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Calvin B. Taylor Bankshares, Inc. Reports Second-Quarter 2021 Financial Results

Berlin, Maryland - (NewMediaWire) - August 2, 2021 - Calvin B. Taylor Bankshares, Inc. (the “Company”) (OTCQX: TYCB), parent company of Calvin B. Taylor Bank, today reported net income of $2.07 million for the second quarter ended June 30, 2021 (“2Q21”), as compared to $2.03 million for the second quarter ended June 30, 2020 (“2Q20”) and $2.60 million for the first quarter ended March 31, 2021 (“1Q21”).  Net income for the six months ended June 30, 2021 was $4.67 million, as compared to $3.94 million for the six months ended June 30, 2020.  Highlights of the company’s financial results are noted below and included in the following tables.

  • The provision for loan losses in 2Q21 decreased $310 thousand, as compared to 2Q20 and decreased $125 thousand, as compared to 1Q21 as economic conditions related to the COVID-19 pandemic have improved.
  • Organic asset growth continued in 2Q21 as assets grew to $839.0 million at June 30, 2021, a 30.1% increase compared to June 30, 2020, and annualized growth of 35.7% compared to December 31, 2020.
  • Organic loan growth continued in 2Q21 but was partially offset by repayments of Paycheck Protection Program (“PPP”) loans by the Small Business Administration (“SBA”) associated with loan forgiveness.  Annualized loan growth, excluding PPP loans, was 6.6% since June 30, 2020 and 7.9% since December 31, 2020. 
  • Net interest margin was 2.78% in 2Q21, as compared to 3.58% in 2Q20 and 3.05% in 1Q21.  Continued deposit and asset growth from changes in customer behavior and government economic stimulus programs associated with the COVID-19 pandemic continued downward pressure on net interest margin.

Quarterly Results of Operations

Loan interest revenue, including fees, increased to $4.93 million in 2Q21, as compared to $4.64 million in 2Q20, as the result of continued organic loan growth and funding of SBA PPP loans.  Upon repayment of a PPP loan by the SBA associated with loan forgiveness, unamortized net loan fees are recognized and reported as loan interest revenue.  SBA PPP loan interest revenue, including fees, was $341 thousand in 2Q21, as compared to $156 thousand in 2Q20 and $458 thousand in 1Q21.  Unamortized net loan fees related to SBA PPP loans were $1.8 million as of June 30, 2021 compared to $946 thousand as of June 30, 2020 and $1.7 million as of March 31, 2021.  The yield on loans was 4.31% in 2Q21, as compared to 4.65% in 2Q20 and 4.58% in 1Q21.  The decrease in loan yields in 2Q21, as compared to 1Q21, is primarily due to fewer SBA PPP loan repayments in 2Q21.    

Net interest income increased to $5.13 million in 2Q21, as compared to $4.96 million in 2Q20 and $5.08 million in 1Q21.  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 2.78% in 2Q21, as compared to 3.58% in 2Q20 and 3.05% in 1Q21.  Average deposits increased in 2Q21 by $184.2 million, or 36.6%, as compared to 2Q20, and was the primary reason for the lower net interest margin.

A provision for loan losses was not recorded in 2Q21, as compared to $310 thousand recorded in 2Q20.  Net charge offs were $7 thousand in 2Q21 which primarily relate to overdraft deposit accounts, as compared to net recoveries of $68 thousand in 2Q20.  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 a reduction in government economic stimulus has prevented a reduction in the allowance for loan losses at this time.    

Noninterest income increased to $785 thousand in 2Q21, as compared to $756 thousand in 2Q20.  The increase in noninterest income in 2Q21, as compared to 2Q20, is primarily the result of improving consumer spending as COVID-19 pandemic restrictions were removed which has resulted in higher debit card interchange income in 2Q21.  Higher debit card interchange income was partially offset by a reduction in gains on disposition of investment securities.

Noninterest expense increased to $3.14 million in 2Q21, as compared to $2.69 million in 2Q20, which can be attributed to the opening of a new branch in Onley, Virginia in July 2020 and a decrease in the amount of salaries expense deferred for loan origination activities.  PPP loan originations in 2Q21 were significantly lower than 2Q20 which reduced the amount of salaries expense that was deferred.  In addition, FDIC deposit insurance premiums were higher in 2Q21, as compared to 2Q20, due to Small Bank Assessment Credits received in 2020 that offset the quarterly insurance assessment by the FDIC.  Increases in deposits related to the COVID-19 pandemic have also increased FDIC deposit insurance premiums.  The increases in noninterest expense exceeded the increases in net interest income and noninterest income which caused the efficiency ratio to increase from 48.23% in 2Q20 to 53.15% in 2Q21.  

Net income increased 2.0% to $2.07 million in 2Q21, as compared to $2.03 million in 2Q20, and is primarily attributable to a decrease in the provision for loan losses of $310 thousand which was partially offset by an increase in noninterest expense as noted above.  Sustained growth in deposits in the last 12 months associated with the COVID-19 pandemic resulted in an increase in average assets of 31.3% from 2Q20 to 2Q21 which resulted in a decrease to Return on Average Assets (“ROA”) from 1.36% in 2Q20 to 1.06% in 2Q21.  Return on Average Stockholders’ Equity (“ROE”) decreased from 8.81% in 2Q20 to 8.58% in 2Q21 due to an increase in average equity of 4.7%, as compared to a 2.0% increase in net income.  Dividends declared were $0.29 per share in 2Q21 compared to $0.26 per share in 2Q20.  Dividend payout ratios were 38.71% for 2Q21 and 35.50% for 2Q20. 

Year to Date Results of Operations

Loan interest revenue, including fees, was $9.89 million for the six months ended June 30, 2021, as compared to $9.15 million for the six months ended June 30, 2020, which is the result of continued organic loan growth and funding of SBA PPP loans.  Upon repayment of a PPP loan by the SBA, unamortized net loan fees are recognized and reported as loan interest revenue.  PPP loan interest revenue, including fees, was $799 thousand for the six months ended June 30, 2021, as compared to $156 thousand for the six months ended June 30, 2020. 

Net interest income increased to $10.20 million for the six months ended June 30, 2021, as compared to $9.92 million for the six months ended June 30, 2020.  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 2.88% for the six months ended June 30, 2021, as compared to 3.74% for the six months ended June 30, 2020.  Average deposits for the six months ended June 30, 2021 increased by $179.40 million, or 29.5%, when compared to the same period in 2020, and was the primary reason for the lower net interest margin.  SBA PPP loan origination, changes in consumer behavior, and additional government economic stimulus payments contributed to the growth in average deposits.

Provision for loan losses was $125 thousand for the six months ended June 30, 2021, as compared to $530 thousand for the six months ended June 30, 2020.  Net charge offs were $13 thousand in six months ended June 30, 2021 which primarily relate to overdraft deposit accounts, as compared to net recoveries of $39 thousand in the same period in 2020.  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 by $769 thousand to $2.13 million for the six months ended June 30, 2021, as compared to $1.36 million for the six months ended June 30, 2020, due to nonrecurring and nontaxable income of $618 thousand recognized in 1Q21 related to income from death proceeds of bank owned life insurance policies.  While income from the increase 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 expense increased from $5.48 million for the six months ended June 30, 2020 to $6.18 million for the six months ended June 30, 2021, and was primarily attributable to the opening of a new branch in Onley, Virginia in July 2020 and a decrease in the amount of salaries expense deferred due to lower origination costs for 2nd round PPP loans originated in 2021.  In addition, FDIC deposit insurance premiums increased $94 thousand in the six months ending June 30, 2021, as compared to the same period in 2020, due to Small Bank Assessment Credits received in 2020 that offset the quarterly expense assessed by the FDIC.  The efficiency ratio for the six months ended June 30, 2021 was 50.38% for the six months ended June 30, 2021, as compared to 49.23% for same period in 2020.

Net income increased from $3.94 million for the six months ended June 30, 2020 to $4.67 million for the six months ended June 30, 2021 and is primarily due to nonrecurring and nontaxable income of $618 thousand recorded in 1Q21 related to income from bank owned life insurance death proceeds.  Sustained growth in deposits associated with the COVID-19 pandemic resulted in an increase in average assets of 32.1% for the six months ended June 30, 2021, as compared to the same period in 2020, which resulted in ROA decreasing from 1.38% for the six months ended June 30, 2020 to 1.24% for the same period in 2021.  ROE increased from 8.61% for the six months ended June 30, 2020 to 9.71% for the six months ended June 30, 2021 due to an increase in average equity of 5.0%, as compared to an 18.4% increase in net income.  Dividends declared were $0.58 per share in six months ended June 30, 2021 compared to $0.52 per share for the same period in 2020.  Dividend payout ratios were 34.4% for the six months ended June 30, 2021 and 36.6% for the same period in 2020.

Financial Condition

Total assets were $839.0 million as of June 30, 2021, as compared to $644.7 million as of June 30, 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 $739.8 million as of June 30, 2021, as compared to $548.3 million as of June 30, 2020 and $614.4 million as of December 31, 2020.  Total loans as of June 30, 2021 were $457.3 million, as compared to $421.1 million as of June 30, 2020 which represents growth of $36.2 million, or 8.6%.  The growth in loans since June 30, 2020 is attributable to $10.5 million increase in SBA PPP loans and $25.7 million of organic loan growth attributable to strong commercial and residential real estate loan demand in our markets.  Loans increased $33.9 million since December 31, 2020 which can be attributed to $18.1 million in PPP loan growth and $15.8 million of continued organic loan growth.  PPP loans, net of unamortized loans fees, were $42.3 million as of June 30, 2021, as compared to $31.7 million as of June 30, 2020 and $24.2 million as of December 31, 2020.  PPP loan balances increased in 2Q21 as new loan origination activity associated with 2nd draw PPP loans exceeded loan repayments by the SBA associated with loan forgiveness of existing 1st draw PPP loans.  The loans to deposits ratio as of June 30, 2021 was 61.8%, as compared to 76.8% as of June 30, 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 June 30, 2021, loans past due 30 days or more totaled $994 thousand which includes $459 thousand of loans that previously received temporary payment deferral. 

Average assets grew by 32.1% to $755.0 million for the six months ended June 30, 2021, as compared to $571.3 million for the six months ended June 30, 2020.  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 deposits increased 37.6% for the six months ended June 30, 2021, as compared to same period in 2020, while average loans grew 16.6% to $450.0 million for the six months ended June 30, 2021, as compared to $386.0 million for the six months ended June 30, 2020.  SBA PPP loans contributed to $29.6 million of the increase in average loans while the remaining $34.4 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 68.5% for the six months ended June 30, 2021, as compared to 80.9% for the same period in 2020, and relates to significant growth in average deposits associated with the COVID-19 pandemic. 

Calvin B. Taylor Bankshares, Inc. & Subsidiary     
Financial Highlights     
 Three Months Ended  Six Months Ended 
 June 30,% June 30,%
Results of Operations20212020Change 20212020Change
Net interest income $        5,126,373 $        4,956,0623.4%  $     10,202,566 $        9,919,6142.9%
Provision for loan losses $                       -   $           310,000-100.0%  $           125,000 $           530,000-76.4%
Noninterest income $           784,970 $           755,7263.9%  $        2,129,531 $        1,360,87656.5%
Noninterest expense $        3,143,954 $        2,690,14616.9%  $        6,184,280 $        5,477,04012.9%
Net income $        2,071,889 $        2,031,6422.0%  $        4,667,317 $        3,942,95018.4%
Net income per share $                  0.75 $                  0.732.3%  $                  1.69 $                  1.4218.6%
Dividend per share $                  0.29 $                  0.2611.5%  $                  0.58 $                  0.5211.5%
Dividend payout ratio38.71%35.50%  34.37%36.58% 
        
Average assets $   785,085,477 $   598,105,21331.3%  $   754,970,089 $   571,318,36132.1%
Average loans $   459,147,814 $   402,111,05214.2%  $   449,950,541 $   386,009,17916.6%
Average deposits $   687,038,885 $   502,798,63536.6%  $   656,712,880 $   477,315,33537.6%
Average loans to average deposits66.83%79.97%  68.52%80.87% 
Average stockholders' equity $     96,562,487 $     92,206,2594.7%  $     96,168,130 $     91,614,9475.0%
Average stockholders' equity to average assets12.30%15.42%  12.74%16.04% 
        
Ratios       
Net interest margin2.78%3.58%  2.88%3.74% 
Return on average assets1.06%1.36%  1.24%1.38% 
Return on average stockholders' equity8.58%8.81%  9.71%8.61% 
Efficiency ratio53.15%48.23%  50.38%49.23% 
        
Stock Repurchased       
Number of shares                          -                        914-100.0%                    7,480                   1,294478.1%
Repurchase amount $                       -   $             27,396-100.0%  $           253,572 $             39,404543.5%
Average price per share $                       -   $                29.97-100.0%  $                33.90 $                30.4511.3%
        
 June 30,June 30,  June 30,December 31,% Change
Financial Condition20212020% Change 20212020Annualized
Assets $   839,010,222 $   644,666,53630.1%  $   839,010,222 $   711,791,00435.7%
Loans $   457,348,554 $   421,087,2448.6%  $   457,348,554 $   423,467,76616.0%
Deposits $   739,844,239 $   548,275,84934.9%  $   739,844,239 $   614,437,08040.8%
Stockholders' equity $     97,124,149 $     93,231,4114.2%  $     97,124,149 $     94,785,1304.9%
Common stock - shares outstanding           2,765,452           2,773,632-0.3%            2,765,452           2,772,932-0.5%
Book value per share $                35.12 $                33.614.5%  $                35.12 $                34.185.5%
Loans to deposits61.82%76.80%  61.82%68.92% 
Equity to assets11.58%14.46%  11.58%13.32% 


Calvin B. Taylor Bankshares, Inc. and Subsidiary  
Consolidated Balance Sheets     
  (unaudited)     (unaudited) 
  June 30,   December 31,   June 30, 
 2021 2020 2020
Assets     
Cash and cash equivalents     
Cash and due from banks $    17,240,944  $    14,398,578  $    13,234,177
Federal funds sold and interest bearing deposits     221,200,232      156,706,746         97,696,589
Total cash and cash equivalents     238,441,176      171,105,324      110,930,766
Time deposits in other financial institutions          6,981,022           8,733,754         14,281,230
Debt securities available for sale, at fair value        99,345,642         72,166,997         57,515,065
Debt securities held to maturity, at amortized cost          3,509,644           5,994,955         10,353,991
Equity securities, at cost          1,103,733           1,240,233           1,240,233
Loans     457,348,554      423,467,766      421,087,244
Less: allowance for loan losses        (1,948,398)         (1,836,451)         (1,427,122)
Net loans     455,400,156      421,631,315      419,660,122
Accrued interest receivable          2,077,867           2,402,222           2,761,121
Prepaid expenses             601,955              612,188              445,833
Other real estate owned                         -                            -                            -  
Premises and equipment, net        12,672,886         12,951,511         12,151,821
Computer software             350,877              389,236              291,802
Bank owned life insurance        17,940,582         13,405,779         13,146,379
SBA PPP loan fee receivable             130,083                   8,819           1,391,040
Other assets             454,599           1,148,671              497,133
Total assets $  839,010,222  $  711,791,004  $  644,666,536
      
Liabilities and Stockholders' Equity     
Deposits     
Non-interest bearing $  284,870,586  $  211,945,179  $  202,106,787
Interest bearing     454,973,653      402,491,901      346,169,062
Total deposits     739,844,239      614,437,080      548,275,849
Accrued interest payable                26,483                 26,837                 24,660
Dividends payable             801,981              804,150              721,144
Accrued expenses             156,095              602,027              193,593
Non-qualified deferred compensation             553,488              485,626              349,160
Deferred income taxes             447,841              601,057              709,612
Other liabilities                55,946                 49,097           1,161,107
Total liabilities     741,886,073      617,005,874      551,435,125
Stockholders' equity     
Common stock, par value $1 per share;     
authorized 10,000,000 shares; issued and outstanding          2,765,452           2,772,932           2,773,632
Additional paid-in capital          2,562,103           2,808,195           2,831,428
Retained earnings        91,460,155         88,396,800         86,680,141
Accumulated other comprehensive income, net of tax             336,439              807,203              946,210
Total stockholders' equity        97,124,149         94,785,130         93,231,411
Total liabilities and stockholders' equity $  839,010,222  $  711,791,004  $  644,666,536


Calvin B. Taylor Bankshares, Inc. and Subsidiary    
Consolidated Statements of Comprehensive Income (unaudited)      
        
 For the three months ended For the six months ended
  Jun 30, 2021   Jun 30, 2020   Jun 30, 2021   June 30, 2020 
Interest revenue       
Loans, including fees $  4,930,082  $  4,644,935  $   9,887,836  $   9,147,108
U. S. Treasury and government agency debt securities           69,005          123,915           126,233           270,641
Mortgage-backed debt securities         172,651          161,280           289,423           317,114
State and municipal debt securities           47,506            58,089             98,509           107,291
Federal funds sold and interest bearing deposits           53,200            23,396             89,132           175,902
Time deposits in other financial institutions           40,630          104,350             85,304           238,856
Total interest revenue      5,313,074       5,115,965     10,576,437     10,256,912
        
Interest expense       
Deposits         186,701          159,903           373,871           337,298
Net interest income      5,126,373       4,956,062     10,202,566       9,919,614
Provision for loan losses                     -            310,000           125,000           530,000
Net interest income after provision for loan losses      5,126,373       4,646,062     10,077,566       9,389,614
        
Noninterest income       
Debit card and ATM         358,110          234,320           674,226           469,167
Service charges on deposit accounts         177,268          142,937           356,355           327,264
Merchant payment processing           58,739            32,158             72,256             67,518
Increase in cash surrender value of bank owned life insurance           99,825          110,974           185,758           141,680
Income from bank owned life insurance death proceeds                     -                        -             618,463                      -  
Dividends           10,124            12,292             14,719             19,267
Gain on disposition of investment securities            (3,652)          133,829             56,801           155,313
Gain (loss) on disposition of fixed assets            (2,583)                      -                (7,514)               1,400
Miscellaneous           87,139            89,216           158,467           179,267
Total noninterest income         784,970          755,726       2,129,531       1,360,876
        
Noninterest expenses       
Salaries      1,371,866       1,005,214       2,620,823       2,259,112
Employee benefits         449,571          483,329           848,836           800,793
Occupancy          222,492          187,138           449,860           388,907
Furniture and equipment          197,159          169,236           400,844           338,260
Data processing         193,382          131,770           359,497           263,248
ATM and debit card         129,836          101,206           242,086           212,556
Marketing           85,331            95,719           120,945           158,878
Directors fees           86,100            85,950           161,200           161,650
Telecommunication services           81,541            77,774           163,686           158,401
Deposit insurance premiums           43,774                      -               93,669                      -  
Other operating         282,902          352,810           722,834           735,235
Total noninterest expenses      3,143,954       2,690,146       6,184,280       5,477,040
Income before income taxes       2,767,389       2,711,642       6,022,817       5,273,450
Income taxes         695,500          680,000       1,355,500       1,330,500
Net income      2,071,889       2,031,642       4,667,317       3,942,950
        
Other comprehensive income, net of tax       
Unrealized gains (losses) on available for sale debt securities      
arising during the period, net of tax         118,499          290,912         (470,764)           777,931
Comprehensive income $  2,190,388  $  2,322,554  $   4,196,553  $   4,720,881
        
Earnings per common share - basic and diluted $             0.75  $             0.73  $             1.69  $             1.42

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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