 2Q20, 30.75% for 2Q19, and 37.74% for 1Q20.
Total assets were $644.7 million as of June 30, 2020, as compared to $548.0 million as of December 31, 2019 and $524.0 million as of June 30, 2019. Significant asset growth in 2Q20 was primarily the result of customer behavior changes related to the COVID-19 pandemic and government economic stimulus programs which resulted in a significant increase in customer deposits. Deposits totaled $548.3 million as of June 30, 2020, as compared to $453.7 million as of December 31, 2019 and $434.3 million as of June 30, 2019. A significant portion of the deposit growth in 2Q20 was utilized to fund loan originations including $32.7 million of SBA PPP loans representing 521 customers. Total loans as of June 30, 2020 were $421.1 million as compared to $363.2 million as of December 31, 2019 and $351.7 million as of June 30, 2019. Deposit growth outpaced loan growth in 2Q20 which decreased the loan to deposit ratio as of June 30, 2020 to 76.8%, as compared to 80.1% as of December 31, 2019 and 81.0% as of June 30, 2019.
As a result of the COVID-19 pandemic and related economic uncertainty in our markets, a temporary loan payment deferral program was established in 2Q20 for both commercial and consumer borrowers impacted by the pandemic. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provided financial institutions the ability to provide loan payment accommodations and short-term modifications without requiring the loans to be reported and accounted for as Troubled Debt Restructurings. As of June 30, 2020, the temporary loan payment deferral program included 235 loans with an outstanding principal balance of $148.1 million and accrued interest of $1.8 million.
Average assets grew to $597.0 million in 2Q20, as compared to $514.2 million in 2Q19 and $544.1 million in 1Q20. Average loans were $402.1 million in 2Q20, as compared to $352.6 million in 2Q19 and $370.0 million in 1Q20. SBA PPP loans originated in 2Q20 contributed to $23.1 million of the increase in average loans during the same period. The average loans to average deposits ratio decreased to 80.0% in 2Q20, as compared to 82.9% in 2Q19 and 82.0% in 1Q20, and relates to significant growth in average deposits associated with the COVID-19 pandemic.
About Calvin B. Taylor Banking Company
Calvin B. Taylor Banking Company, the bank subsidiary of Calvin B. Taylor Bankshares, Inc. (OTCQX: TYCB), founded in 1890, offers a wide range of loan, deposit, and ancillary banking services through both physical and digital delivery channels. The Company has 12 banking locations within the eastern coastal area of the Delmarva Peninsula including Worcester County, Maryland, Sussex County, Delaware and Accomack County, Virginia.
M. Dean Lewis, Vice President and Chief Financial Officer