Calvin B. Taylor Bankshares, Inc. Reports First Quarter 2024 Financial Results

BERLIN, MD / ACCESSWIRE / June 29, 2024 / Calvin B. Taylor Bankshares, Inc. (the "Company") (OTCQX:TYCB), the holding company of Calvin B. Taylor Bank (the "Bank"), today reported unaudited financial results for the first quarter ended March 31, 2024. Highlights of the Company's financial results are noted below.

• Return on Average Assets was 1.38% for the 1^st quarter of 2024 compared to 1.49% for 1^st quarter of 2023 and 1.25% for the 4^th quarter of 2023

• Quarterly net income decreased $358 thousand, or 10.8%, to $2.97 million for the 1^st quarter of 2024 as compared to the 1^st quarter of 2023 and increased $232 thousand, or 8.5%, compared to the 4^th quarter of 2023.

• Net interest income decreased by $564 thousand, or 7.6%, in the 1^st quarter of 2024 as compared to the same quarter in 2023 and decreased by $721 thousand, or 9.5%, compared to the previous quarter.

• The cost of interest-bearing deposits increased to 1.82% in the 1^st quarter of 2024 as compared to 0.88% in the 1^st quarter of 2023 and 1.38% in the 4^th quarter of 2023.

• Following several years of significant growth, deposits decreased by $35.1 million, or 4.5%, in the previous 12 months which resulted in total assets decreasing by $27.4 million, or 3.1%, since March 31, 2023.

• Deposits increased by $10.4 million, or 1.4%, since December 31, 2023 as a result of a $27.5 million increase in time deposits resulting from featured terms and rates offered to customers.

• Organic loan growth continued in the 1^st quarter of 2024 with loans growing $20.1 million, or 3.5%, since December 31, 2023. Loans have increased $49.0 million, or 9.0%, in the twelve months ended March 31, 2024.

• On-balance sheet liquidity, as measured by cash and unencumbered available for sale debt securities, remains strong as of March 31, 2024 and equaled 23.3% of total deposits.

"The first quarter growth in loans and deposits is a great accomplishment for our team in the current interest rate environment. We continue to deliver products, services and customer service with local bankers which is highly valued by customers and prospects. Our strong liquidity position allows us to be flexible and competitive in funding loan growth and meeting the demand for credit in the markets we serve", commented President and Chief Executive Officer Raymond M. Thompson.

Quarterly Results of Operations

Quarterly net income was $2.97 million for the first quarter ended March 31, 2024 ("1Q24"), as compared to $3.33 million for the first quarter ended March 31, 2023 ("1Q23") and $2.74 million for the fourth quarter ended December 31, 2023 ("4Q23"). A summary of the quarterly results of operations are included in the table and comments that follow.

Net interest income decreased $564 thousand, or 7.6%, in 1Q24, as compared to 1Q23, which is attributable to higher deposit interest expense. The Federal Reserve Bank increased the federal funds rate to over 5.0% in 2023 which has increased the cost of interest-bearing deposits from 0.9% in 1Q23 to 1.8% in 1Q24. The Bank increased deposit rates over the last 12 months to remain competitive in local markets and to preserve on-balance sheet liquidity. Depositors have moved funds into interest-bearing accounts including featured terms and rates offered on time deposits which resulted in an increase of $58.1 million in time deposits since March 31, 2023. Loan growth and increases in loan yields increased interest revenue from loans in 1Q24 by 23.5%, as compared to 1Q23, which partially offset the higher deposit interest expense. Net interest income decreased $721 thousand, or 9.5%, in 1Q24, as compared to the prior quarter, due to higher deposit interest expense resulting from migration of deposits into higher yielding money market and time deposit products. Yields on earning-assets increased to 4.52% in 1Q24, as compared to 4.06% in 1Q23, and 4.43% in the prior quarter.

On January 1, 2023 the Company adopted the current expected credit losses ("CECL") model pursuant to ASU 2016-13. The estimate of expected credit losses considers historical information, current information, and supportable forecasts, including estimates of prepayments. The provision for credit losses of $475 thousand recorded in 1Q24 was primarily the result of aging of the loan portfolio and increases in lines of credit related to seasonal borrowings and was not related to charge-offs. No significant changes in the economic indicators and related forecasts utilized in the CECL model occurred in 1Q24. The provision for credit losses of $180 thousand recorded in 1Q23 was related to growth in the loan portfolio during the same period. The negative provision for credit losses of $60 thousand recorded in 4Q23 was primarily the result of improvement in loan risk ratings within the loan portfolio. The allowance for credit losses increased to 0.63% of total loans as of March 31, 2024, as compared to 0.60% and 0.56% as of March 31, 2023 and December 31, 2023, respectively.

Noninterest income increased in 1Q24 by $375 thousand, or 47.1%, as compared to 1Q23, due to a $793 thousand increase in income from death proceeds of bank owned life insurance policies. No income was recognized in 1Q23 related to death proceeds of bank owned life insurance policies. The income from death proceeds of bank owned life insurance policies in 1Q24 was partially offset by realized losses on sale of debt securities of $369 thousand in the same period. The realized losses relate to restructuring of the debt securities portfolio to sell lower-yielding securities and purchase new securities at substantially higher yields to maximize future interest revenue. Noninterest income increased in 1Q24 by $819 thousand or 230.9%, as compared to the previous quarter, due to a $793 thousand increase in income from death proceeds of bank owned life insurance policies. No income was recognized in 4Q23 related to death proceeds of bank owned life insurance policies.

Current quarter noninterest expense increased by $282 thousand or 7.7%, as compared to 1Q23, and is a result of increases in both employee salaries and marketing expenses. Salaries expense increased $182 thousand, or 12.1%, which is attributable to the fulfillment of open positions and higher salaries paid to remain competitive in the current labor market. Marketing expenses increased $62 thousand, or 47.9%, in 1Q24, as compared to 1Q23, which relates to timing and scope of marketing campaigns.

Noninterest expense decreased in 1Q24 by $610 thousand, or 13.4%, as compared to 4Q23, which primarily relates to higher salaries and benefits expense associated with yearend bonuses and 401K profit sharing contributions recorded in 4Q23. Salaries expense decreased in 1Q24 by $375 thousand, or 18.2%, compared to the prior quarter. Employee health insurance is provided through a partially self-funded plan and claims incurred by the plan were higher in 4Q23, as compared to 1Q24, resulting in a decrease in expense by $299 thousand, or 38.5%.

Quarterly per share data and repurchases of stock by the Company for each period is included in the following table. The stock repurchase plan previously adopted by the Board of Directors remains in place and has 53,436 shares available to be repurchased as of March 31, 2024. The amount and timing of future stock repurchases will depend upon several factors including regulatory capital requirements, market value of the Company's stock, general market and economic conditions, liquidity, and other relevant considerations, as determined by the Company.

Financial Condition

Recent disruption in the banking industry has highlighted the importance of deposit insurance, core deposits, liquidity and capital. The Company relies mostly on core deposits, as defined by bank regulators, which are gathered from customers in local markets. The Company and the Bank remain well-capitalized according to regulatory capital standards and exceed the threshold to be considered well-capitalized (Community Bank Leverage Ratio) by 51% as of March 31, 2024. The Company's financial condition at quarter end is summarized in the table and comments that follow.

Following several years of significant growth, deposits decreased by $35.1 million, or 4.5%, in the previous 12 months which resulted in total assets decreasing by $27.4 million, or 3.1% since March 31, 2023. Significant increases in short term interest rates have encourage certain depositors to invest excess cash into short term government bonds resulting in a decrease in deposits. During the first quarter of 2024, deposits increased by $10.4 million, or 1.4%, as a result of a $27.5 million increase in time deposits resulting from featured terms and rates offered to customers. Decreases in other deposits during 1Q24 were primarily related to seasonal deposit outflows. The Bank operates with a high level of core deposits. Core deposits are defined by banking regulators as checking, money market, and savings accounts plus any time deposits less than $250,000. Bank failures in the previous 12 months have increased the focus on concentrations of uninsured deposits. All deposit accounts with a balance in excess of the FDIC insurance limit of $250,000 are disclosed on quarterly regulatory reports filed with bank regulators. As of March 31, 2024, the Bank had deposit accounts with balances in excess of $250,000 totaling $173.5 million which represents 23.0% of total deposits. The Bank is a member of the IntraFi Network which enables large depositors with access to multi-million dollar FDIC insurance for funds placed into the network and provides an equal amount of reciprocal deposits under FDIC insurance limits to the bank. Bank failures in the last 12 months have led to an increase in usage of the IntraFi Network by existing and new customers. Reciprocal deposits from the IntraFi Network increased by 39.0% to $130.6 million as of March 31, 2024, as compared to $93.9 million as of March 31, 2023.

On-balance sheet liquidity, as measured by cash and unencumbered available for sale debt securities, remained strong as of March 31, 2024 and equaled 23.3% of total deposits. Selected liquidity metrics are summarized in the table below.

Noncore funding sources including Federal Home Loan Bank ("FHLB") borrowings and brokered deposits are readily available to the Bank but are intended for contingency funding needs and not to pursue growth. As of March 31, 2024, the Bank has the ability to borrow up to $212.9 million from the FHLB that would require pledging of loans and/or debt securities as collateral. Debt securities currently pledged are related to FHLB Letters of Credit used to collateralize public deposits. As of March 31, 2024 the Bank had $1.5 million of brokered deposits which were obtained through the IntraFi Network and were utilized for seasonal liquidity needs.

Loans and Asset Quality

Higher interest rates, economic uncertainty and other factors have impacted current loan demand as compared to demand experienced in the previous 12 months. Conversely, funding of previously committed construction loans, localized demand for commercial real estate loans, and seasonal borrowings during 1Q24 resulted in continued organic loan growth with loans increasing $20.1 million, or 3.5%, since December 31, 2023. Loan growth of $49.0 million, or 9.0%, in the previous 12 months was the result of strong demand for local real estate and construction of both residential and commercial properties. Growth in the loan portfolio during the rising interest rate environment over the last 12 months along with variable rate loans within the portfolio has expanded the yield on loans from 4.73% in 1Q23 to 5.18% in 1Q24. Loan yields increased 10 bps in 1Q24 as compared to 4Q23.

Loan performance has remained strong over the past 12 months as local economic conditions have remained stable. Inflation and higher interest rates have not resulted in a deterioration of credit quality as of March 31, 2024. Past due loans have increased slightly and were 0.63% of total loans as of March 31, 2024, as compared to 0.45% as of December 31, 2023 and 0.20% as of March 31, 2023. Past due loans as of March 31, 2024 primarily consist of loans secured by residential real estate with balances less than $300,000 and are well secured. Selected asset quality metrics are summarized in the table below.

Financial Statements
Consolidated balance sheets at quarter end and consolidated income statements for the quarters ended are presented below.

Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Balance Sheets

Calvin B. Taylor Bankshares, Inc. and Subsidiary
Consolidated Statements of Income

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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 on the Delmarva Peninsula including Worcester County, Maryland, Wicomico County, Maryland, Sussex County, Delaware and Accomack County, Virginia.

Contact
M. Dean Lewis, Executive Vice President and Chief Financial Officer
410-641-1700, taylorbank.com

SOURCE: Calvin B. Taylor Bankshares, Inc.

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