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Berlin, Maryland – 
· Net income increased $684 thousand to $2.60 million in 1Q21, a 35.8% increase compared to 1Q20
· Net income increased $1.18 million in 1Q21 compared to 4Q20, a 83.6% increase
· Nonrecurring and nontaxable income of $618 thousand related to bank owned life insurance death proceeds was recognized in 1Q21
· Organic asset growth continued in 1Q21 with assets growing $39.6 million, or 5.6%, since December 31, 2020
· Organic loan growth continued in 1Q21 with loans growing $32.2 million, or 7.6%, since December 31, 2020
· Small Business Administration Paycheck Protection Program (“SBA PPP”) loans originated in 1Q21 totaled $29.2 million
· Net interest margin improved from 2.99% in 4Q20 to 3.05% in 1Q21
· Provision for loan losses decreased 43.2% to $125 thousand in 1Q21 as compared to $220 thousand in 1Q20 and decreased 24.2% compared to the $165 thousand recorded in 4Q20
Quarterly Results of Operations
Loan interest revenue, including fees, increased to $4.96 million in 1Q21, as compared to $4.50 million in 1Q20 and $4.81 million in 4Q20, as the result of continued organic loan growth and funding of Small Business Administration Paycheck Protection Program (“SBA PPP”) loans. SBA PPP loan balances increased in 1Q21 as new loan origination activity associated with 2nd draw SBA PPP loans exceeded loan repayments by the SBA associated with loan forgiveness of existing 1st draw SBA PPP loans. Upon repayment by the SBA, unamortized net loan fees are recognized and reported as loan interest revenue which resulted in an increase in loan interest revenue in 1Q21 as compared to 4Q20. SBA PPP loan interest revenue increased from $335 thousand in Q420 to $458 thousand in 1Q21. SBA PPP loan originations in 1Q21 resulted in an increase in unamortized net loan fees from $756 thousand as of December 31, 2020 to $1.9 million as of March 31, 2021.
Net interest income increased 2.3% to $5.08 million in 1Q21, as compared to $4.96 million in 1Q20 and 4Q20. Increases in loan interest revenue, as noted above, were partially offset by lower yields on other earning assets as interest rates remain historically low. Net interest margin decreased to 3.05% in 1Q21, as compared to 3.93% in 1Q20, 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 in 1Q21 by $174.9 million, or 38.8%, when compared to 1Q20 and increased $17.5 million, or 2.9%, as compared to 4Q20. SBA PPP loan originations of $29.2 million and additional government economic stimulus payments in 1Q21 was a primary factor in the continued growth in average deposits when compared to 4Q20.
The provision for loan losses was $125 thousand in 1Q21, as compared to $220 thousand in 1Q20 and $165 thousand in 4Q20. The provision for loan losses recorded in 1Q21 was primarily attributable to loan portfolio growth and further adjustments to qualitative factors used to estimate the allowance for loan losses. Qualitative factors were adjusted due to the continued uncertainty associated with the economic recovery from the COVID-19 pandemic. Net charge offs were $6 thousand in 1Q21, as compared to $29 thousand in 1Q20 and $15 thousand in 4Q20. Government economic stimulus payments, PPP loans, foreclosure moratoriums, and increasing residential real estate prices have mitigated charge offs during the COVID-19 pandemic. However, uncertainty about borrowers’ ability to repay and real estate values subsequent to the pandemic and related reduction in government economic stimulus has prevented a reduction in the allowance for loan losses at this time.
Noninterest income increased to $1.34 million in 1Q21, as compared to $605 thousand in 1Q20 and $775 thousand in 4Q20. The increase in noninterest income is primarily attributable to nonrecurring income recognized in 1Q21 related to income from death proceeds of bank owned life insurance policies. While income from increases in cash surrender value of bank owned life insurance is generally consistent and recurring income, the income from death proceeds is not, and is triggered upon the death of an insured employee or former employee. Bank owned life insurance investments are used to recover present and long term costs of employee benefits and compensation. Noninterest income also increased as a result of improving consumer spending as COVID-19 pandemic restrictions are removed which has resulted in higher debit card interchange income in 1Q21 as compared to 1Q20 and 4Q20. Other sources of noninterest income have been negatively impacted by the COVID-19 pandemic including certain deposit account and placement fees, but were offset by higher interchange and overdraft fees in 1Q21.
Noninterest expense increased to $3.04 million in 1Q21, as compared to $2.79 million in 1Q20, 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 employee benefits expense and higher FDIC deposit insurance premiums due to significant deposit growth. The increases in noninterest expense were offset by increases in net interest income and noninterest income, which decreased the efficiency ratio from 50.24% in 1Q20 to 47.80% in 1Q21. Noninterest expense decreased in 1Q21 to $3.04 million, as compared to $3.76 million in 4Q20, which primarily relates to higher salaries expense associated with yearend discretionary bonuses and 401K contributions recorded in 4Q20. A reduction in noninterest expense accompanied by increases in net interest income and noninterest income decreased the efficiency ratio to 47.80% in 1Q21, as compared to 65.72% in 4Q20.
Net income increased 35.8% to $2.60 million in 1Q21, as compared to $1.91 million in 1Q20, and is primarily attributable to nonrecurring and nontaxable income of $618 thousand recorded in 1Q21 related to income from bank owned life insurance death proceeds. Average assets had a comparable increase of 32.8% in 1Q21, as compared to 1Q20, which resulted in a modest increase to Return on Average Assets (“ROA”) from 1.41% in 1Q20 to 1.44% in 1Q21. Average equity increased 4.5% to $95.15 million in 1Q21, as compared to 1Q20, but net income growth of 35.8% during the same period increased the Return on Average Stockholders’ Equity (“ROE”) from 8.40% in 1Q20 to 10.91% in 1Q21.
Net income increased 83.6% to $2.60 million in 1Q21, as compared to $1.41 million in 4Q20, due to nonrecurring and nontaxable income of $618 thousand recorded in 1Q21 related to income from bank owned life insurance death proceeds and higher noninterest expense in 4Q20 related to year end discretionary bonuses and 401K contributions. Average assets continued their recent pattern of growth and increased 2.6% in 1Q21 as compared to 4Q20 and was primarily the result of additional government economic stimulus including 2nd draw SBA PPP loans. Average equity also increased during 1Q21, and was 0.9% higher than 4Q20. The significant growth in net income compared to the modest increases in average assets and average equity resulted in an increase in ROA from 0.80% in 4Q20 to 1.44% in 1Q21 and an increase in ROE from 6.00% in 4Q20 to 10.91% in 1Q21. Dividends declared were $0.29 per share in 1Q21 and 4Q20, and $0.26 per share in 1Q20. Dividend payout ratios were 30.90% for 1Q21, 37.74% for 1Q20, and 56.89% for 4Q20.
Financial Condition
Total assets were $751.4 million as of March 31, 2021, as compared to $545.3 million as of March 31, 2020 and $711.8 million as of December 31, 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 $653.5 million as of March 31, 2021, as compared to $451.5 million as of March 31, 2020 and $614.4 million as of December 31, 2020. A portion of deposit growth since March 31, 2020 was utilized to fund loan originations including $62.7 million of SBA PPP loans. SBA PPP loans, net of unamortized loans fees, were $41.9 million as of March 31, 2021 as compared to $24.1 million as of December 31, 2020. SBA PPP loan balances increased in 1Q21 as new loan origination activity associated with 2nd draw SBA PPP loans exceeded loan repayments by the SBA associated with loan forgiveness of existing 1st draw SBA PPP loans. Total loans as of March 31, 2021 were $455.7 million as compared to $370.9 million as of March 31, 2020 which represents growth of $84.8 million, or 22.9%. The growth in loans since March 31, 2020 is attributable to $41.9 million in SBA PPP loans and $42.9 million of organic loan growth attributable to strong commercial and residential real estate loan demand in our markets. Loans increased $32.2 million, or 7.6%, since December 31, 2020 which can be attributed to $17.8 million in SBA PPP loan growth and $14.4 million of organic loan growth attributable to continued strong demand in commercial and residential real estate loans in our markets. The loans to deposits ratio as of March 31, 2021 was 69.7%, as compared to 82.2% as of March 31, 2020 and 68.9% as of December 31, 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 the 2nd quarter of 2020 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 4th quarter of 2020. 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 were restored and resumed contractual payments. As of March 31, 2021, loans past due 30 days or more totaled $2.3 million which includes $459 thousand of loans that previously received temporary payment deferral.
Average assets grew by 32.8% to $722.3 million in 1Q21, as compared to $544.1 million in 1Q20. 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 19.1% to $440.4 million in 1Q21, as compared to $369.9 million in 1Q20. SBA PPP loans contributed to $32.2 million of the increase in average loans while the remaining $38.3 million increase in average loans was attributable to strong commercial and residential real estate loan demand in the last 12 months. The average loans to average deposits ratio decreased to 70.4% in 1Q21, as compared to 82.0% in 1Q20, and relates to significant growth in average deposits associated with the COVID-19 pandemic.
| Three Months Ended | Three Months Ended | ||||||
| March 31, | % | March 31, | December 31, | % | |||
| Results of Operations | 2021 | 2020 | Change | 2021 | 2020 | Change | |
| Net interest income | $ 5,076,193 | $ 4,963,552 | 2.3% | $ 5,076,193 | $ 4,961,837 | 2.3% | |
| Provision for loan losses | $ 125,000 | $ 220,000 | -43.2% | $ 125,000 | $ 165,000 | -24.2% | |
| Noninterest income | $ 1,344,561 | $ 605,150 | 122.2% | $ 1,344,561 | $ 774,876 | 73.5% | |
| Noninterest expense | $ 3,040,326 | $ 2,786,894 | 9.1% | $ 3,040,326 | $ 3,761,079 | -19.2% | |
| Net income | $ 2,595,428 | $ 1,911,308 | 35.8% | $ 2,595,428 | $ 1,413,634 | 83.6% | |
| Net income per share | $ 0.94 | $ 0.69 | 36.0% | $ 0.94 | $ 0.51 | 83.8% | |
| Dividend per share | $ 0.29 | $ 0.26 | 11.5% | $ 0.29 | $ 0.29 | 0.0% | |
| Dividend payout ratio | 30.90% | 37.74% | 30.90% | 56.89% | |||
| Average assets | $ 722,291,769 | $ 544,076,794 | 32.8% | $ 722,291,769 | $ 704,175,818 | 2.6% | |
| Average loans | $ 440,383,147 | $ 369,907,305 | 19.1% | $ 440,383,147 | $ 419,211,495 | 5.1% | |
| Average deposits | $ 625,914,322 | $ 450,993,182 | 38.8% | $ 625,914,322 | $ 608,449,556 | 2.9% | |
| Average loans to average deposits | 70.36% | 82.02% | 70.36% | 68.90% | |||
| Average stockholders’ equity | $ 95,153,292 | $ 91,023,635 | 4.5% | $ 95,153,292 | $ 94,308,170 | 0.9% | |
| Average stockholders’ equity to average assets | 13.17% | 16.73% | 13.17% | 13.39% | |||
| Ratios | |||||||
| Net interest margin | 3.05% | 3.93% | 3.05% | 2.99% | |||
| Return on average assets | 1.44% | 1.41% | 1.44% | 0.80% | |||
| Return on average stockholders’ equity | 10.91% | 8.40% | 10.91% | 6.00% | |||
| Efficiency ratio | 47.80% | 50.24% | 47.80% | 65.72% | |||
| Stock Repurchased | |||||||
| Number of shares | 7,480 | 380 | 1868.4% | 7,480 | 700 | 968.6% | |
| Repurchase amount | $ 253,572 | $ 12,008 | 2011.7% | $ 253,572 | $ 23,933 | 959.5% | |
| Average price per share | $ 33.90 | $ 31.60 | 7.3% | $ 33.90 | $ 34.19 | -0.8% | |
| March 31, | March 31, | % | March 31, | December 31, | % | ||
| Financial Condition | 2021 | 2020 | Change | 2021 | 2020 | Change | |
| Assets | $ 751,416,895 | $ 545,342,222 | 37.8% | $ 751,416,895 | $ 711,791,004 | 5.6% | |
| Loans | $ 455,677,254 | $ 370,901,684 | 22.9% | $ 455,677,254 | $ 423,467,766 | 7.6% | |
| Deposits | $ 653,484,299 | $ 451,478,843 | 44.7% | $ 653,484,299 | $ 614,437,080 | 6.4% | |
| Stockholders’ equity | $ 95,735,742 | $ 91,657,497 | 4.4% | $ 95,735,742 | $ 94,785,130 | 1.0% | |
| Common stock – shares outstanding | 2,765,452 | 2,774,546 | -0.3% | 2,765,452 | 2,772,932 | -0.3% | |
| Book value per share | $ 34.62 | $ 33.04 | 4.8% | $ 34.62 | $ 34.18 | 1.3% | |
| Loans to deposits | 69.73% | 82.15% | 69.73% | 68.92% | |||
| Equity to assets | 12.74% | 16.81% | 12.74% | 13.32% | |||
| (unaudited) | (unaudited) | ||||
| March 31, | December 31, | March 31, | |||
| Balance Sheet | 2021 | 2020 | 2020 | ||
| Assets | |||||
| Cash and cash equivalents | |||||
| Cash and due from banks | $ 10,759,131 | $ 14,398,578 | $ 10,613,174 | ||
| Federal funds sold and interest bearing deposits | 164,416,904 | 156,706,746 | 45,495,801 | ||
| Total cash and cash equivalents | 175,176,035 | 171,105,324 | 56,108,975 | ||
| Time deposits in other financial institutions | 8,732,396 | 8,733,754 | 20,524,375 | ||
| Debt securities available for sale, at fair value | 78,437,955 | 72,166,997 | 60,680,486 | ||
| Debt securities held to maturity, at amortized cost | 3,515,601 | 5,994,955 | 10,337,668 | ||
| Equity securities, at cost | 1,103,733 | 1,240,233 | 1,240,233 | ||
| Loans | 455,677,254 | 423,467,766 | 370,901,684 | ||
| Less: allowance for loan losses | (1,955,434) | (1,836,451) | (1,044,056) | ||
| Net loans | 453,721,820 | 421,631,315 | 369,857,628 | ||
| Accrued interest receivable | 2,123,934 | 2,402,222 | 1,320,664 | ||
| Prepaid expenses | 521,291 | 612,188 | 421,812 | ||
| Other real estate owned | – | – | – | ||
| Premises and equipment, net | 12,827,221 | 12,951,511 | 11,166,811 | ||
| Computer software | 365,169 | 389,236 | 297,543 | ||
| Bank owned life insurance | 13,491,712 | 13,405,779 | 13,035,405 | ||
| Other assets | 1,400,028 | 1,157,490 | 350,622 | ||
| Total assets | $ 751,416,895 | $ 711,791,004 | $ 545,342,222 | ||
| Liabilities and Stockholders’ Equity | |||||
| Deposits | |||||
| Non-interest bearing | $ 232,686,437 | $ 211,945,179 | $ 153,876,312 | ||
| Interest bearing | 420,797,862 | 402,491,901 | 297,602,531 | ||
| Total deposits | 653,484,299 | 614,437,080 | 451,478,843 | ||
| Accrued interest payable | 26,079 | 26,837 | 26,822 | ||
| Dividends payable | 801,981 | 804,150 | 721,382 | ||
| Accrued expenses | 249,640 | 602,027 | 110,009 | ||
| Non-qualified deferred compensation | 519,539 | 485,626 | 301,386 | ||
| Deferred income taxes | 534,278 | 601,057 | 620,878 | ||
| Other liabilities | 65,337 | 49,097 | 425,405 | ||
| Total liabilities | 655,681,153 | 617,005,874 | 453,684,725 | ||
| Stockholders’ equity | |||||
| Common stock, par value $1 per share; | |||||
| authorized 10,000,000 shares; issued and outstanding | 2,765,452 | 2,772,932 | 2,774,546 | ||
| Additional paid-in capital | 2,562,103 | 2,808,195 | 2,857,911 | ||
| Retained earnings | 90,190,247 | 88,396,800 | 85,369,742 | ||
| Accumulated other comprehensive income, net of tax | 217,940 | 807,203 | 655,298 | ||
| Total stockholders’ equity | 95,735,742 | 94,785,130 | 91,657,497 | ||
| Total liabilities and stockholders’ equity | $ 751,416,895 | $ 711,791,004 | $ 545,342,222 | ||
| For the three months ended | |||
| Statement of Comprehensive Income (unaudited) | Mar 31, 2021 | Mar 31, 2020 | |
| Interest revenue | |||
| Loans, including fees | $ 4,957,754 | $ 4,502,173 | |
| U. S. Treasury and government agency debt securities | 57,228 | 146,726 | |
| Mortgage-backed debt securities | 116,772 | 155,834 | |
| State and municipal debt securities | 51,003 | 49,202 | |
| Federal funds sold and interest bearing deposits | 35,932 | 152,506 | |
| Time deposits in other financial institutions | 44,674 | 134,506 | |
| Total interest revenue | 5,263,363 | 5,140,947 | |
| Interest expense | |||
| Deposits | 187,170 | 177,395 | |
| Net interest income | 5,076,193 | 4,963,552 | |
| Provision for loan losses | 125,000 | 220,000 | |
| Net interest income after provision for loan losses | 4,951,193 | 4,743,552 | |
| Noninterest income | |||
| Debit card and ATM | 316,116 | 234,847 | |
| Service charges on deposit accounts | 179,087 | 184,327 | |
| Merchant payment processing | 13,517 | 35,360 | |
| Increase in cash surrender value of bank owned life insurance | 85,933 | 30,706 | |
| Income from bank owned life insurance death proceeds | 618,463 | – | |
| Dividends | 4,595 | 6,975 | |
| Gain on disposition of investment securities | 60,453 | 21,484 | |
| Gain (loss) on disposition of fixed assets | (4,931) | 1,400 | |
| Miscellaneous | 71,328 | 90,051 | |
| Total noninterest income | 1,344,561 | 605,150 | |
| Noninterest expenses | |||
| Salaries | 1,248,957 | 1,253,898 | |
| Employee benefits | 399,265 | 317,464 | |
| Occupancy | 227,368 | 201,769 | |
| Furniture and equipment | 203,685 | 169,024 | |
| Data processing | 166,115 | 131,478 | |
| ATM and debit card | 112,250 | 111,350 | |
| Marketing | 35,614 | 63,159 | |
| Directors fees | 75,100 | 75,700 | |
| Telecommunication services | 82,145 | 80,627 | |
| Deposit insurance premiums | 49,895 | – | |
| Other operating | 439,932 | 382,425 | |
| Total noninterest expenses | 3,040,326 | 2,786,894 | |
| Income before income taxes | 3,255,428 | 2,561,808 | |
| Income taxes | 660,000 | 650,500 | |
| Net income | 2,595,428 | 1,911,308 | |
| Other comprehensive income, net of tax | |||
| Unrealized gains (losses) on available for sale debt securities | |||
| arising during the period, net of tax | (589,263) | 487,019 | |
| Comprehensive income | $ 2,006,165 | $ 2,398,327 | |
| Earnings per common share – basic and diluted | $ 0.94 | $ 0.69 | |
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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