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

Rhea-AI Summary

Calvin B. Taylor Bankshares, Inc. (OTCQX: TYCB) reported a net income of $2.67 million for 3Q21, up from $1.91 million in 3Q20, and $7.34 million for the first nine months, compared to $5.85 million last year. Loan repayments under the PPP totaled $20.6 million in 3Q21. Total assets grew by 30.6% year-over-year to $914 million. Despite strong deposit growth of 35%, the net interest margin decreased to 2.76%. Noninterest income rose 39.8% to $1.03 million in 3Q21, reflecting increased consumer spending.

Positive

• Net income increased by 39.8% year-over-year in 3Q21.
• Total assets rose by 30.6% year-over-year to $914 million.
• Noninterest income increased by 39.8% in 3Q21.
• Annualized loan growth (excluding PPP) was 9.5% since September 30, 2020.

Negative

• Net interest margin decreased to 2.76%, down from 3.12% in 3Q20.
• PPP loans decreased, contributing to lower loan yields.

Berlin, MD, Nov. 03, 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 $2.67 million for the third quarter ended September 30, 2021 (“3Q21”), as compared to $1.91 million for the third quarter ended September 30, 2020 (“3Q20”) and $2.07 million for the second quarter ended June 30, 2021 (“2Q21”).  Net income for the nine months ended September 30, 2021 was $7.34 million, as compared to $5.85 million for the nine months ended September 30, 2020.  Highlights of the company’s financial results are noted below and included in the following tables.

•  Repayments of Paycheck Protection Program (“PPP”) loans by the Small Business Administration (“SBA”) associated with loan forgiveness was $20.6 million in 3Q21 and was partially offset by growth in non-PPP loans of $9.1 million.  Annualized loan growth, excluding PPP loans, was 9.5% since September 30, 2020 and 8.3% since December 31, 2020. 
•  Net interest income increased 17.6% in 3Q21, as compared to 3Q20, as repayment of PPP loans in 3Q21 increased PPP loan interest revenue, including fees, by $715 thousand.  PPP interest revenue, including fees, was $1.7 million for the nine months ended September 30, 2021, as compared to $293 thousand for the nine months ended September 30, 2020.
•  The provision for loan losses in 3Q21 decreased $270 thousand, as compared to 3Q20 and decreased $675 thousand for the nine months ended September 30, 2021, as compared to the same period in 2020 as economic conditions related to the COVID-19 pandemic have improved.
•  Organic asset growth continued in 3Q21 as assets grew to $914.0 million at September 30, 2021, a 30.6% increase compared to September 30, 2020, and annualized growth of 37.9% compared to December 31, 2020.
•  Net interest margin was 2.76% in 3Q21, as compared to 3.12% in 3Q20 and 2.78% in 2Q21. Decreases in net interest margin are attributable to the continued growth in deposits and assets resulting from changes in customer behavior and government economic stimulus programs associated with the COVID-19 pandemic.   

Quarterly Results of Operations

Loan interest revenue, including fees, increased to $5.48 million in 3Q21, as compared to $4.67 million in 3Q20, as the result of continued organic loan growth and repayment 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.  SBA PPP loan interest revenue, including fees, was $852 thousand in 3Q21, as compared to $138 thousand in 3Q20 and $341 thousand in 2Q21.  Unamortized net loan fees related to SBA PPP loans were $994 thousand as of September 30, 2021, as compared to $902 thousand as of September 30, 2020 and $1.75 million as of June 30, 2021.  The yield on loans was 4.81% in 3Q21, as compared to 4.45% in 2Q20 and 4.31% in 2Q21.  The increase in loan yields in 3Q21 is primarily due to the increase in SBA PPP loan interest revenue, including fees, recognized in 3Q21 as a result of SBA PPP loan repayments.    

Net interest income increased to $5.76 million in 3Q21, as compared to $4.89 million in 3Q20 and $5.13 million in 2Q21.  Increases in loan interest revenue related to PPP loans, as noted above, was the primary contributor to the growth in net interest income.  Interest revenue associated with debt securities and other earning assets also increased due to growth in underlying balances.  Interest expense associated with customer deposits is slightly higher in 3Q21 due to growth in the underlying balances.  Net interest margin decreased to 2.76% in 3Q21, as compared to 3.12% in 3Q20 and 2.78% in 2Q21.  Average deposits increased in 3Q21 by $201.8 million, or 35.0%, as compared to 3Q20, and was the primary reason for the decrease in net interest margin.  Net interest margin in 3Q21 was relatively the same as 2Q21 as higher loan interest revenue in 3Q21 offset the increase in average deposits in the same period.                 

A provision for loan losses was not recorded in 3Q21, as compared to $270 thousand recorded in 3Q20.  The resolution of an impaired real estate loan in 3Q21 led to net recoveries of $62 thousand, as compared to net charge offs of $5 thousand recognized in 3Q20.  Government economic stimulus payments, PPP loans, foreclosure moratoriums, and increasing residential real estate prices have mitigated charge offs related to 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 $1.03 million in 3Q21, as compared to $738 thousand in 3Q20 and $785 thousand in 2Q21.  The increase in noninterest income in 3Q21 is primarily related to higher noninterest income from debit card interchange fees and merchant payment processing fees.  The improvements in both revenue sources can be attributed to increased consumer spending as COVID-19 pandemic restrictions were removed and consumers resumed spending. 

Noninterest expense increased to $3.18 million in 3Q21, as compared to $2.83 million in 3Q20, due to higher employee salary and benefits costs and an increase in other operating expenses related to increased charitable donations.  The increases in net interest income and noninterest income exceeded the increases in noninterest expense which resulted in the efficiency ratio decreasing from 50.16% in 3Q20 to 46.81% in 3Q21.  Noninterest expense in 3Q21 was relatively unchanged as compared to 2Q21. 

Net income increased to $2.67 million in 3Q21, as compared to $1.91 million in 3Q20 and $2.07 million in 2Q21.  Sustained growth in deposits in the last 12 months associated with the COVID-19 pandemic resulted in an increase in average assets of 30.6% from 3Q20 to 3Q21.  Net income increased by 39.8% during the same period which resulted in an increase to Return on Average Assets (“ROA”) from 1.14% in 3Q20 to 1.22% in 3Q21.  Return on Average Stockholders’ Equity (“ROE”) increased from 8.18% in 3Q20 to 10.90% in 3Q21 due to an increase in average equity of 5.0%, as compared to a 39.8% increase in net income.  Dividends declared were $0.29 per share in 3Q21 and 3Q20 which resulted in dividend payout ratios of 30.0% for 3Q21 and 42.1% for 3Q20.  

Year to Date Results of Operations

Loan interest revenue, including fees, increased 11.2% to $15.37 million for the nine months ended September 30, 2021, as compared to $13.82 million for the nine months ended September 30, 2020, which is the result of continued organic loan growth and repayment 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 $1.65 million for the nine months ended September 30, 2021, as compared to $293 thousand for the nine months ended September 30, 2020.  

Net interest income increased 7.7% to $15.96 million for the nine months ended September 30, 2021, as compared to $14.81 million for the nine months ended September 30, 2020.  Increases in loan interest revenue, as noted above, were partially offset by lower yields on debt securities and other earning assets as interest rates remain historically low.  Net interest margin decreased to 2.84% for the nine months ended September 30, 2021, as compared to 3.51% for the nine months ended September 30, 2020.  Average deposits for the nine months ended September 30, 2021 increased by $187.2 million, or 36.7%, as compared to the same period in 2020, and was the primary reason for the lower net interest margin.  SBA PPP loan originations, changes in consumer behavior, and additional government economic stimulus payments have contributed to the growth in average deposits.                      

Provision for loan losses was $125 thousand for the nine months ended September 30, 2021, as compared to $800 thousand for the nine months ended September 30, 2020.  Net recoveries were $49 thousand for the nine months ended September 30, 2021, as compared to net recoveries of $34 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 to $3.16 million for the nine months ended September 30, 2021, as compared to $2.10 million for the nine months ended September 30, 2020, and was primarily due to nonrecurring and nontaxable income of $618 thousand recognized in 1Q21 related to income from death proceeds of bank owned life insurance.  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.  The remaining increase in noninterest income was related to a $462 thousand increase in noninterest income from debit card interchange fees and merchant payment processing fees which can be attributed to increased consumer spending as COVID-19 pandemic restrictions were removed and consumers resumed spending.    

Noninterest expense increased from $8.30 million for the nine months ended September 30, 2020 to $9.36 million for the nine months ended September 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 $100 thousand in the nine months ending September 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 nine months ended September 30, 2021 was 49.11%, as compared to 49.54% for same period in 2020.

Net income increased 25.4% to $7.34 million for the nine months ended September 30, 2021, as compared to $5.85 million for the nine months ended September 30, 2020.  Interest revenue from PPP loans and noninterest income from bank owned life insurance, debit card interchange fees, and merchant payment processing fees outpaced growth in noninterest expense resulting in an increase to net income.  Sustained growth in deposits associated with the COVID-19 pandemic resulted in an increase in average assets of 31.5% for the nine months ended September 30, 2021, as compared to the same period in 2020.  Average asset growth outpaced net income growth which resulted in a decrease in ROA from 1.29% for the nine months ended September 30, 2020 to 1.23% for the same period in 2021.  ROE increased from 8.46% for the nine months ended September 30, 2020 to 10.13% for the nine months ended September 30, 2021 due to an increase in average equity of 4.7%, as compared to an increase in net income of 25.4%.  Dividends declared were $0.87 per share in nine months ended September 30, 2021 compared to $0.81 per share for the same period in 2020, an increase of 7.4%.  Dividend payout ratios were 32.8% for the nine months ended September 30, 2021 and 38.4% for the same period in 2020. 

Financial Condition

Total assets were $914.0 million as of September 30, 2021, as compared to $699.8 million as of September 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 $807.9 million as of September 30, 2021, as compared to $603.3 million as of September 30, 2020 and $614.4 million as of December 31, 2020.  Total loans as of September 30, 2021 were $445.8 million, as compared to $419.9 million as of September 30, 2020 which represents growth of $25.9 million, or 6.2%.  The growth in loans since September 30, 2020 is attributable to $36.5 of organic loan growth attributable to strong commercial and residential real estate loan demand in our markets.  This growth was offset by a $10.6 million decrease in PPP loans in the last 12 months as a result of ongoing repayments by the SBA as customers receive forgiveness of their PPP loans.  Loans increased $22.4 million since December 31, 2020 which can be attributed to $24.9 million of continued organic loan growth that was partially offset by $2.5 million decrease in PPP loans.  PPP loans, net of unamortized loans fees, were $21.7 million as of September 30, 2021, as compared to $32.3 million as of September 30, 2020 and $24.2 million as of December 31, 2020.  The loans to deposits ratio as of September 30, 2021 was 55.2%, as compared to 69.6% as of September 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 September 30, 2021, loans past due 30 days or more totaled $1.66 million which includes $511 thousand of loans that previously received temporary payment deferral. 

Average assets grew by 31.5% to $796.0 million for the nine months ended September 30, 2021, as compared to $605.3 million for the nine months ended September 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 36.7% for the nine months ended September 30, 2021, as compared to same period in 2020, while average loans grew by 13.7%.  Average loans increased $54.4 million and were $451.0 million for the nine months ended September 30, 2021, as compared to $396.5 million for the nine months ended September 30, 2020.  SBA PPP loans contributed to $36.0 million of the increase in average loans while the remaining $18.4 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 64.7% for the nine months ended September 30, 2021, as compared to 77.7% 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				Nine Months Ended
	Sept 30,		%		Sept 30,		%
Results of Operations	2021	2020	Change		2021	2020	Change
Net interest income	$5,756,531	$4,894,391	17.6%		$15,959,097	$14,814,005	7.7%
Provision for loan losses	$-	$270,000	-100.0%		$125,000	$800,000	-84.4%
Noninterest income	$1,031,696	$737,724	39.8%		$3,161,227	$2,098,600	50.6%
Noninterest expense	$3,178,125	$2,825,185	12.5%		$9,362,405	$8,302,225	12.8%
Net income	$2,672,602	$1,911,430	39.8%		$7,339,919	$5,854,380	25.4%
Net income per share	$0.97	$0.69	40.2%		$2.65	$2.11	25.7%
Dividend per share	$0.29	$0.29	0.0%		$0.87	$0.81	7.4%
Dividend payout ratio	30.00%	42.08%			32.78%	38.38%
Average assets	$879,324,606	$673,207,091	30.6%		$796,032,921	$605,281,271	31.5%
Average loans	$452,592,856	$417,610,324	8.4%		$450,975,929	$396,542,894	13.7%
Average deposits	$778,277,360	$576,478,199	35.0%		$697,311,266	$510,090,005	36.7%
Average loans to average deposits	58.15%	72.44%			64.67%	77.74%
Average stockholders' equity	$98,077,512	$93,422,435	5.0%		$96,597,763	$92,217,443	4.7%
Average stockholders' equity to average assets	11.15%	13.88%			12.13%	15.24%
Ratios
Net interest margin	2.76%	3.12%			2.84%	3.51%
Return on average assets	1.22%	1.14%			1.23%	1.29%
Return on average stockholders' equity	10.90%	8.18%			10.13%	8.46%
Efficiency ratio	46.81%	50.16%			49.11%	49.54%
Stock Repurchased
Number of shares	288	-	-		7,768	1,294	500.3%
Repurchase amount	$10,008	$-	-		$263,580	$39,404	568.9%
Average price per share	$34.75	$-	-		$33.93	$30.45	11.4%
	Sept 30,	Sept 30,	%		Sept 30,	December 31,	% Change
Financial Condition	2021	2020	Change		2021	2020	Annualized
Assets	$914,014,070	$699,803,647	30.6%		$914,014,070	$711,791,004	37.9%
Loans	$445,837,961	$419,855,455	6.2%		$445,837,961	$423,467,766	7.0%
Deposits	$807,902,713	$603,337,234	33.9%		$807,902,713	$614,437,080	42.0%
Stockholders' equity	$98,753,483	$94,276,510	4.7%		$98,753,483	$94,785,130	5.6%
Common stock - shares outstanding	2,765,164	2,773,632	-0.3%		2,765,164	2,772,932	-0.4%
Book value per share	$35.71	$33.99	5.1%		$35.71	$34.18	6.0%
Loans to deposits	55.18%	69.59%			55.18%	68.92%
Equity to assets	10.80%	13.47%			10.80%	13.32%

Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Balance Sheets
	(unaudited)				(unaudited)
	Sept 30,		December 31,		Sept 30,
	2021		2020		2020
Assets
Cash and cash equivalents
Cash and due from banks	$16,926,370		$14,398,578		$11,708,285
Federal funds sold and interest bearing deposits	285,246,313		156,706,746		150,087,731
Total cash and cash equivalents	302,172,683		171,105,324		161,796,016
Time deposits in other financial institutions	5,479,633		8,733,754		13,037,522
Debt securities available for sale, at fair value	124,857,941		72,166,997		65,016,339
Debt securities held to maturity, at amortized cost	3,003,102		5,994,955		9,485,601
Equity securities, at cost	1,103,733		1,240,233		1,240,233
Loans	445,837,961		423,467,766		419,855,455
Less: allowance for loan losses	(2,010,014)		(1,836,451)		(1,687,175)
Net loans	443,827,947		421,631,315		418,168,280
Accrued interest receivable	1,760,744		2,402,222		3,114,471
Prepaid expenses	571,414		612,188		497,091
Other real estate owned	-		-		-
Premises and equipment, net	12,509,904		12,951,511		12,971,768
Computer software	361,781		389,236		340,648
Bank owned life insurance	18,094,883		13,405,779		13,291,112
SBA PPP loan fee receivable	-		8,819		-
Other assets	270,305		1,148,671		844,566
Total assets	$914,014,070		$711,791,004		$699,803,647
Liabilities and Stockholders' Equity
Deposits
Non-interest bearing	$306,704,120		$211,945,179		$223,337,161
Interest bearing	501,198,593		402,491,901		380,000,073
Total deposits	807,902,713		614,437,080		603,337,234
Accrued interest payable	26,830		26,837		26,481
Dividends payable	801,898		804,150		804,353
Accrued expenses	170,805		602,027		180,687
Non-qualified deferred compensation	613,558		485,626		433,836
Deferred income taxes	369,778		601,057		687,551
Debt securities payable	5,331,629		-		-
Other liabilities	43,376		49,097		56,994
Total liabilities	815,260,587		617,005,874		605,527,136
Stockholders' equity
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued and outstanding	2,765,164		2,772,932		2,773,632
Additional paid-in capital	2,552,383		2,808,195		2,831,428
Retained earnings	93,330,860		88,396,800		87,787,316
Accumulated other comprehensive income, net of tax	105,076		807,203		884,134
Total stockholders' equity	98,753,483		94,785,130		94,276,510
Total liabilities and stockholders' equity	$914,014,070		$711,791,004		$699,803,646

Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income (unaudited)
	For the three months ended				For the nine months ended
	Sept 30, 2021		Sept 30, 2020		Sept 30, 2021		Sept 30, 2020
Interest revenue
Loans, including fees	$5,484,703		$4,674,123		$15,372,539		$13,821,231
U. S. Treasury and government agency debt securities	82,775		118,939		209,008		389,580
Mortgage-backed debt securities	220,186		118,299		509,609		435,413
State and municipal debt securities	48,488		54,925		146,997		162,216
Federal funds sold and interest bearing deposits	89,139		29,614		178,271		205,516
Time deposits in other financial institutions	29,736		78,277		115,040		317,133
Total interest revenue	5,955,027		5,074,177		16,531,464		15,331,089
Interest expense
Deposits	198,496		179,786		572,367		517,084
Net interest income	5,756,531		4,894,391		15,959,097		14,814,005
Provision for loan losses	-		270,000		125,000		800,000
Net interest income after provision for loan losses	5,756,531		4,624,391		15,834,097		14,014,005
Noninterest income
Debit card and ATM	368,898		296,046		1,043,124		765,213
Service charges on deposit accounts	198,770		157,140		555,125		484,404
Merchant payment processing	292,276		113,324		364,532		180,842
Increase in cash surrender value of life insurance	97,270		87,702		283,028		229,382
Income from bank owned life insurance death proceeds	-		-		618,463		-
Dividends	3,247		5,344		17,966	-	24,611
Gain (loss) on disposition of debt securities	(476)		-		56,325		155,313
Gain (loss) on disposition of fixed assets	(3,175)		-		(10,689)		1,400
Miscellaneous	74,886		78,168		233,353		257,435
Total noninterest income	1,031,696		737,724		3,161,227		2,098,600
Noninterest expenses
Salaries	1,361,965		1,278,112		3,982,788		3,537,224
Employee benefits	353,056		308,728		1,201,892		1,109,521
Occupancy	237,596		232,573		687,456		621,480
Furniture and equipment	188,562		179,118		589,406		517,378
Data processing	189,970		146,294		549,467		409,542
ATM and debit card	146,410		112,627		388,496		325,183
Marketing	77,327		118,018		198,272		276,896
Directors fees	82,350		78,200		243,550		239,850
Telecommunication services	82,867		81,561		246,553		239,962
Deposit insurance premiums	63,337		57,375		157,006		57,375
Other operating	394,685		232,579		1,117,519		967,814
Total noninterest expenses	3,178,125		2,825,185		9,362,405		8,302,225
Income before income taxes	3,610,102		2,536,930		9,632,919		7,810,380
Income taxes	937,500		625,500		2,293,000		1,956,000
Net income	2,672,602		1,911,430		7,339,919		5,854,380
Other comprehensive income, net of tax
Unrealized gains (losses) on available for sale debt
securities arising during the period, net of tax	(231,363)		(62,076)		(702,127)		715,855
Comprehensive income	$2,441,239		$1,849,354		$6,637,792		$6,570,235
Earnings per common share - basic and diluted	$0.97		$0.69		$2.65		$2.11

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, Senior Vice President and Chief Financial Officer
410-641-1700, taylorbank.com

FAQ

What were the earnings results for TYCB in 3Q21?

Calvin B. Taylor Bankshares reported a net income of $2.67 million for 3Q21.

How did TYCB's net income for the first nine months of 2021 compare to last year?

Net income for the first nine months of 2021 was $7.34 million, compared to $5.85 million in the same period last year.

What is the current asset growth for Calvin B. Taylor Bankshares?

Total assets grew by 30.6% year-over-year to $914 million as of September 30, 2021.

How did the net interest margin for TYCB change in 3Q21?

The net interest margin decreased to 2.76% in 3Q21, down from 3.12% in 3Q20.

What factors contributed to the increase in noninterest income for TYCB?

Noninterest income rose by 39.8% in 3Q21, primarily due to increased consumer spending.