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

Rhea-AI Summary

Calvin B. Taylor Bankshares, Inc. (OTCQX: TYCB) reported a net income of $2.07 million for Q2 2021, a 2% increase year-over-year but a decrease from $2.60 million in Q1 2021. For the first half of 2021, net income reached $4.67 million, up from $3.94 million in the same period of 2020. The provision for loan losses decreased significantly, reflecting improved economic conditions due to COVID-19. Total assets grew by 30.1% year-over-year to $839 million, driven by organic loan growth despite the impact of PPP loan repayments.

Positive

• Net income for Q2 2021 increased 2% year-over-year to $2.07 million.
• Total assets grew 30.1% year-over-year to $839 million.
• Loan interest revenue increased to $4.93 million in Q2 2021 from $4.64 million in Q2 2020.

Negative

• Net interest margin decreased to 2.78% in Q2 2021 from 3.58% in Q2 2020.
• Return on Assets (ROA) decreased from 1.36% in Q2 2020 to 1.06% in Q2 2021.

Berlin, Maryland, Aug. 02, 2021 (GLOBE NEWSWIRE) -- via NewMediaWire -- 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 Operations	2021	2020	Change		2021	2020	Change
Net interest income	$        5,126,373	$        4,956,062	3.4%		$     10,202,566	$        9,919,614	2.9%
Provision for loan losses	$                       -	$           310,000	-100.0%		$           125,000	$           530,000	-76.4%
Noninterest income	$           784,970	$           755,726	3.9%		$        2,129,531	$        1,360,876	56.5%
Noninterest expense	$        3,143,954	$        2,690,146	16.9%		$        6,184,280	$        5,477,040	12.9%
Net income	$        2,071,889	$        2,031,642	2.0%		$        4,667,317	$        3,942,950	18.4%
Net income per share	$                  0.75	$                  0.73	2.3%		$                  1.69	$                  1.42	18.6%
Dividend per share	$                  0.29	$                  0.26	11.5%		$                  0.58	$                  0.52	11.5%
Dividend payout ratio	38.71%	35.50%			34.37%	36.58%
Average assets	$   785,085,477	$   598,105,213	31.3%		$   754,970,089	$   571,318,361	32.1%
Average loans	$   459,147,814	$   402,111,052	14.2%		$   449,950,541	$   386,009,179	16.6%
Average deposits	$   687,038,885	$   502,798,635	36.6%		$   656,712,880	$   477,315,335	37.6%
Average loans to average deposits	66.83%	79.97%			68.52%	80.87%
Average stockholders' equity	$     96,562,487	$     92,206,259	4.7%		$     96,168,130	$     91,614,947	5.0%
Average stockholders' equity to average assets	12.30%	15.42%			12.74%	16.04%
Ratios
Net interest margin	2.78%	3.58%			2.88%	3.74%
Return on average assets	1.06%	1.36%			1.24%	1.38%
Return on average stockholders' equity	8.58%	8.81%			9.71%	8.61%
Efficiency ratio	53.15%	48.23%			50.38%	49.23%
Stock Repurchased
Number of shares	-	914	-100.0%		7,480	1,294	478.1%
Repurchase amount	$                       -	$             27,396	-100.0%		$           253,572	$             39,404	543.5%
Average price per share	$                       -	$                29.97	-100.0%		$                33.90	$                30.45	11.3%
	June 30,	June 30,			June 30,	December 31,	% Change
Financial Condition	2021	2020	% Change		2021	2020	Annualized
Assets	$   839,010,222	$   644,666,536	30.1%		$   839,010,222	$   711,791,004	35.7%
Loans	$   457,348,554	$   421,087,244	8.6%		$   457,348,554	$   423,467,766	16.0%
Deposits	$   739,844,239	$   548,275,849	34.9%		$   739,844,239	$   614,437,080	40.8%
Stockholders' equity	$     97,124,149	$     93,231,411	4.2%		$     97,124,149	$     94,785,130	4.9%
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	$                33.61	4.5%		$                35.12	$                34.18	5.5%
Loans to deposits	61.82%	76.80%			61.82%	68.92%
Equity to assets	11.58%	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

FAQ

What is the net income reported by TYCB for Q2 2021?

Calvin B. Taylor Bankshares, Inc. reported a net income of $2.07 million for Q2 2021.

How did TYCB's total assets change in Q2 2021?

Total assets increased by 30.1% year-over-year to $839 million as of June 30, 2021.

What was TYCB's net interest margin in Q2 2021?

The net interest margin decreased to 2.78% in Q2 2021.

What is the year-over-year growth rate of TYCB's loan interest revenue?

Loan interest revenue increased to $4.93 million in Q2 2021, up from $4.64 million in Q2 2020.

How much net income did TYCB report for the first half of 2021?

For the first half of 2021, TYCB reported a net income of $4.67 million.