Berlin, Maryland – (NewMediaWire) – October 26, 2020 – Calvin B. Taylor Bankshares, Inc. (the “Company”) (OTCQX: TYCB), parent company of Calvin B. Taylor Bank, today reported unaudited financial results for the third-quarter ending September 30, 2020. Net income was $1.91 million, or $0.69 per share, for the third-quarter ended September 30, 2020 (“3Q20”), as compared to $2.34 million, or $0.84 per share, for the third-quarter ended September 30, 2019 (“3Q19”) and $2.03 million, or $0.73 per share, for the second-quarter ended June 30, 2020 (“2Q20”). Additional highlights of the Company’s financial results are included below.
|Three Months Ended||Nine Months Ended|
|September 30,||%||September 30,||%|
|Results of Operations||2020||2019||Change||2020||2019||Change|
|Net interest income||$ 4,894,391||$ 5,180,701||-5.5%||$ 14,814,005||$ 14,943,048||-0.9%|
|Provision for loan losses||$ 270,000||$ 45,000||500.0%||$ 800,000||$ 195,000||310.3%|
|Noninterest income||$ 737,724||$ 752,980||-2.0%||$ 2,098,600||$ 2,118,516||-0.9%|
|Noninterest expense||$ 2,825,185||$ 2,768,045||2.1%||$ 8,302,225||$ 8,077,233||2.8%|
|Net income||$ 1,911,430||$ 2,344,636||-18.5%||$ 5,854,380||$ 6,619,331||-11.6%|
|Net income per share||$ 0.69||$ 0.84||-18.1%||$ 2.11||$ 2.37||-11.1%|
|Dividend per share||$ 0.29||$ 0.25||16.0%||$ 0.81||$ 0.75||8.0%|
|Dividend payout ratio||42.08%||29.59%||38.38%||31.55%|
|Average assets||$ 671,459,636||$ 552,221,669||21.6%||$ 604,173,489||$ 528,080,915||14.4%|
|Average loans||$ 417,610,324||$ 351,070,646||19.0%||$ 396,542,894||$ 346,932,628||14.3%|
|Average deposits||$ 576,478,199||$ 461,762,120||24.8%||$ 510,090,005||$ 439,544,439||16.0%|
|Average loans to average deposits||72.44%||76.03%||77.74%||78.93%|
|Average stockholders’ equity||$ 93,422,435||$ 89,002,077||5.0%||$ 92,217,443||$ 87,508,558||5.4%|
|Average stockholders’ equity to average assets||13.91%||16.12%||15.26%||16.57%|
|Net interest margin||3.12%||4.01%||3.55%||4.07%|
|Return on average assets||1.14%||1.70%||1.29%||1.67%|
|Return on average stockholders’ equity||8.18%||10.54%||8.46%||10.09%|
|Number of shares||–||14,000||-100.0%||1,294||14,000||-90.8%|
|Repurchase amount||$ –||$ 450,240||-100.0%||$ 39,404||$ 450,240||-91.2%|
|Average price per share||$ –||$ 32.16||-100.0%||$ 30.45||$ 32.16||-5.3%|
|September 30,||December 31,||%||September 30,||September 30,||%|
|Assets||$ 699,803,646||$ 548,004,110||27.7%||$ 699,803,646||$ 557,000,844||25.6%|
|Loans||$ 419,855,455||$ 363,242,332||15.6%||$ 419,855,455||$ 352,734,996||19.0%|
|Deposits||$ 603,337,234||$ 453,681,281||33.0%||$ 603,337,234||$ 466,010,504||29.5%|
|Stockholders’ equity||$ 94,276,510||$ 89,992,560||4.8%||$ 94,276,510||$ 89,166,512||5.7%|
|Common stock – shares outstanding||2,773,632||2,774,926||0.0%||2,773,632||2,774,926||0.0%|
|Book value per share||$ 33.99||$ 32.43||4.8%||$ 33.99||$ 32.13||5.8%|
|Loans to deposits||69.59%||80.07%||69.59%||75.69%|
|Equity to assets||13.47%||16.42%||13.47%||16.01%|
Results of Operations
Loan interest revenue, including fees, increased to $4.67 million in 3Q20, as compared to $4.46 million in 3Q19 and $4.64 million in 2Q20, as the result of continued organic loan growth and funding of Small Business Administration Paycheck Protection Program (“SBA PPP”) loans. Net interest income decreased to $4.89 million in 3Q20, as compared to $5.18 million in 3Q19 and $4.96 million in 2Q20, due to decreases in the federal funds interest rate and lower yields on loans and investments. Net interest margin decreased to 3.12% in 3Q20, as compared to 4.01% in 3Q19 and 3.58% in 2Q20, 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 assets in 3Q20 increased $119.2 million, or 21.6%, when compared to 3Q19.
The provision for loan losses was $270 thousand in 3Q20, as compared to $45 thousand in 3Q19 and $310 thousand in 2Q20. The provision for loan losses recorded in 3Q20 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 insignificant in 3Q20 and 3Q19, and net recoveries of $68 thousand were recognized in 2Q20. Excluding SBA PPP loans, the allowance for loan losses represents 0.44% of gross loans as of September 30, 2020, as compared to 0.21% as of September 30, 2019 and 0.37% as of June 30, 2020.
Noninterest income in 3Q20 was $738 thousand, as compared to $753 thousand in 3Q19 and $756 thousand in 2Q20. 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 fees. Noninterest income in 2Q20 included nonrecurring gains on the disposition of investment securities of $134 thousand which helped offset decreases in noninterest income related to the COVID-19 pandemic.
Noninterest expense increased to $2.83 million in 3Q20, as compared to $2.77 million in 3Q19 and $2.69 million in 2Q20. Salaries expense was higher in 3Q20, as compared to 2Q20, due to increased loan origination activity in 2Q20 related primarily to 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. The majority of SBA PPP loans were originated in 2Q20 resulting in a deferral of salaries expense during that period. As of September 30, 2020, unamortized deferred loan origination costs related to SBA PPP loans was $320 thousand. Employee benefits expense decreased in 3Q20, as compared to 3Q19 and 2Q20, due to certain employee health insurance claims that are reimbursable by a stop loss insurance policy. Decreases in net interest income in 3Q20, as compared to 3Q19, resulted in an increase to the efficiency ratio which equaled 50.16% for 3Q20, as compared to 46.78% for 3Q19. The efficiency ratio increased to 50.16% in 3Q20, as compared to 48.23% in 2Q20, as originations of SBA PPP loans in 2Q20 decreased salaries expense in that period.
Net income in 3Q20 decreased to $1.91 million, as compared to $2.27 million in 3Q19, and is primarily attributable to the increase in provision for loan losses in 3Q20 associated with the COVID-19 pandemic and lower net interest income due to lower yields on investments and loans. Net income in 3Q20 decreased to $1.91 million, as compared to $2.03 million in 2Q20, due to lower noninterest expense in 2Q20 as a result of SBA PPP loan originations. A decrease in net income accompanied by a significant increase in average assets in 3Q20, as compared to 3Q19, resulted in a decrease in the Return on Average Assets (“ROA”) from 1.70% in 3Q19 to 1.14% in 3Q20. A decrease in net income accompanied by higher average equity in 3Q20, as compared to 3Q19, resulted in a reduction in Return on Average Stockholders’ Equity (“ROE”) from 10.54% in 3Q19 to 8.18% in 3Q20. Similarly, significant increases in average assets in 3Q20, as compared to 2Q20, resulted in a decrease in ROA from 1.36% in 2Q20 to 1.14% in 3Q20. Average assets were $74.5 million, or 12.5%, higher in 3Q20, as compared to 2Q20. Dividends declared in 3Q20 were $0.29 per share, as compared to $0.25 per share in 3Q19 and $0.26 per share in 2Q20. Dividend payout ratios were 42.08% for 3Q20, 29.59% for 3Q19, and 35.50% for 2Q20.
Total assets were $699.8 million as of September 30, 2020, as compared to $548.0 million as of December 31, 2019 and $557.0 million as of September 30, 2019. 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 $603.3 million as of September 30, 2020, as compared to $453.7 million as of December 31, 2019 and $466.0 million as of September 30, 2019. A significant portion of the deposit growth was utilized to fund loan originations including $33.2 million of SBA PPP loans representing 546 customers. Total loans as of September 30, 2020 were $419.9 million as compared to $363.2 million as of December 31, 2019 and $352.7 million as of September 30, 2019. The loans to deposits ratio as of September 30, 2020 was 69.6%, as compared to 80.1% as of December 31, 2019 and 75.7% as of September 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. The majority of borrowers in the program received 6 month payment deferral periods and the related deferral period will expire in 4Q20. During 3Q20, certain borrowers voluntarily resumed their contractual payments. As of September 30, 2020, loans remaining in the temporary loan payment deferral program include 189 loans with an outstanding principal balance of $134.3 million and accrued interest of $2.0 million. As of June 30, 2020, the temporary payment deferral program included 235 loans with an outstanding principal balance of $148.1 million and accrued interest of $1.8 million. Loans in the temporary payment deferral program represented 32.0% of total loans outstanding as of September 30, 2020, as compared to 35.2% as of June 30, 2020.
Average assets grew to $671.5 million in 3Q20, as compared to $552.2 million in 3Q19 and $597.0 million in 2Q20. Average loans were $417.6 million in 3Q20, as compared to $351.1 million in 3Q19 and $402.1 million in 2Q20. SBA PPP loans contributed to $32.2 million of the increase in average loans in 3Q20, as compared to 3Q19, and contributed to $9.1 million of the increase in average loans in 3Q20, as compared to 2Q20. The average loans to average deposits ratio decreased to 72.4% in 3Q20, as compared to 76.0% in 3Q19 and 80.0% in 2Q20, 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