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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-23402
COLUMBIA BANCORP
(Exact name of registrant as specified in its charter)
Maryland 52-1545782
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10480 Little Patuxent Parkway
Columbia, Maryland 21044
(Address of principal executive offices) (zip code)
410-465-4800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
[cover page 1 of 2 pages]
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
60 days prior to the date of this filing.
Common Stock, par value $0.01 per share:
Market value held by non-affiliates based on the
closing sales price at March 20, 1997 $33,948,622
==========
State the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Common Stock, par value $0.01 per share:
Shares outstanding at March 24, 1997 2,148,345
=========
Documents Incorporated by Reference:
Portions of Annual Report to Stockholders for Fiscal Year
Ended December 31, 1996, incorporated by reference
into Part II.
Portions of Definitive Proxy Statement dated March 25, 1997
incorporated by reference into Part III.
[cover page 2 ]
TABLE OF CONTENTS
PART I PAGE
----
Item 1 - Description of Business.................................... 2
Item 2 - Description of Property.................................... 9
Item 3 - Legal Proceedings.......................................... 9
Item 4 - Submission of Matters to a Vote of Stockholders............ 9
PART II
Item 5 - Market for Common Stock and Related Stockholder Matters.... 10
Item 6 - Selected Financial Data.................................... 10
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 10
Item 8 - Financial Statements and Supplementary Data................ 10
Columbia Bancorp and Subsidiaries:
Independent Auditor's Report
Consolidated Statements of Financial Condition as of
December 31, 1996 and 1995
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Item 9 - Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 10
PART III
Item 10 - Directors and Executive Officers of the Registrant......... 11
Item 11 - Executive Compensation..................................... 12
Item 12 - Security Ownership of Certain Beneficial Owners and
Management................................................. 12
Item 13 - Certain Relationships and Related Transactions............. 12
Item 14 - Exhibits and Reports on Form 8-K........................... 12
Signatures............................................................ 16
(1)
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Columbia Bancorp (the "Company"), a bank holding company, was
incorporated in November, 1987, under the laws of Maryland and registered under
the Bank Holding Company Act of 1956, as amended. The Columbia Bank (the "Bank")
was organized by the Company as a Maryland trust company and commenced
operations in May, 1988. The Bank currently accounts for substantially all of
the Company's assets. The deposits of the Bank are insured by the Federal
Deposit Insurance Corporation ("FDIC"). The Bank is headquartered in Columbia,
Maryland and has six branch locations in Howard County, Maryland; three branch
locations in Baltimore County, Maryland; and two branch locations in Baltimore
City, Maryland. Three additional branch locations in Howard County, Maryland are
scheduled to open in 1997. At December 31, 1996, the Company had total assets of
$317.2 million, total loans, net of unearned income of $237.9 million, total
deposits of $254.6 million and stockholders' equity of $31.0 million.
The Bank is an independent, community bank which seeks to provide
personal attention and professional financial services to its customers while
offering virtually all of the banking services of larger competitors. These
customers are primarily individuals and small- and medium-sized businesses. The
Bank's business philosophy includes offering direct access to its President and
other officers and providing friendly, informed and courteous service, local and
timely decision-making, flexible and reasonable operating procedures and
consistently-applied credit policies.
The executive offices of the Company and the principal office of the
Bank are located at 10480 Little Patuxent Parkway, Columbia, Maryland 21044,
telephone number (410) 465-4800.
Services of the Bank
The Bank provides comprehensive and service-intensive commercial and
retail banking services to individuals and small and medium-sized businesses.
The following types of services are offered by the Bank:
Commercial Services:
* Loans, including working capital loans and lines of credit, a
wide range of demand, term, and time loans, loans for real
estate land acquisition, development and construction and
equipment, inventory and accounts receivable financing.
* Cash management, including automatic overnight investment of funds.
* Certificates of deposit and other interest-bearing accounts.
* Direct deposit of payroll.
* Letters of credit.
(2)
Retail Services:
* Transaction accounts, including checking and NOW accounts.
* Savings accounts.
* Certificates of deposit.
* Individual retirement accounts.
* 24-hour automated teller machines with access to most major
network systems.
* 24-hour telephone banking.
* Installment and home equity loans and lines of credit.
* Residential construction and first mortgage loans.
* VISA(R) credit and debit cards.
* Travelers checks, money orders and safe deposit boxes.
The Bank does not now exercise general trust powers.
Lending Activities
General. At December 31, 1996, the Company's loan portfolio, net of
unearned income, totaled $237.9 million, representing approximately 75.0% of its
total assets of $317.2 million. The categories of loans in the Company's
portfolio are commercial, real estate development and construction, residential
real estate mortgage, commercial real estate mortgage and consumer.
Loan Portfolio Composition. The following table sets forth the
Company's loans by major categories as of December 31, 1996:
December 31, 1996
----------------------
Amount Percent
----------------------
(dollars in thousands)
Commercial...................................... $ 30,517 12.8%
Real estate - development and construction(1)... 112,838 47.2
Real estate - mortgage:
Residential................................... 11,897 5.0
Commercial.................................... 14,470 6.1
Consumer:
Retail(2)..................................... 67,731 28.3
Credit Card................................... 1,543 .6
-------- -----
Total loans..................................... $238,996 100.0%
======== =====
- ---------------------
(1) At December 31, 1996, loans to individuals for constructing primary
personal residences represented $10.8 million.
(2) Approximately $62.4 million were retail loans secured by the borrowers'
principal residences in the form of home equity lines of credit and
second mortgages.
Commercial Loans. The Company originates secured and unsecured loans
for business purposes. Additionally, commercial business loans are made to
provide working capital to businesses in the form of lines of credit
(3)
which may be secured by real estate, accounts receivable, inventory, equipment
or other assets. At December 31, 1996, $30.5 million or 12.8% of the Company's
total loan portfolio consisted of commercial business loans. The financial
condition and cash flow of commercial borrowers are closely monitored by the
submission of corporate financial statements, personal financial statements
and income tax returns. The frequency of submissions of required information
depends upon the size and complexity of the credit and the collateral which
secures the loan. Financial statements are analyzed using a financial
spreadsheet software program. It is also the Company's general policy to
obtain personal guarantees from the principals of the commercial loan borrowers.
Real Estate Development and Construction Loans. The real estate
development and construction loan portfolio consisted of the following at
December 31, 1996:
December 31, 1996
----------------------
Amount Percent
----------------------
(dollars in thousands)
Residential construction(1)..................... $ 50,902 45.1%
Commercial construction......................... 4,419 3.9
Residential land development.................... 50,262 44.6
Residential land acquisition(2)................. 7,255 6.4
-------- -----
$112,838 100.0%
======== =====
- -----------
(1) Includes $10.8 million of loans to individuals for construction of
primary personal residences.
(2) Includes $2.1 million of loans to individuals for the purchase of
residential building lots.
The Company provides interim residential real estate development and
construction loans to builders, developers and persons who will ultimately
occupy the single family dwellings. Residential real estate construction and
development loans constitute the largest portion of the Company's lending
activities. The real estate development and construction loan portfolio
primarily represents loans for the construction of single family dwellings. At
December 31, 1996, loans to individuals for the construction of primary personal
residences accounted for $10.8 million of the $50.9 million residential
construction portfolio. These loans are typically secured by the property under
construction, frequently include additional collateral (such as a second
mortgage on the borrower's present home), and commonly have maturities of six to
twelve months. The remaining $40.1 million of residential construction loans
represented loans to residential builders and developers. Approximately 43% of
these loans were for the construction of residential homes for which a binding
sales contract existed and the prospective buyers have been pre-qualified for
permanent mortgage financing by either third-party lenders (mortgage companies
or other financial institutions) or the Company. To date, permanent mortgage
loan financing has primarily been provided by third-party lenders. The Company
attempts to obtain the permanent mortgage loan under terms, conditions and
documentation standards which permit the sale of the mortgage loan in the
secondary mortgage loan market. The Company's practice is to immediately sell
substantially all residential mortgage loans in the secondary market with
servicing released.
Loans for the development of residential land represented the second
largest component of the real estate development and construction loan portfolio
at December 31, 1996. Generally, development loans are extended only when
evidence is provided that the lots under development will be sold to builders
satisfactory to the Company.
The Company makes residential real estate development and construction
loans generally to provide interim financing on property during the construction
period. These loans are typically made for 80% or less of the appraised value of
the property. Residential real estate development and construction loan funds
are disbursed periodically as pre-specified stages of completion are attained
based upon site inspections. Interest rates on these loans are usually
adjustable.
The Company has successfully limited losses in this area of lending
through careful monitoring of development and construction loans with on-site
inspections and control of disbursements on loans in process. Development and
construction loans are secured by the properties under development/construction
and personal guarantees are typically obtained. Further, to assure that reliance
is not placed solely upon the value of the underlying
(4)
collateral, the Company considers the financial condition and reputation
of the borrower and any guarantors, the amount of the borrower's equity in
the project, independent appraisals, cost estimates and pre-construction sale
information.
Residential Real Estate Mortgage Loans. The Company originates
adjustable and fixed-rate residential mortgage loans in order to provide a full
range of products to its customers. Such mortgage loans are generally originated
under terms, conditions and documentation which permit their sale in the
secondary mortgage market. The Company's practice is to immediately sell
substantially all residential mortgage loans in the secondary market with
servicing released. At December 31, 1996, $11.9 million or 5.0% of the Company's
total loan portfolio consisted of residential mortgage loans.
For any loans retained by the Company, title insurance insuring the
priority of its mortgage lien, as well as fire and extended coverage casualty
insurance protecting the properties securing its mortgage loans are required.
Borrowers may be required to advance funds, with each monthly payment of
principal and interest, to a loan escrow account from which the Company makes
disbursements for items such as real estate taxes, hazard insurance premiums and
mortgage insurance premiums. The properties securing all of the Company's
residential mortgage loans are appraised by appraisers approved by the Company.
Commercial Real Estate Mortgage Loans. The Company also originates
mortgage loans secured by commercial real estate. At December 31, 1996, $14.5
million or 6.1% of the Company's total loan portfolio consisted of commercial
mortgage loans. Such loans are primarily secured by office condominiums, retail
buildings and warehouse and general purpose business space. Although terms vary,
the Company's commercial mortgages generally have maturities of five years or
less.
The Company seeks to reduce the risks associated with commercial
mortgage lending by generally lending in its market area, using conservative
loan-to-value ratios and obtaining periodic financial statements and tax returns
from borrowers to perform annual loan reviews. It is also the Company's general
policy to obtain personal guarantees from the principals of the borrowers.
Consumer Loans. The Company offers a variety of consumer loans in order
to provide a full range of financial services to its customers. The consumer
loans offered by the Company include home equity loans and lines of credit and
loans that are secured by personal property. At December 31, 1996, $69.3 million
or 29.0% of the Company's total loan portfolio consisted of consumer loans.
Home equity loans are originated by the Company for typically up to 85%
of the appraised value, less the amount of any existing prior liens on the
property. Home equity loans have a maximum term of 15 years and the interest
rate is generally adjustable. The Company secures these loans with mortgages on
the homes (typically a second mortgage).
Other Potential Problem Loans. At December 31, 1996, management had
identified four loans totaling approximately $972,000 which, while not adversely
classified, had exhibited potential weaknesses. These weaknesses may at some
future date result in a reduced likelihood of repayment. These loans are subject
to an increased level of monitoring by management in accordance with the
Company's established credit policies and procedures.
Competition
While promotional activities emphasize the many advantages of dealing
with a locally-run institution closely attuned to the needs of its community,
the Company faces strong competition in all areas of its operations. This
competition comes from entities operating in the Baltimore-Washington
metropolitan area, which include offices of most of the largest banks in
Maryland. Its most direct competition for deposits comes from other commercial
banks
(5)
savings banks, savings and loan associations and credit unions operating
in the Baltimore/Washington marketplace. The Company also competes for deposits
with money market mutual funds and with larger banks for cash management
customers. The Company competes with banking entities, mortgage banking
companies, and other institutional lenders for loans. The competition for loans
varies from time to time depending on certain factors. These factors include,
among others, the general availability of lendable funds and credit, general and
local economic conditions, current interest rate levels, conditions in the
mortgage market and other factors which are not readily predictable.
Interstate Banking
Adequately capitalized bank holding companies, such as the Company, may
acquire control of banks in any state, although states may limit the eligibility
of banks to be acquired to those in existence for a period of time but no longer
than five years. No bank holding company may acquire more than 10% of the
nationwide insured deposits or more than 30% of deposits in any state; however,
states may waive the 30% limit. In addition, beginning June 1, 1997, banks may
branch across state lines either by merging with banks in other states or by
establishing new branches in other states. The date relating to interstate
branching through mergers may be accelerated by any state, and such mergers may
be prohibited by any state. The provision relating to establishing new branches
in another state requires a state's specific approval. Maryland law permits
interstate branching both by mergers and establishing new branches; however,
until June 1, 1997 this provision is subject to the reciprocity requirements
that banks from another state may branch into Maryland only if Maryland banks
may branch into that state. The Company is unable to predict the ultimate impact
of interstate banking legislation on it or its competitors.
Supervision and Regulation
Bank Holding Company Regulations. Bank holding companies and banks are
extensively regulated under both federal and state law. These laws and
regulations are intended primarily to protect depositors and not stockholders.
To the extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to the particular
statutory and regulatory provisions. Any change in the applicable law or
regulation may have a material effect on the business and prospects of the
Company and the Bank.
The Company is a registered bank holding company subject to regulation
and examination by the Federal Reserve Board under the Bank Holding Company Act
of 1956, as amended (the "Act"). The Company is required to file with the
Federal Reserve Board quarterly and annual reports and any additional
information that may be required under the Act. The Act also requires every bank
holding company to obtain the prior approval of the Federal Reserve Board before
(i) acquiring all or substantially all of the assets of, or direct or indirect
ownership or control of, more than 5% of the outstanding voting stock of any
bank which is not already majority owned, or (ii) acquiring, or, merging or
consolidating with, any other bank holding company. The Federal Reserve Board
will not approve any acquisition, merger, or consolidation that would have a
substantially anti-competitive effect, unless the anti-competitive impact of the
proposed transaction is clearly outweighed by a greater public interest in
meeting the convenience and needs of the community to be served. The Federal
Reserve Board also considers capital adequacy and other financial and managerial
resources and future prospects of the companies and the banks concerned,
together with the convenience and needs of the community to be served, when
reviewing acquisitions, mergers or consolidations. The Act now further provides
that the Federal Reserve Board shall not approve any such acquisition of control
of any bank operating outside the bank holding company's principal state of
operations, unless such action is specifically authorized by the statutes of the
state in which the bank to be acquired is located. This prohibition on
interstate acquisitions has been amended, effective September 29, 1995.
Additionally, the Act prohibits a bank holding company, with certain
limited exceptions, from (i) acquiring or retaining direct or indirect ownership
or control of more than 5% of the outstanding voting stock of any company which
is not a bank or bank holding company, or (ii) engaging directly or indirectly
in activities other than those of banking, managing or controlling banks, or
performing services for its subsidiaries unless such non-banking business is
determined by the Federal Reserve Board to be so closely related to banking or
managing or controlling banks as to be properly incident thereto. In making such
determination, the Federal Reserve Board is required to weigh the expected
(6)
benefits to the public, such as greater convenience, increased competition or
gains in efficiency, against the possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest, or unsound banking practices.
In January, 1989, the Federal Reserve Board adopted risk-based capital
guidelines for bank holding companies. The risk-based capital guidelines are
designed to make regulatory capital requirements more sensitive to differences
in risk profile among banks and bank holding companies, to account for
off-balance sheet exposure and to minimize disincentives for holding liquid
assets. Under these guidelines, assets and off-balance sheet items are assigned
to broad risk categories. Failure to meet the capital guidelines could subject a
banking institution to a variety of enforcement remedies available to federal
regulatory authorities.
Bank holding companies currently are required to maintain a minimum
ratio of total capital to risk-weighted assets (including certain off-balance
sheet activities, such as standby letters of credit) of 8%. At least half of the
total capital is required to be "Tier 1 capital," consisting of common equity,
retained earnings, noncumulative perpetual preferred stock and a limited amount
of cumulative perpetual preferred stock, less goodwill items and certain other
intangible assets. The remainder ("Tier 2 capital") may consist of (a) the
allowance for loan losses of up to 1.25% of risk-weighted risk assets, (b)
excess of qualifying perpetual preferred stock (c) hybrid capital instruments,
(d) perpetual debt, (e) mandatory convertible debt securities, and (f) a limited
amount of subordinated debt and intermediate-term preferred stock up to 50% of
Tier 1 capital. The maximum amount of supplementary capital elements that
qualifies as Tier 2 capital is limited to 100% of Tier 1 capital net of goodwill
and certain other intangible assets. Total capital is the sum of Tier 1 and Tier
2 capital less reciprocal holdings of other banking organizations' capital
instruments, investments in unconsolidated subsidiaries and any other deductions
as determined by the Federal Reserve Board (determined on a case by case basis
or as a matter of policy after formal rule-making).
Bank holding company assets are given risk-weights of 0%, 20%, 50% and
100%. In addition, certain off-balance sheet items are given similar credit
conversion factors to convert them to asset equivalent amounts to which an
appropriate risk-weight will apply. These computations result in the total
risk-weighted assets. Most loans will be assigned to the 100% risk category,
except for performing first mortgage loans fully secured by certain residential
property, which carry a 50% risk rating. Most investment securities (including,
primarily, general obligation claims on states or other political subdivisions
of the United States) will be assigned to the 20% category, except for municipal
or state revenue bonds, which have a 50% risk-weight, and direct obligations of
the U.S. Treasury or obligations backed by the full faith and credit of the U.S.
Government, which have a 0% risk-weight. In converting off-balance-sheet items,
direct credit substitutes including general guarantees and standby letters of
credit backing financial obligations, are given a 100% conversion factor.
Transaction related contingencies such as bid bonds, standby letters of credit
backing non-financial obligations and commitments (including commercial credit
lines) with an initial maturity or more than one year have a 50% conversion
factor. Short-term commercial letters of credit are converted at 20% and certain
short-term or unconditionally cancelable commitments have a 0% factor.
The Company's management believes that the risk-weighting of assets
under these guidelines does not and will not have a material impact on the
Company's operations or on the operations of the Bank. As of December 31, 1996
and 1995, the Company's total risk-based capital ratios were 13.2% and 14.1%,
respectively, and its Tier 1 risk-based capital ratios were 11.9% and 13.0%,
respectively. In addition to the risk-based capital guidelines, the Federal
Reserve Board has adopted a minimum Tier 1 capital leverage ratio, under which a
bank holding company that has the highest regulatory examination rating and is
not contemplating significant growth or expansion must maintain a minimum level
of Tier 1 capital to average total consolidated assets of at least 3%. All other
bank holding companies are expected to maintain a Tier 1 leverage ratio of at
least 1.0% to 2.0% above the stated minimum. The Tier 1 leverage ratio assists
in the assessment of the capital adequacy of bank holding companies. Its
principal objective is to place a constraint on the maximum degree to which a
banking organization can leverage its equity capital base, even if it invests
primarily in assets with low risk-weights. As of December 31, 1996 and 1995, the
Company's Tier 1 capital leverage ratios were 10.1% and 10.7%, respectively.
(7)
In September, 1995, the federal bank regulatory agencies revised the
capital adequacy guidelines to explicitly include a bank's exposure to declines
in the economic value of its capital due to changes in interest rates as a
factor that the banking agencies will consider in evaluating a bank's capital
adequacy. While the revised capital guidelines do not codify a measurement
framework for assessing the level of a bank's interest rate exposure, the
measurement of interest rate exposure using either a supervisory model,
developed by the federal bank agencies, or the bank's own internal model is a
quantitative factor, among other quantitative and qualitative factors, available
for use by examiners in determining the adequacy of an individual bank's capital
for interest rate risk. Other quantitative factors include the bank's historical
financial performance and its earnings exposure to interest rate movements.
Qualitative factors include the adequacy of the bank's internal interest rate
management. Establishment of an explicit supervisory threshold, defining a
"normal" level of interest rate risk exposure is expected at some future date.
The revision of the capital adequacy guidelines did not have a material adverse
effect on the Company.
Bank Regulations. The Bank is a state-chartered bank subject to
supervision, regulation and examination by the Maryland Commissioner of
Financial Regulation and by the FDIC under the Federal Deposit Insurance Act.
Deposits, reserves, investments, loans, consumer law compliance, issuance of
securities, payment of dividends, establishment and closing of branches, mergers
and consolidations, changes in control, electronic funds transfer, community
reinvestment, management practices and other aspects of operations are subject
to regulation by the appropriate federal and state regulatory agencies. The Bank
is also subject to various regulatory requirements of the Federal Reserve Board
applicable to FDIC-insured banks, including disclosure requirements in
connection with personal and mortgage loans, interest on deposits and reserve
requirements. In addition, the Bank is subject to numerous federal, state and
local laws and regulations which set forth specific restrictions and procedural
requirements with respect to the extension of credit, credit practices, the
disclosure of credit terms and discrimination in credit transactions. Federal
regulatory agencies have broad powers to take prompt corrective action to
resolve problems at banking institutions, including (in certain cases) the
appointment of a conservator or receiver. The extent of these powers is
generally influenced by the level of capital at the institution.
The Bank is assessed by the FDIC in respect of its deposit insurance.
As a result of the acquisition of Fairview Federal Savings and Loan Association
("Fairview") in June 1992, approximately $82.9 million or 35.3% of the Bank's
average assessable deposit base is insured by the Savings Association Insurance
Fund (the "SAIF"). The remainder of the Bank's average assessable deposit base
is insured by the Bank Insurance Fund (the "BIF"). In September 1996 and as a
result of congressional legislation to recapitalize the SAIF, the Company was
charged a one-time special assessment of approximately $486,000 pretax. Also,
effective October 1, 1996, the Company began paying a Financing Corporation
("FICO") assessment of 1.30 cents per $100 of BIF deposits and 6.48 cents per
$100 of SAIF deposits. The impact of the special assessment and the FICO
assessment was mitigated by a significant reduction (from 23 cents per $100 of
deposits to zero) in the FDIC insurance premium associated with BIF deposits
assessed the Company during 1996. The Company's FDIC insurance premium
associated with deposits insured by the SAIF was also reduced from 23 cents per
$100 to zero effective October 1, 1996.
In the liquidation or other resolution by any receiver of a bank
insured by the FDIC, the claims of depositors have priority over the general
claims of other creditors. Hence, in the event of the liquidation or other
resolution of a banking subsidiary of the Company, the general claims of the
Company as creditor of such banking subsidiary would be subordinate to the
claims of the depositors of such banking subsidiary, even if the claims of the
Company were not by their terms so subordinated.
As a consequence of the extensive regulation of the commercial banking
business in the United States, the business of the Company and the Bank are
particularly susceptible to changes in federal and state legislation and
regulations which may increase the cost of doing business.
(8)
Governmental Monetary Policies and Economic Controls
The Company is affected by monetary policies of regulatory agencies,
including the Federal Reserve Board, which regulates the national money supply
in order to mitigate recessionary and inflationary pressures. Among the
techniques available to the Federal Reserve Board are engaging in open market
transactions in the United States Government securities, changing the discount
rate on bank borrowings, changing reserve requirements against bank deposits,
prohibiting the payment of interest on demand deposits, and imposing conditions
on time and savings deposits. These techniques are used in varying combinations
to influence the overall growth of bank loans, investments and deposits. Their
use may also affect interest rates charged on loans or paid on deposits. The
effect of governmental policies on the earnings of the Company cannot be
predicted; however, modest short-term changes should have little effect so long
as the Company maintains its current interest sensitivity gap position.
Employees
At December 31, 1996, the Company and the Bank had 185 employees of
which 43 were officers, 160 were full-time employees and 25 were part-time
employees. The Company believes its employee relations are good.
ITEM 2. DESCRIPTION OF PROPERTY
The principal offices of the Company and the Bank are located at 10480
Little Patuxent Parkway, Columbia, Howard County, Maryland.
At December 31, 1996, the Company owned one banking office and an
adjacent office building. These properties had a book value of $3.4 million at
December 31, 1996, and the office building was producing annual rental income of
$170,400. The remaining ten banking offices open at December 31, 1996 were
leased. The lease for the principal office of the Bank expires in 2013 (after
giving effect to all renewal options), and annual rent is currently $232,999.
Leases for the remaining leased banking offices expire from 1997 through 2011
(after giving effect to all renewal options), and aggregate annual rent is
currently $323,000. The Company is also in the process of constructing a banking
office on leased property which is scheduled to open prior to the end of March
1997. The lease expires in 2037 (after giving effect to all renewal options),
and the annual rent will be $63,000. In addition, the Company is currently
negotiating leases for two additional banking offices. The Company believes that
its facilities are adequate for its current and near-term needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to legal actions which are routine and incidental
to its business. In management's opinion, the outcome of these matters,
individually or in the aggregate, will not have a material adverse impact on the
results of operations or financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
No matter was submitted to a vote of stockholders during the fourth
quarter of the fiscal year covered by this report.
(9)
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required by this item is set forth by reference to the
information appearing under the captions "Dividends" on page 38 and "Recent
Common Stock Prices" on page 44 of the 1996 Annual Report to Stockholders
included in Exhibit 13.1 filed herewith.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item as to the Company is incorporated
by reference to the information appearing under the caption "Selected Financial
Highlights" on page 6 of the 1996 Annual Report to Stockholders included in
Exhibit 13.1 filed herewith.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item as to the Company is incorporated
by reference to the information appearing under the caption "Management's
Discussion and Analysis" on pages 7 through 20 of the 1996 Annual Report to
Stockholders included in Exhibit 13.1 filed herewith.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item as to the Company and the
Company's Independent Public Accountants' Report thereon is incorporated by
reference to the 1996 Annual Report to Stockholders included in Exhibit 13.1,
pages 21 through 43.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in nor disagreements with accountants on
accounting and financial disclosure.
(10)
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to Directors of the Company is
incorporated by reference to the Company's Proxy Statement for the 1997 Annual
Meeting of Stockholders included in Exhibit 99.1 filed herewith.
The following information is supplied with respect to Mr. Bond and to
other named executive officers of the Company and the Bank who do not serve on
the Board of Directors. Each such officer serves at the pleasure of the Board
and is appointed annually. Except as noted, each person's principal occupation
for at least the past five years has been to serve as an officer of the Company
and/or the Bank. "Age" is that as of March 15, 1997.
Position with the
Name Age Company and the Bank
---- --- --------------------
John M. Bond, Jr. 53 President, Chief Executive Officer and Treasurer
of the Company and the Bank.
Michael T. Galeone 48 Executive Vice President of the Bank.
Charles C. Holman 63 Executive Vice President of the Bank since June
1992. Prior to that, Mr. Holman served as a senior
officer of Fairview.
Robert W. Locke 51 Senior Vice President of the Bank.
John A. Scaldara, Jr. 33 Executive Vice President of the Bank, Chief
Financial Officer and Secretary of the Company and
the Bank.
Mr. Bond has over 20 years of experience in the banking industry,
holding senior positions with the Bank, Chase Bank of Maryland and The
First National Bank of Maryland. Prior to returning to Maryland in 1978, Mr.
Bond was a Vice President with Citibank, N.A. in New York and a consultant
with McKinsey & Company. Mr. Bond is an active volunteer in his community,
working with various organizations involved in education, health and
community development in both Howard County and Baltimore. Mr. Bond is a
graduate of Harvard College (A.B.) and Columbia University (M.B.A. and J.D.).
He has been admitted to the New York State Bar.
Mr. Galeone directs the retail branch operations and consumer lending
activities of the Bank. He has in excess of 20 years experience in the
consumer finance industry with the Bank and Household International
Corporation. Mr. Galeone is actively involved in civic and professional
affairs, currently serving as President of the Howard County Arts Council
and Vice Chair of the Howard County Board of Realtors and member of several
other civic organizations. Mr. Galeone attended Temple University, Institute of
Technology.
Mr. Holman directs the real estate construction and development
lending activities of the Bank relating to builders and developers. He has
over 30 years of experience in the banking and real estate industries with
the Bank, Fairview, Union Trust Company of Maryland, James W. Rouse & Co.,
Inc. and Weaver Brothers, Inc. of Maryland. He has been active in several
civic and professional organizations in the community. Mr. Holman is a
graduate of University of Baltimore (B.S. in Business Management).
Mr. Locke directs the commercial lending activities of the Bank.
He has 20 years experience in the commercial lending area with the Bank and
the former Maryland National Bank and The National Bank of
(11)
Washington. Mr. Locke is actively involved in civic and professional affairs,
serving in the past as a director of the Howard County Chamber of Commerce
and the president of the James Rouse Entrepreneurial Fund. He is a graduate
of Colgate University (B.A.) and City College of New York (M.S.Ed).
Mr. Scaldara directs the accounting, finance, loan administration, cash
management and transaction processing activities of the Company. He has been a
Certified Public Accountant since 1985. Prior to joining the Company, Mr.
Scaldara held various staff accounting and consulting positions with KPMG Peat
Marwick LLP in Baltimore. He is a graduate of Loyola College (B.A.) and is
actively involved in civic organizations, serving as a director of The Family
Life Center and Howard Hospital Foundation. Mr. Scaldara has served as Secretary
of the Company and the Bank since January 14, 1991.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
the information appearing under the caption "Executive Compensation" in the
Company's Proxy Statement for the 1997 Annual Meeting of Stockholders included
in Exhibit 99.1 filed herewith.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
the information appearing under the caption "Beneficial Ownership of Officers,
Directors and Nominees" in the Company's Proxy Statement for the 1997 Annual
Meeting of Stockholders included in Exhibit 99.1 filed herewith.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
the information appearing under the caption "Certain Relationships and Related
Transactions" in the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders included in Exhibit 99.1 filed herewith.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
(3.1) Form of Restated Articles of Incorporation of the
Company, restated as of December 31, 1995,
previously filed with the Commissioner as an Exhibit
to, and incorporated herein by reference from, the
Company's Annual Report on Form 10-KSB for fiscal
year ended December 31, 1995 (File No. 0-23402).
(3.2) Form of Restated By-Laws of the Company as in effect
on June 7, 1994, and amended December 19, 1994, and
at all times since then through March 24, 1997,
previously filed with the Commission as an Exhibit
to, and incorporated herein by reference from, the
Company's Annual Report on Form 10-KSB for fiscal
year ended December 31, 1994, (File No. 0-23402).
(12)
(10.1) Form of the Company's 1987 Stock Option Plan, as
amended April 17, 1990, December 18, 1995, and
February 24, 1997 (filed herein as Exhibit 10.1).
(10.2) Form of Incentive Stock Option Agreement for use
under the 1987 Stock Option Plan, as amended
(previously filed with the Commission as an
Exhibit to, and incorporated herein by reference
from, the Company's Registration Statement on
Form S-8 filed August 15, 1996)(Reg. No. 333-10231).
(10.3) Form of Non-Qualified Stock Option Agreement for
use under the 1987 Stock Option Plan, as amended
(previously filed with the Commission as an
Exhibit to, and incorporated herein by reference
from, the Company's Registration Statement on
Form S-8 filed August 15, 1996)(Reg. No. 333-10231).
(10.4) Form of the Company's 1990 Director Stock Option
Plan, as amended July 29, 1996 and February 24, 1997
(filed herein as Exhibit 10.4).
(10.5) Form of Employment Agreement dated February 26, 1996
with John M. Bond, Jr., previously filed with the
Commissioner as an Exhibit to, and incorporated
herein by reference from, the Company's Annual Report
on Form 10-KSB for fiscal year ended December 31,
1995 (File No. 0-23402).
(10.6) Form of Employment Agreement dated February 26, 1996
with Michael T. Galeone, previously filed with the
Commissioner as an Exhibit to, and incorporated
herein by reference from, the Company's Annual Report
on Form 10-KSB for fiscal year ended December 31,
1995 (File No. 0-23402).
(10.7) Form of Employment Agreement dated February 27, 1996
with Charles C. Holman, previously filed with the
Commissioner as an Exhibit to, and incorporated
herein by reference from, the Company's Annual Report
on Form 10-KSB for fiscal year ended December 31,
1995 (File No. 0-23402).
(10.8) Form of Employment Agreement dated February 26, 1996
with John A. Scaldara, Jr., previously filed with the
Commissioner as an Exhibit to, and incorporated
herein by reference from, the Company's Annual Report
on Form 10-KSB for fiscal year ended December 31,
1995 (File No. 0-23402).
(10.9) Form of Severance Agreement dated February 26, 1996
with Robert W. Locke, previously filed with the
Commissioner as an Exhibit to, and incorporated
herein by reference from, the Company's Annual Report
on Form 10-KSB for fiscal year ended December 31,
1995 (File No. 0-23402).
(10.10) Agreements by and between the Bank and an affiliate
of Directors G. Clark and Moxley, previously filed
with the Commissioner as an Exhibit to, and
incorporated herein by
(13)
reference from, the Company's Annual Report on Form
10-KSB for fiscal year ended December 31, 1995 (File
No. 0-23402).
(10.11) Agreements by and between the Bank and an affiliate
of Director G. Clark, previously filed with the
Commissioner as an Exhibit to, and incorporated
herein by reference from, the Company's Annual Report
on Form 10-KSB for fiscal year ended December 31,
1995 (File No. 0-23402).
(10.12) Deferred Compensation Plan dated September 27, 1996,
as amended December 30, 1996, and February 24, 1997,
including addendums thereto (filed herein as Exhibit
10.12).
(10.13) Data Processing agreements by and between the Bank
and M&I Data Services, Inc., including addendums
thereto (filed herein as Exhibit 10.13)
(11.1) Information Used in the Computation of Net Income
Per Common Share (filed herein as Exhibit 11.1).
(13.1) 1996 Annual Report to Stockholders (filed herein as
Exhibit 13.1).
(21.1) List of Subsidiaries of the Company
State of Percentage
Name Incorporation Owned by Ownership
---- ------------- -------- ----------
The Columbia Maryland Columbia 100%
Bank Bancorp
McAlpine Maryland The Columbia 100%
Enterprises, Bank
Inc.
(23.1) Consent of Independent Certified Public Accountants
(filed herein as Exhibit 23.1).
(27.1) Financial Data Schedule (filed herein as Exhibit 27.1).
(99.1) Notice of the 1997 Annual Meeting of Stockholders,
Proxy Statement for the 1997 Annual Meeting of
Stockholders and the 1997 Form of Proxy (filed herein
as Exhibit 99.1).
(14)
b. Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the quarter
ended December 31, 1996.
(15)
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Columbia Bancorp
(Registrant)
March 24, 1997 By: /S/
--------------------------------------
John M. Bond, Jr.
President, Chief Executive Officer and
Treasurer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Company and in the capacities and on the
dates indicated.
Signature Title Date
- --------- ----- ----
/S/
- ---------------------------- Chairman of the 3/24/97
James R. Moxley, Jr. Board -----------
/S/
- ---------------------------- Vice Chairman of 3/24/97
Herschel L. Langenthal the Board -----------
/S/
- ---------------------------- President, Chief 3/24/97
John M. Bond, Jr. Executive Officer and -----------
Treasurer
/S/
- ---------------------------- Secretary 3/24/97
John A. Scaldara, Jr. and Chief Financial -----------
Officer
/S/
- ---------------------------- Director 3/24/97
Anand S. Bhasin -----------
(16)
Signature Title Date
- --------- ----- ----
/S/
- ---------------------------- Director 3/24/97
John M. Bond, Sr. -----------
/S/
- ---------------------------- Director 3/24/97
Garnett Y. Clark -----------
/S/
- ---------------------------- Director 3/24/97
James Clark, Jr. -----------
/S/
- ---------------------------- Director 3/24/97
Hugh F.Z. Cole -----------
/S/
- ---------------------------- Director 3/24/97
G. William Floyd -----------
/S/
- ---------------------------- Director 3/24/97
Robert J. Gaw -----------
- ---------------------------- Director
Mary T. Gould -----------
/S/
- ---------------------------- Director 3/24/97
William L. Hermann -----------
/S/
- ---------------------------- Director 3/24/97
Harry L. Lundy, Jr. -----------
/S/
- ---------------------------- Director 3/24/97
Richard E. McCready -----------
/S/
- ---------------------------- Director 3/24/97
Osborne A. Payne -----------
/S/
- ---------------------------- Director 3/24/97
Patricia T. Rouse -----------
(17)
Signature Title Date
- --------- ----- ----
- ---------------------------- Director
Mary S. Scrivener -----------
/S/
- ---------------------------- Director 3/24/97
Robert N. Smelkinson -----------
/S/
- ---------------------------- Director 3/24/97
Theodore G. Venetoulis -----------
(18)
INDEX TO EXHIBITS
-----------------
Exhibit No. Title of Exhibit
- ----------- ----------------
10.1 Form of 1987 Stock Option Plan, as amended April 17,
1990, December 18, 1995 and February 24, 1997.
10.4 Form of 1990 Director Stock Option Plan, as amended July
29, 1996 and February 24, 1997.
10.12 Deferred Compensation Plan dated September 27, 1996,
as amended December 30, 1996 and February 24, 1997,
including addendums thereto.
10.13 Data Processing agreements by and between the Bank
and M&I Data Services, Inc., including addendums
thereto.
11.1 Information Used in the Computation of Net Income Per
Common Share.
13.1 Annual Report to Stockholders for the year ended December
31, 1996.
23.1 Consent of Independent Certified Public Accountants.
27.1 Financial Data Schedule
99.1 Notice of the 1997 Annual Meeting of Stockholders, Proxy
Statement for the 1997 Annual Meeting of Stockholders and
the 1997 Form of Proxy.