Calvin B. Taylor Bankshares, Inc. Reports 2024 Third Quarter and Year to Date Financial Results | TYCB Stock News

12/26/2024 – 04:15 PM

BERLIN, MD / ACCESSWIRE / December 26, 2024 / Calvin B. Taylor Bankshares, Inc. (the “Company”) (OTCQX:TYCB), the holding company of Calvin B. Taylor Bank (the “Bank”), today reported net income for the third quarter 2024 (“3Q24”) of $3.7 million, or $1.37 per share compared to net income of $2.8 million, or $1.03 per share for the second quarter of 2024 (“2Q24), and net income of $4.1 million, or $1.50 per share for the third quarter of 2023 (“3Q23”). Net income for the nine months ended September 30, 2024 was $9.5 million or $3.47 per share, compared to net income for the nine months ended September 30, 2023 of $10.7 million, or $3.90 per share.

2024 Third Quarter and Year to Date Highlights

• Return on Average Assets (“ROAA”) – The Company reported ROAA of 1.59% for the third quarter of 2024, compared to 1.29% for the second quarter of 2024 and 1.81% for the third quarter of 2023.

• Net Interest Margin Expansion – Net interest margin (“NIM”) increased to 3.58% for the third quarter of 2024 from 3.48% for the second quarter of 2024. The NIM expansion experienced in the third quarter 2024 was primarily the result of an improvement in the average yield of total interest-earning assets of 8 bps coupled with higher average balances in noninterest-bearing deposits which reduced total funding costs by 3 bps.

• Significant Deposit Growth and Stable Low-Cost Funding – Total deposits increased $56.0 million, or 7.1%, when compared to June 30, 2024 and $98.5 million, or 13.2%, when compared to December 31, 2023. The increase in deposits for the third quarter 2024 when compared to the second quarter 2024 was driven by increases in noninterest-bearing deposits of $26.7 million, or 11.1%, and Interest-bearing deposits of $29.3 million, or 5.4%, for the same period. These increases were the result of initiatives to gather low-cost deposits, normal seasonal inflows, and featured terms and rates offered to customers on time deposits.

• Strong Operating Leverage – The reported efficiency ratio for the third quarter of 2024 was 46.6%, compared to 50.6% for the second quarter of 2024 and 41.2% for the third quarter of 2023.

• Core System Conversion Update – The Company has been diligently working on upgrading its core banking system which is scheduled to be finalized in the 4^th quarter this year. This core system upgrade will greatly benefit our customers with additional functions and features while creating operational efficiencies within our branches, digital banking, lending and other supporting functions.

“We are pleased to report strong financial results for the third quarter and year to date thru September,” commented President and Chief Executive Officer Raymond M. Thompson. “We continue to make great strides at sourcing low-cost deposits thus adding liquidity to our balance sheet as the local tourism economy enters its offseason. We remain disciplined on our lending opportunities and continue to transition lower-yielding assets for higher yielding assets to improve net interest income and net operating margin. Our core system conversion and new branch in Cape Charles, VA, remain our top priorities and on schedule.”

Quarterly Results of Operations

Quarterly net income was $3.7 million for 3Q24, as compared to $2.8 million for 2Q24 and $4.1 million for 3Q23. A summary of the quarterly results of operations are included in the table and comments below.

Net interest income in 3Q24 increased $932 thousand, or 12.9%, as compared to 2Q24, primarily due to an increase in interest earned on interest-bearing deposits with other banks of $941 thousand, partially offset by higher interest expense on deposits of $150 thousand, both the result of significant seasonal deposit growth and increased liquidity during the quarter. Net interest income in 3Q24 increased $124 thousand, or 1.5%, as compared to 3Q23, due to increases in interest income on loans of $1.2 million and on interest-bearing deposits with other banks of $116 thousand, and almost entirely offset by an increase in deposit interest expense of $1.1 million.

The allowance for credit losses was 0.63% of total loans, which was unchanged compared to 2Q24 and 3Q23. No significant changes in the economic indicators and related forecasts utilized in the CECL model occurred in 3Q24. There was no provision for credit losses recorded for 3Q24, compared to $75 thousand recorded for 2Q24 and a reversal of provision for credit losses of $80 thousand for 3Q23. The decrease in provision for credit losses when compared to 2Q24 was due to a decrease in total loans related to seasonal line of credit repayments. The reversal of provision for credit losses in 3Q23 was the result of a loan recovery recorded during the same period.

Noninterest income increased in 3Q24 by $417 thousand, or 80.3%, as compared to 2Q24, due to the absence of losses experienced in the second quarter related to restructuring certain bank owned life insurance (“BOLI”) policies and consumer check fraud. The restructuring of certain BOLI policies in 2Q24 resulted in one-time losses of $171 thousand in 2Q24 as the Company sought to maximize yields on these investments in future periods. Losses from consumer check fraud were reduced by $124 thousand in 3Q24 when compared to 2Q24 and remain a top priority with enhanced monitoring and prevention. Compared to 3Q23, noninterest income increased $30 thousand, or 3.4%, in the current quarter and is primarily attributable to higher income from BOLI policies and the absence of losses realized in 3Q23 from restructuring of the bond portfolio, partially offset by lower fees earned on other banking services.

Current quarter noninterest expense increased by $323 thousand or 8.3%, as compared to 2Q24, and was primarily attributed to an increase in the combined salaries and employee benefits expense of $286 thousand. Higher health insurance claims in the current quarter contributed to $206 thousand of the increase in the combined salaries and employee benefits expense. Noninterest expense increased in 3Q24 by $522 thousand, or 14.1%, as compared to the 3Q23, and was primarily attributed to an increase in the combined salaries and employee benefits expense of $504 thousand. The higher salaries and employee benefits expense in 3Q24 when compared to the linked quarter are the result of compensation and wage adjustments implemented in 2024 based on compensation studies to retain and attract talented employees to remain competitive in the financial industry. Higher health insurance claims in the current quarter contributed to $225 thousand of the increase in the combined salaries and employees benefit expense.

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 as of September 30, 2024 has 26,078 shares available to be repurchased.

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.

Year to Date Results of Operations

Net income was $9.5 million for the nine months ended September 30, 2024 as compared to $10.7 million for the nine months ended September 30, 2023, a decrease of $1.2 million, or 11.3%. A summary of the year to date results of operations are included in the table and comments below.

Net interest income decreased $655 thousand, or 2.9%, for the nine months ended September 30, 2024, as compared to same period last year, and was attributable to increases in deposit costs outpacing growth in interest income from earning assets. Deposit costs increased $3.5 million, or 86.3%, over the prior year while interest income increased $2.9 million, or 10.6%, in the same period. Costs of interest-bearing deposits increased 85 bps in the nine months ended September 30, 2024, as compared the same period in the prior year. Organic loan growth combined with higher yields enhanced interest income from loans by $3.8 million, or 19.2%, for the nine months ended September 30, 2024, as compared to nine months ended September 30, 2023. Loan yields have increased 45 bps in the previous 12 months due to higher interest rates on new loan originations. Average loan balances increased $39.5 million, or 7.1%, since September 30, 2023 and the growth was primarily funded by decreases in debt securities and growth in deposits, in the same period. Interest income from debt securities and fed funds sold decreased by $957 thousand, in the same period, as the result of lower balances in debt securities and the Federal Reserve rate cut of 50bps on September 18, 2024.

The allowance for credit losses was 0.63% of total loans as of September 30, 2024, which is relatively unchanged compared to September 30, 2023. The provision for credit losses recorded in the nine months ended September 30, 2024 of $550 thousand was related to growth in the loan portfolio during the same period and not the result of loan charge-offs. No significant changes in the economic indicators and related forecasts utilized in the CECL model occurred in 2024. The provision for credit losses of $340 thousand recorded in the nine months ended September 30, 2023 was related to growth in the loan portfolio during the same period and not the result of loan charge-offs.

Noninterest income for the nine months ended September 30, 2024 increased by $204 thousand, or 8.4%, as compared to the nine months ended September 30, 2023, primarily due to a $728 thousand increase in income from BOLI. Nonrecurring income of $784 thousand was recognized in the first quarter of 2024 related to death proceeds from BOLI. Other sources of noninterest income decreased compared to the prior year partially offsetting the increase in BOLI income and included losses from the disposition of debt securities of $228 thousand and losses from check fraud of $110 thousand. Restructuring of the debt securities portfolio in 2024 resulted in the sale of lower-yielding debt securities at a loss so proceeds could be reinvested into new securities or fund loans at substantially higher yields to maximize future interest revenue.

Noninterest expense for the nine months ended September 30, 2024 increased $1.0 million, or 9.3% as compared to the same period in 2023, and is the result of a $665 thousand, or 14.3%, increase in employee salaries expense and $145 thousand, or 9.8% increase in employee benefits. Higher salaries expense relates to the fulfillment of open positions and compensation wage adjustments paid during 2024 to remain competitive in the current labor market. Employee health insurance is provided through a partially self-funded plan and year to date claims incurred by the plan were higher in 2024, which had the most significant impact on employee benefits. Additionally, employment taxes on a higher wage base resulting from the wage adjustments and fulfillment of open positions was a contributing factor in higher employee benefits expense. Other operating costs increased by $151 thousand, or 9.4%, which primarily relate to increases in professional fees and charitable donations.

Per share data and repurchases of stock by the Company for each period is included in the following table.

Financial Condition

The Company relies predominately 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 as of September 30, 2024 the Tier 1 capital of the Company exceeded the threshold to be considered well-capitalized (Community Bank Leverage Ratio) by $37.4 million, or 42.9%. The Company’s financial condition at quarter end is summarized in the table and comments below.

Short term interest rates have remained elevated in the last 12 months which encouraged certain depositors to invest excess cash into short term government bonds or other high-yield investments. The Company has been able to offset the outflow of these deposits by growing core deposits and has not relied on brokered deposits or short-term borrowings for funding. During the nine months ended September 30, 2024, deposits increased by $98.5 million, or 13.2%, consisting of $42.0 million in time deposits, $41.1 million in noninterest-bearing deposits, $14.4 million in ICS deposits, and $9.9 million in money market deposits, partially offset by a decrease in savings accounts of $8.6 million. 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 thousand. All deposit accounts with a balance in excess of the FDIC insurance limit of $250 thousand are disclosed on quarterly regulatory reports filed with bank regulators. As of September 30, 2024, the Bank had deposit accounts with balances in excess of $250 thousand totaling $233.2 million which represents 27.7% of total deposits. The Bank is a member of the IntraFi Network which enables large depositor’s access to multimillion-dollar FDIC insurance for funds placed into the network and provides an equal amount of reciprocal deposits under FDIC insurance limits to the bank. Recent events in the banking industry led to an increase in usage of the IntraFi Network by both commercial and consumer customers. Reciprocal deposits from the IntraFi Network increased by 29.5% to $122.2 million as of September 30, 2024, as compared to $94.4 million as of September 30, 2023.

On-balance sheet liquidity, as measured by cash and unencumbered available for sale debt securities, remains strong as of September 30, 2024 and equaled 32.7% 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 only and not to pursue growth. As of September 30, 2024, the Bank has the ability to borrow up to $207.2 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.

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 the nine months ended September 30, 2024 resulted in continued organic loan growth with loans increasing $17.8 million, or 3.1%, since December 31, 2023. Loan growth of $38.1 million, or 6.9%, 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 have expanded the yield on loans from 4.93% in 3Q23 to 5.38% in 3Q24.

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 September 30, 2024. Past due loans were 0.64% of total loans as of September 30, 2024, as compared to 0.42% of total loans as of June 30, 2024 and 0.49% as of September 30, 2023. Past due loans as of September 30, 2024 primarily consist of loans secured by residential real estate with balances less than $300 thousand and are well secured. Selected asset quality metrics are summarized in the table below.

Financial Statements
Consolidated balance sheets at period end and consolidated statements of income for the periods 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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