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Berlin, Maryland – 
| Three Months Ended | Twelve Months Ended | ||||||
| December 31, | % | December 31, | % | ||||
| Results of Operations | 2020 | 2019 | Change | 2020 | 2019 | Change | |
| Net interest income | $ 4,961,837 | $ 5,036,961 | -1.5% | $ 19,775,842 | $ 19,980,009 | -1.0% | |
| Provision for loan losses | $ 165,000 | $ 75,000 | 120.0% | $ 965,000 | $ 270,000 | 257.4% | |
| Noninterest income | $ 774,876 | $ 698,744 | 10.9% | $ 2,873,476 | $ 2,817,260 | 2.0% | |
| Noninterest expense | $ 3,761,079 | $ 3,382,977 | 11.2% | $ 12,063,304 | $ 11,460,210 | 5.3% | |
| Net income | $ 1,413,634 | $ 1,710,728 | -17.4% | $ 7,268,014 | $ 8,330,059 | -12.7% | |
| Net income per share | $ 0.51 | $ 0.61 | -17.0% | $ 2.62 | $ 2.99 | -12.4% | |
| Dividend per share | $ 0.29 | $ 0.31 | -6.5% | $ 1.10 | $ 1.06 | 3.8% | |
| Dividend payout ratio | 56.89% | 50.28% | 41.98% | 35.39% | |||
| Average assets | $ 704,175,818 | $ 551,956,033 | 27.6% | $ 629,497,297 | $ 534,148,634 | 17.9% | |
| Average loans | $ 419,211,495 | $ 352,834,890 | 18.8% | $ 402,298,573 | $ 348,458,440 | 15.5% | |
| Average deposits | $ 608,449,556 | $ 460,369,767 | 32.2% | $ 534,995,652 | $ 444,701,320 | 20.3% | |
| Average loans to average deposits | 68.90% | 76.64% | 75.20% | 78.36% | |||
| Average stockholders’ equity | $ 94,308,170 | $ 90,043,047 | 4.7% | $ 92,746,273 | $ 88,155,464 | 5.2% | |
| Average stockholders’ equity to average assets | 13.39% | 16.31% | 14.73% | 16.50% | |||
| Ratios | |||||||
| Net interest margin | 2.99% | 3.88% | 3.36% | 4.02% | |||
| Return on average assets | 0.80% | 1.24% | 1.15% | 1.56% | |||
| Return on average stockholders’ equity | 6.00% | 7.60% | 7.84% | 9.45% | |||
| Efficiency ratio | 65.72% | 59.24% | 53.66% | 50.36% | |||
| Stock Repurchased | |||||||
| Number of shares | 700 | – | 1,994 | 14,000 | -85.8% | ||
| Repurchase amount | $ 23,933 | $ – | $ 63,337 | $ 450,240 | -85.9% | ||
| Average price per share | $ 34.19 | $ – | $ 31.76 | $ 32.16 | -1.2% | ||
| December 31, | December 31, | % | December 31, | September 30, | % | ||
| Financial Condition | 2020 | 2019 | Change | 2020 | 2020 | Change | |
| Assets | $ 711,791,004 | $ 548,004,110 | 29.9% | $ 711,791,004 | $ 699,803,646 | 1.7% | |
| Loans | $ 423,467,766 | $ 363,242,332 | 16.6% | $ 423,467,766 | $ 419,855,455 | 0.9% | |
| Deposits | $ 614,437,080 | $ 453,681,281 | 35.4% | $ 614,437,080 | $ 603,337,234 | 1.8% | |
| Stockholders’ equity | $ 94,785,130 | $ 89,992,560 | 5.3% | $ 94,785,130 | $ 94,276,510 | 0.5% | |
| Common stock – shares outstanding | 2,772,932 | 2,774,926 | -0.1% | 2,772,932 | 2,773,632 | 0.0% | |
| Book value per share | $ 34.18 | $ 32.43 | 5.4% | $ 34.18 | $ 33.99 | 0.6% | |
| Loans to deposits | 68.92% | 80.07% | 68.92% | 69.59% | |||
| Equity to assets | 13.32% | 16.42% | 13.32% | 13.47% | |||
Annual Results of Operations
Loan interest revenue, including fees, grew 6.5% to $18.63 million in FY20, as compared to $17.50 million in FY19, as the result of continued organic loan growth and funding of Small Business Administration Paycheck Protection Program (“SBA PPP”) loans. Net interest income decreased 1.0% to $19.78 million in FY20, as compared to $19.98 million in FY19, due to decreases in the federal funds interest rate and lower yields on investments which offset interest revenue growth from loans. Net interest margin decreased to 3.36% in FY20, as compared to 4.02% in FY19, which is attributable to significant increases in average deposits from customer behavior changes and government economic stimulus programs related to the COVID-19 pandemic. Average deposits increased in FY20 by $90.29 million, or 20.3%, as compared to FY19.
The provision for loan losses was $965 thousand in FY20, as compared to $270 thousand in FY19. The increase in the provision for loan losses in 2020 was attributable to adjustments of qualitative factors used to estimate the allowance for loan losses. Qualitative factors were adjusted due to the continued economic uncertainty associated with the COVID-19 pandemic. Net recoveries of $18 thousand were recognized in FY20, as compared to net charge offs of $35 thousand recognized in FY19. Excluding SBA PPP loans, the allowance for loan losses represents 0.46% of gross loans as of December 31, 2020, as compared to 0.23% as of December 31, 2019.
Noninterest income increased to $2.87 million in FY20, as compared to $2.82 million in FY19. Several sources of noninterest income have been negatively impacted by the COVID-19 pandemic including merchant payment processing fees and certain deposit account and placement fees. Noninterest income in 2020 included nonrecurring gains on the disposition of investment securities of $169 thousand which helped offset decreases in noninterest income related to the COVID-19 pandemic.
Noninterest expense increased 5.3% to $12.06 million in FY20, as compared to $11.46 million in FY19. Increases in noninterest expense are primarily related to opening a new branch in Onley, Virginia in July 2020 and costs to purchase personal protective equipment, cleaning supplies, and cleaning services associated with the COVID-19 pandemic. A reduction in net interest income accompanied by higher noninterest expense in FY20, as compared to FY19, increased the efficiency ratio from 50.36% in FY19 to 53.66% in FY20.
Net income decreased to $7.27 million in FY20, as compared to $8.33 million in FY19, and is primarily attributable to the increase in provision for loan losses in FY20 associated with the COVID-19 pandemic and lower interest revenue due to decreases in the federal funds interest rate and lower yields on investments. A decrease in net income accompanied by a significant increase in average assets in FY20, as compared to FY19, resulted in a decrease in the Return on Average Assets (“ROA”) from 1.56% in FY19 to 1.15% in FY20. Average assets were $95.35 million, or 17.9%, higher in FY20, as compared to FY19. A decrease in net income accompanied by higher average equity in FY20, as compared to FY19, resulted in a reduction in Return on Average Stockholders’ Equity (“ROE”) from 9.45% in FY19 to 7.84% in FY20. Dividends declared in FY20 were $1.10 per share, as compared to $1.06 per share in FY19, resulting in dividend payout ratios of 41.98% for FY20 and 35.39% in FY19.
Quarterly Results of Operations
Loan interest revenue, including fees, increased to $4.81 million in 4Q20, as compared to $4.41 million in 4Q19 and $4.67 million in 3Q20, as the result of continued organic loan growth and funding of Small Business Administration Paycheck Protection Program (“SBA PPP”) loans. SBA PPP loan balances decreased in 4Q20 as borrowers received loan forgiveness and related loans were repaid by the SBA. Upon repayment, unamortized net loan fees are recognized and reported as loan interest revenue which resulted in an increase in loan interest revenue in Q420 as compared to 3Q20. SBA loan interest revenue increased from $138 thousand in Q320 to $335 thousand in Q420. As of December 31, 2020, unamortized net loan fees related to SBA PPP loans were $641 thousand.
Net interest income decreased to $4.96 million in 4Q20, as compared to $5.04 million in 4Q19, due to decreases in the federal funds interest rate and lower yields on loans and investments. Net interest income increased slightly in 4Q20, as compared to $4.89 million in 3Q20, and was attributable to SBA PPP loan forgiveness as discussed above. Net interest margin decreased to 2.99% in 4Q20, as compared to 3.88% in 4Q19 and 3.12% in 3Q20, and is attributable to significant increases in average deposits from customer behavior changes and government economic stimulus programs related to the COVID-19 pandemic. Average deposits increased $148.1 million, or 32.2%, when compared to 4Q19 and increased $32.0 million or 5.5%, when compared to 3Q20.
The provision for loan losses was $165 thousand in 4Q20, as compared to $75 thousand in 4Q19 and $270 thousand in 3Q20. The provision for loan losses recorded in 4Q20 was primarily attributable to further adjustments to qualitative factors used to estimate the allowance for loan losses. Qualitative factors were adjusted due to the continued economic uncertainty associated with the COVID-19 pandemic. Net charge offs were $15 thousand in 4Q20, as compared to net recoveries of $25 thousand in 4Q19, and net charge offs of $5 thousand in 3Q20.
Noninterest income increased to $775 thousand in 4Q20, as compared to $699 thousand in 4Q19 and $738 thousand in 3Q20. The increase is primarily attributable to higher levels of consumer spending in 4Q20 which increased both debit card interchange income and overdraft fees. Other sources of noninterest income have been negatively impacted by the COVID-19 pandemic including merchant payment processing fees and certain deposit account and placement fees, but were offset by higher interchange and overdraft fees in Q420.
Noninterest expense increased to $3.76 million in 4Q20, as compared to $3.38 million in 4Q19, which can be attributed to the opening of a new branch in Onley, Virginia in July 2020, costs to purchase personal protective equipment, cleaning supplies, and cleaning services associated with the COVID-19 pandemic, increases in salaries expense and higher FDIC deposit insurance premiums. Noninterest expense increased in 4Q20 to $3.76 million, as compared to $2.83 million in 3Q20, which primarily relates to year end discretionary bonuses and 401K contributions. A reduction in net interest income accompanied by higher noninterest expense in Q420, as compared to Q419, increased the efficiency ratio from 59.24% in Q419 to 65.72% in Q420. Due to year end discretionary bonuses and 401K contributions recorded in 4Q20, the efficiency ratio increased to 65.72%, as compared to 50.16% in 3Q20.
Net income in 4Q20 decreased to $1.41 million, as compared to $1.71 million in 4Q19, and is primarily attributable to higher noninterest expense associated with the opening of a new branch in Onley, Virginia in July 2020 and lower net interest income due to lower yields on investments and loans. Net income in 4Q20 decreased to $1.41 million, as compared to $1.91 million in 3Q20, due to higher noninterest expense related to year end discretionary bonuses and 401K contributions awarded in 4Q20. A decrease in net income accompanied by a significant increase in average assets in 4Q20, as compared to 4Q19, resulted in a decrease in the Return on Average Assets (“ROA”) from 1.24% in 4Q19 to 0.80% in 4Q20. Average assets were $152.2 million, or 27.6%, higher in 4Q20, as compared to 4Q19. A decrease in net income accompanied by higher average equity in 4Q20, as compared to 4Q19, resulted in a reduction in Return on Average Stockholders’ Equity (“ROE”) from 7.60% in 4Q19 to 6.00% in 4Q20. Similarly, decreases in net income and increases in average assets in 4Q20, as compared to 3Q20, resulted in a decrease in ROA from 1.14% in 3Q20 to 0.80% in 4Q20. Average assets were $32.7 million, or 4.9%, higher in 4Q20, as compared to 3Q20. Dividends declared in 4Q20 were $0.29 per share, as compared to $0.31 per share in 4Q19 and $0.29 per share in 3Q20. Dividend payout ratios were 56.89% for 4Q20, 50.28% for 4Q19, and 42.08% for 3Q20.
Financial Condition
Total assets were $711.8 million as of December 31, 2020, as compared to $548.0 million as of December 31, 2019 and $699.8 million as of September 30, 2020. Significant asset growth was primarily the result of customer behavior changes and government economic stimulus programs related to the COVID-19 pandemic which resulted in a significant increase in customer deposits. Deposits totaled $614.4 million as of December 31, 2020, as compared to $453.7 million as of December 31, 2019 and $603.3 million as of September 30, 2020. A significant portion of the deposit growth was utilized to fund loan originations including $33.2 million of SBA PPP loans representing 546 customers. SBA PPP loans, net of unamortized loans fees, were $24.1 million as of December 31, 2020. Total loans as of December 31, 2020 were $423.5 million as compared to $363.2 million as of December 31, 2019 and $419.9 million as of September 30, 2020, which represents growth of 16.6% since December 31, 2019 and 0.9% since September 30, 2020. Strong loan demand in FY20, excluding SBA PPP loans, contributed to $36.1 million, or 9.9%, of loan portfolio growth since December 31, 2019. During 4Q20, SBA PPP loans decreased $8.1 million, or 25.2%, as borrowers received loan forgiveness and related loans were repaid by the SBA. The decrease in the loan portfolio from SBA PPP payoffs in 4Q20 was offset by continued organic loan growth in other portfolios which grew by $11.8 million in Q420, which equals an annualized growth rate of 12.2%. The loans to deposits ratio as of December 31, 2020 was 68.9%, as compared to 80.1% as of December 31, 2019 and 69.6% as of September 30, 2020.
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. The majority of borrowers in the program received 6 month payment deferral periods and the related deferral period expired in 4Q20. Certain borrowers voluntarily resumed their contractual payments prior to the end of the deferral period. As of December 31, 2020, all loans in the temporary payment deferral program have been restored and have resumed contractual payments. As of September 30, 2020, the temporary loan payment deferral program included 189 loans with an outstanding principal balance of $134.3 million and accrued interest of $2.0 million. Loans in the temporary payment deferral program represented 32.0% of total loans outstanding as of September 30, 2020.
Average assets grew by 17.9% to $629.5 million in FY20, as compared to $534.1 million in FY19. Significant average asset growth was primarily the result of customer behavior changes and government economic stimulus programs related to the COVID-19 pandemic which resulted in a significant increase in average deposits. Average loans grew 15.5% to $402.3 million in FY20, as compared to $348.5 million in FY19. SBA PPP loans contributed to $21.2 million of the $53.8 million increase in average loans in FY20, as compared to FY19, while the remaining $32.6 million increase in average loans was attributable to strong loan demand in FY20. The average loans to average deposits ratio decreased to 75.2% in FY20, as compared to 78.4% in FY19, and relates to significant growth in average deposits associated with the COVID-19 pandemic.
| Calvin B. Taylor Bankshares, Inc. and Subsidiary | |||||
| Consolidated Balance Sheets | |||||
| (unaudited) | (unaudited) | ||||
| December 31, | December 31, | September 30, | |||
| 2020 | 2019 | 2020 | |||
| Assets | |||||
| Cash and cash equivalents | |||||
| Cash and due from banks | $ 14,398,578 | $ 12,022,238 | $ 11,708,285 | ||
| Federal funds sold and interest bearing deposits | 156,706,746 | 53,111,059 | 150,087,731 | ||
| Total cash and cash equivalents | 171,105,324 | 65,133,297 | 161,796,016 | ||
| Time deposits in other financial institutions | 8,733,754 | 25,509,040 | 13,037,522 | ||
| Debt securities available for sale, at fair value | 72,166,997 | 54,424,907 | 65,016,339 | ||
| Debt securities held to maturity, at amortized cost | 5,994,955 | 13,318,100 | 9,485,601 | ||
| Equity securities, at cost | 1,240,233 | 1,215,433 | 1,240,233 | ||
| Loans | 423,467,766 | 363,242,332 | 419,855,455 | ||
| Less: allowance for loan losses | (1,836,451) | (853,329) | (1,687,175) | ||
| Net loans | 421,631,315 | 362,389,003 | 418,168,280 | ||
| Accrued interest receivable | 2,402,222 | 1,176,816 | 3,114,471 | ||
| Prepaid expenses | 612,188 | 529,966 | 497,091 | ||
| Other real estate owned | – | – | – | ||
| Premises and equipment, net | 12,951,511 | 10,681,615 | 12,971,768 | ||
| Computer software | 389,236 | 240,287 | 340,648 | ||
| Bank owned life insurance | 13,405,779 | 13,004,699 | 13,291,112 | ||
| Other assets | 1,157,490 | 380,947 | 844,565 | ||
| Total assets | $ 711,791,004 | $ 548,004,110 | $ 699,803,646 | ||
| Liabilities and Stockholders’ Equity | |||||
| Deposits | |||||
| Non-interest bearing | $ 211,945,179 | $ 157,736,204 | $ 223,337,161 | ||
| Interest bearing | 402,491,901 | 295,945,077 | 380,000,073 | ||
| Total deposits | 614,437,080 | 453,681,281 | 603,337,234 | ||
| Accrued interest payable | 26,837 | 31,069 | 26,481 | ||
| Dividends payable | 804,150 | 860,227 | 804,353 | ||
| Debt securities payable | – | 2,048,821 | – | ||
| Accrued expenses | 602,027 | 497,138 | 180,687 | ||
| Non-qualified deferred compensation | 485,626 | 347,387 | 433,836 | ||
| Deferred income taxes | 601,057 | 452,046 | 687,551 | ||
| Other liabilities | 49,097 | 93,581 | 56,994 | ||
| Total liabilities | 617,005,874 | 458,011,550 | 605,527,136 | ||
| Stockholders’ equity | |||||
| Common stock, par value $1 per share; | |||||
| authorized 10,000,000 shares; issued and outstanding | 2,772,932 | 2,774,926 | 2,773,632 | ||
| Additional paid-in capital | 2,808,195 | 2,869,539 | 2,831,428 | ||
| Retained earnings | 88,396,800 | 84,179,816 | 87,787,316 | ||
| Accumulated other comprehensive income, net of tax | 807,203 | 168,279 | 884,134 | ||
| Total stockholders’ equity | 94,785,130 | 89,992,560 | 94,276,510 | ||
| Total liabilities and stockholders’ equity | $ 711,791,004 | $ 548,004,110 | $ 699,803,646 | ||
| Calvin B. Taylor Bankshares, Inc. and Subsidiary | |||||||
| Consolidated Statements of Comprehensive Income (unaudited) | |||||||
| For the three months ended | For the twelve months ended | ||||||
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2019 | ||||
| Interest revenue | |||||||
| Loans, including fees | $ 4,808,154 | $ 4,407,603 | $ 18,629,385 | $ 17,495,750 | |||
| U. S. Treasury and government agency debt securities | 104,428 | 183,622 | 494,008 | 834,936 | |||
| Mortgage-backed debt securities | 83,045 | 117,922 | 518,458 | 376,082 | |||
| State and municipal debt securities | 51,762 | 44,094 | 213,978 | 179,029 | |||
| Federal funds sold and interest bearing deposits | 46,137 | 313,193 | 251,653 | 1,168,383 | |||
| Time deposits in other financial institutions | 66,243 | 154,542 | 383,376 | 613,513 | |||
| Total interest revenue | 5,159,769 | 5,220,976 | 20,490,858 | 20,667,693 | |||
| Interest expense | |||||||
| Deposits | 197,932 | 184,015 | 715,016 | 687,684 | |||
| Net interest income | 4,961,837 | 5,036,961 | 19,775,842 | 19,980,009 | |||
| Provision for loan losses | 165,000 | 75,000 | 965,000 | 270,000 | |||
| Net interest income after provision for loan losses | 4,796,837 | 4,961,961 | 18,810,842 | 19,710,009 | |||
| Noninterest income | |||||||
| Debit card and ATM | 295,411 | 243,613 | 1,060,624 | 1,015,183 | |||
| Service charges on deposit accounts | 190,551 | 164,261 | 674,955 | 643,180 | |||
| Merchant payment processing | 42,259 | 46,224 | 223,101 | 275,188 | |||
| Increase in cash surrender value of bank owned life insurance | 114,667 | 92,962 | 344,049 | 354,427 | |||
| Dividends | 41,382 | 42,502 | 65,993 | 48,334 | |||
| Gain on disposition of investment securities | 13,916 | 24,811 | 169,229 | 41,235 | |||
| Gain (loss) on disposition of fixed assets | – | 25 | 1,400 | (2,906) | |||
| Loan swap referral fees | – | – | – | 85,505 | |||
| Miscellaneous | 76,690 | 84,346 | 334,125 | 357,114 | |||
| Total noninterest income | 774,876 | 698,744 | 2,873,476 | 2,817,260 | |||
| Noninterest expenses | |||||||
| Salaries | 1,687,638 | 1,490,104 | 5,224,862 | 5,124,635 | |||
| Employee benefits | 641,100 | 663,386 | 1,750,621 | 1,765,443 | |||
| Occupancy | 255,955 | 234,619 | 877,435 | 791,122 | |||
| Furniture and equipment | 196,976 | 156,481 | 714,354 | 610,308 | |||
| Data processing | 148,183 | 129,602 | 557,725 | 502,102 | |||
| ATM and debit card | 132,311 | 101,129 | 457,494 | 379,997 | |||
| Marketing | 70,294 | 57,458 | 347,190 | 314,494 | |||
| Directors fees | 82,100 | 73,700 | 321,950 | 298,100 | |||
| Telecommunication services | 80,466 | 69,320 | 320,428 | 251,519 | |||
| Deposit insurance premiums | 37,880 | – | 95,255 | 67,624 | |||
| Other operating | 428,176 | 407,178 | 1,395,990 | 1,354,866 | |||
| Total noninterest expenses | 3,761,079 | 3,382,977 | 12,063,304 | 11,460,210 | |||
| Income before income taxes | 1,810,634 | 2,277,728 | 9,621,014 | 11,067,059 | |||
| Income taxes | 397,000 | 567,000 | 2,353,000 | 2,737,000 | |||
| Net income | 1,413,634 | 1,710,728 | 7,268,014 | 8,330,059 | |||
| Other comprehensive income, net of tax | |||||||
| Unrealized gains (losses) on available for sale debt securities | |||||||
| arising during the period, net of tax | (76,931) | (23,734) | 638,924 | 272,347 | |||
| Comprehensive income | $ 1,336,703 | $ 1,686,994 | $ 7,906,938 | $ 8,602,406 | |||
| Earnings per common share – basic and diluted | $ 0.51 | $ 0.61 | $ 2.62 | $ 2.99 | |||
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.
Contact
M. Dean Lewis, Vice President and Chief Financial Officer
410-641-1700, taylorbank.com
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