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EXCEL - IDEA: XBRL DOCUMENT - TAYLOR CALVIN B BANKSHARES INCFinancial_Report.xls
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2011
Commission File No. 000-50047
 
Calvin B. Taylor Bankshares, Inc.
(Exact name of registrant as specified in its Charter)
 
Maryland
(State of incorporation)
 
52-1948274
(I.R.S. Employer Identification No.)
 
24 North Main Street, Berlin, Maryland 21811
(Address of principal executive offices, including zip code)
 
Registrant's telephone number, including area code: (410) 641-1700
 
 
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]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ____                                                                                 Accelerated filer [X]
Non- accelerated filer ____ (Do not check if a smaller reporting company)    Smaller reporting company ____
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). No [X]
On October 31, 2011, 2,998,778 shares of the registrant's common stock were issued and outstanding.
- 1 -
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Form 10-Q
Index
 
Part I - Financial Information Page
     
Item 1 Consolidated Financial Statements  
  Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010 3
  Consolidated Statements of Income for the three months  
  ended September 30, 2011 and 2010 4
  Consolidated Statements of Income for the nine months  
  ended September 30, 2011 and 2010 5
  Consolidated Statements of Cash Flows for the nine months  
  ended September 30, 2011 and 2010 6-7
  Notes to Consolidated Financial Statements 8-18
     
Item 2 Management’s Discussion and Analysis of Financial Condition  
  and Results of Operations 19-26
     
Item 3 Quantitative and Qualitative Disclosures About Market Risks 26
     
Item 4 Controls and Procedures 26
     
Part II - Other Information  
     
Item 1 Legal Proceedings 27
Item 1A Risk Factors 27
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 27-28
Item 3 Defaults Upon Senior Securities 28
Item 5 Other Information 28
Item 6 Exhibits 28-31
     
  Signatures 32
 
- 2 -
 
  Part I - Financial Information, Item 1 Financial Statements  
  Calvin B. Taylor Bankshares, Inc. and Subsidiary  
  Consolidated Balance Sheets    
    (unaudited)  
    September 30 December 31,
    2011 2010
  Assets
  Cash and due from banks  $             20,654,307  $             14,319,142
  Federal funds sold                 43,992,678                 36,081,862
  Interest-bearing deposits                 10,575,876                 11,650,849
  Investment securities available for sale                 48,498,389                 59,801,920
  Investment securities held to maturity (approximate     
    fair value of $61,182,576 and $32,491,819)                 60,849,807                 32,303,572
  Loans, less allowance for loan losses    
    of $700,036 and $983,178               228,092,988               237,001,219
  Premises and equipment                   6,188,496                   6,319,854
  Other real estate owned                   1,526,151                      779,500
  Accrued interest receivable                   1,015,365                   1,224,920
  Computer software                      132,316                        89,521
  Bank owned life insurance                   5,391,547                   5,260,539
  Prepaid expenses                   1,068,590                   1,285,266
  Other assets                      504,483                        29,640
     $           428,490,993  $           406,147,804
  Liabilities and Stockholders' Equity
  Deposits    
    Noninterest-bearing  $             90,575,547  $             76,763,686
    Interest-bearing               253,861,329               250,014,068
                  344,436,876               326,777,754
  Securities sold under agreements to repurchase                   5,867,107                   4,490,512
  Accrued interest payable                         97,223                      150,299
  Deferred income taxes                      364,519                      383,326
  Other liabilities                        43,130                      151,361
                  350,808,855               331,953,252
  Stockholders' equity    
    Common stock, par value $1 per share     
     authorized 10,000,000 shares, issued and outstanding    
     3,000,078 shares at September 30, 2011, and    
     3,000,508 shares at December 31, 2010                   3,000,078                   3,000,508
    Additional paid-in capital                   8,723,978                   8,733,438
    Retained earnings                 64,929,309                 61,441,595
                    76,653,365                 73,175,541
    Accumulated other comprehensive income                   1,028,773                   1,019,011
                    77,682,138                 74,194,552
     $           428,490,993  $           406,147,804
       
   
  See accompanying Notes to Consolidated Financial Statements
 
- 3 -
 
 
 
  Calvin B. Taylor Bankshares, Inc. and Subsidiary  
  Consolidated Statements of Income (unaudited)    
    For the three months ended
    September 30
    2011 2010
  Interest and dividend revenue    
    Loans, including fees  $               3,743,950  $               4,010,548
    U.S. Treasury and government agency securities                      224,263                      273,065
    State and municipal securities                        13,575                        12,203
    Federal funds sold                         14,390                        17,969
    Interest-bearing deposits                        15,011                        12,618
    Equity securities                          4,424                          6,315
            Total interest and dividend revenue                   4,015,613                   4,332,718
       
  Interest expense    
    Deposits                      324,141                      475,095
    Borrowings                          6,712                          9,646
      Total interest expense                      330,853                      484,741
       
      Net interest income                   3,684,760                   3,847,977
       
  Provision for loan losses                        55,500                        52,500
      Net interest income after provision for loan losses                   3,629,260                   3,795,477
       
  Noninterest revenue    
    Service charges on deposit accounts                      222,778                      238,221
    ATM and debit card                      165,678                      151,000
    Bank owned life insurance                        44,558                        43,931
    Gain on sale of assets                        (3,871)                        (1,319)
    Loss on other than temporary impairment of investment value                      (10,669)                               -  
    Miscellaneous revenue                        77,105                        92,294
      Total noninterest revenue                      495,579                      524,127
       
  Noninterest expenses    
    Salaries                      888,236                      882,680
    Employee benefits                      229,564                      225,225
    Occupancy                      209,342                      197,908
    Furniture and equipment                      138,917                      122,121
    Data processing                        56,312                        64,381
    ATM and debit card                        42,877                        40,252
    Deposit insurance premiums                        21,788                        72,966
    Other operating                      424,941                      405,211
      Total noninterest expenses                   2,011,977                   2,010,744
       
      Income before income taxes                   2,112,862                   2,308,860
  Income taxes                      791,250                      859,500
       
  Net income  $               1,321,612  $               1,449,360
       
  Earnings per common share - basic and diluted  $                        0.44  $                        0.48
       
  See accompanying Notes to Consolidated Financial Statements
 
- 4 -
 
 
  Calvin B. Taylor Bankshares, Inc. and Subsidiary  
  Consolidated Statements of Income (unaudited)    
    For the nine months ended
    September 30
    2011 2010
  Interest and dividend revenue    
    Loans, including fees  $             11,581,071  $             12,072,501
    U.S. Treasury and government agency securities                      717,021                      926,797
    State and municipal securities                        42,862                        38,485
    Federal funds sold                         38,850                        46,054
    Interest-bearing deposits                        44,107                        46,129
    Equity securities                        21,251                        35,321
            Total interest and dividend revenue                 12,445,162                 13,165,287
       
  Interest expense    
    Deposits                   1,091,145                   1,461,333
    Borrowings                        17,273                        25,783
      Total interest expense                   1,108,418                   1,487,116
       
      Net interest income                 11,336,744                 11,678,171
       
  Provision for loan losses                   1,004,400                      653,500
      Net interest income after provision for loan losses                 10,332,344                 11,024,671
       
  Noninterest revenue    
    Service charges on deposit accounts                      674,139                      718,756
    ATM and debit card                      459,690                      417,041
    Bank owned life insurance                      131,007                      128,576
    Gain (loss) on sale of assets                        (3,621)                      183,920
    Loss on other than temporary impairment of investment value                    (188,994)                               -  
    Miscellaneous revenue                      220,842                      340,756
      Total noninterest revenue                   1,293,063                   1,789,049
       
  Noninterest expenses    
    Salaries                   2,636,663                   2,627,163
    Employee benefits                      845,219                      748,739
    Occupancy                      622,574                      605,164
    Furniture and equipment                      379,000                      353,370
    Data processing                      183,726                      210,776
    ATM and debit card                      132,038                      139,154
    Deposit insurance premiums                      171,402                      218,654
    Other operating                   1,184,571                   1,224,074
      Total noninterest expenses                   6,155,193                   6,127,094
       
      Income before income taxes                   5,470,214                   6,686,626
  Income taxes                   1,982,500                   2,448,500
       
  Net income  $               3,487,714  $               4,238,126
       
  Earnings per common share - basic and diluted  $                        1.16  $                        1.41
       
  See accompanying Notes to Consolidated Financial Statements
 
- 5 -
 
 
  Calvin B. Taylor Bankshares, Inc. and Subsidiary  
  Consolidated Statements of Cash Flows (unaudited)    
    For the nine months ended
    September
    2011 2010
  Cash flows from operating activities    
    Interest and dividends received  $              12,819,967  $              13,543,626
    Fees and commissions received                    1,570,506                    1,618,990
    Interest paid                  (1,161,493)                  (1,523,110)
    Cash paid to suppliers and employees                  (5,834,424)                  (5,806,785)
    Income taxes paid                  (2,483,936)                  (2,190,956)
                       4,910,620                    5,641,765
  Cash flows from investing activities    
    Certificates of deposit purchased, net of maturities                       986,681                       826,102
    Proceeds from maturities of investments available    
       for sale                  41,075,000                  15,135,000
    Purchase of investments available for sale                (30,075,045)                (36,198,861)
    Proceeds from maturities of investments held to     
       maturity                  15,125,000                  23,740,000
    Purchase of investments held to maturity                (43,730,947)                (18,935,424)
    Loans made, net of principal reductions                    6,974,680                    1,196,901
    Proceeds from sale of repossessed loan collateral, net of    
      cost of sale                       178,629                       217,551
    Purchases of premises, equipment,    
      and computer software                     (313,006)                     (193,317)
    Proceeds from sale of premises and equipment                              250                         72,100
                     (9,778,758)                (14,139,948)
       
  Cash flows from financing activities    
    Net increase (decrease) in    
      Time deposits                  (8,999,832)                    1,404,046
      Other deposits                  26,658,954                  21,110,274
      Securities sold under agreements to repurchase                    1,376,595                       (48,726)
    Payments on note payable                                 -                         (20,174)
    Common shares repurchased                         (9,890)                                 -  
                     19,025,827                  22,445,420
       
  Net increase in cash and cash equivalents                  14,157,689                  13,947,237
  Cash and cash equivalents at beginning of period                  50,531,537                  43,489,772
  Cash and cash equivalents at end of period  $              64,689,226  $              57,437,009
       
       
       
       
  See accompanying Notes to Consolidated Financial Statements
 
- 6 -
 
 
  Calvin B. Taylor Bankshares, Inc. and Subsidiary  
  Consolidated Statements of Cash Flows (unaudited)    
    For the nine months ended
    September 30,
    2011 2010
  Reconciliation of net income to net cash provided    
    by operating activities    
    Net income  $            3,487,714  $            4,238,126
    Adjustments to reconcile net income to net cash    
      provided by operating activities    
  Provision for loan losses                1,004,400                   653,500
      (Gain) loss on sale of repossessed loan collateral                        3,871                       7,449
      (Gain) on sale of premises, equipment and    
        computer software                         (250)                    (55,061)
      Loss on other than temporary impairment of investment value                   188,994                             -  
      Amortization of premiums and accretion of    
        discount, net                   165,248                   140,537
      Depreciation and amortization                   401,568                   423,829
      Decrease (increase) in    
        Accrued interest receivable                   209,555                   237,803
        Cash surrender value of bank owned life insurance                  (131,008)                  (128,576)
        Other assets                  (258,165)                   355,227
      Increase (decrease) in    
        Accrued interest payable                    (53,076)                    (35,995)
        Other liabilities                  (108,231)                  (195,074)
     $            4,910,620  $            5,641,765
       
       
    Composition of cash and cash equivalents    
      Cash and due from banks  $          20,654,307  $          17,802,078
      Federal funds sold               43,992,678              39,505,700
      Interest-bearing deposits, except for time deposits                     42,241                   129,231
     $          64,689,226  $          57,437,009
       
       
  Supplemental cash flows information:    
      Non-cash transfers from loans to other real estate owned  $               929,151  $                         -  
       
       
       
       
       
       
       
       
  See accompanying Notes to Consolidated Financial Statements
 
- 7 -
 
 
 
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited)
1. Basis of Presentation
    The accompanying unaudited consolidated financial statements conform with accounting principles generally accepted in the United States of America and to the instructions to Form 10-Q. Interim financial statements do not include all the information and footnotes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of financial position and results of operations for these interim periods have been made. These adjustments are of a normal recurring nature. Results of operations for the nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected in any other interim period or for the year ending December 31, 2011. For further information, refer to the audited consolidated financial statements and related footnotes included in the Company's Form 10-K for the year ended December 31, 2010.
    Consolidation has resulted in the elimination of all significant intercompany accounts and transactions.
 
Cash Flows
    For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold, and interest-bearing deposits except for time deposits. Federal funds are purchased and sold for one-day periods.
 
Per share data
    Earnings per common share are determined by dividing net income by the weighted average number of common shares outstanding for the period, as follows:
  2011 2010
Three months ended September 30                     3,000,471                     3,000,508
Nine months ended September 30                     3,000,495                     3,000,508
 
2. Comprehensive Income
    Comprehensive income consists of:
    For the nine months ended
    September 30,
    2011 2010
  Net income  $                 3,487,714  $                 4,238,126
  Unrealized loss on investment securities    
    available for sale, net of income taxes                            9,762                      (191,443)
  Comprehensive income  $                 3,497,476  $                 4,046,683
       
 
 
 
 
 
- 8 -
 
 
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) (continued)
3. Investment Securities
    Investment securities are summarized as follows:
  Amortized  Unrealized Unrealized Fair
  cost gains losses value
September 30, 2011        
Available for sale        
  U.S. Treasury  $         45,020,664  $       1,229,150  $            2,818  $         46,246,996
  State and municipal                  289,826                  3,515                   372                  292,969
  Equity               1,602,843              758,396            402,815               1,958,424
   $         46,913,333  $       1,991,061  $        406,005  $         48,498,389
Held to maturity        
  U.S. Treasury  $         44,989,049  $          311,687  $            4,977  $         45,295,759
  U.S. Government agency               9,500,427                  5,918                1,450               9,504,895
  State and municipal               6,360,331                22,722                1,131               6,381,922
   $         60,849,807  $          340,327  $            7,558  $         61,182,576
         
December 31, 2010        
Available for sale        
  U.S. Treasury  $         56,150,205  $          966,157  $          16,871  $         57,099,491
  State and municipal                  365,772                  4,031                3,709                  366,094
  Equity               1,691,841           1,008,745            364,251               2,336,335
   $         58,207,818  $       1,978,933  $        384,831  $         59,801,920
Held to maturity        
  U.S. Treasury  $         19,487,287  $          178,407  $            5,147  $         19,660,547
  U.S. Government agency               7,002,448                13,646                6,850               7,009,244
  State and municipal               5,813,837                11,979                3,788               5,822,028
   $         32,303,572  $          204,032  $          15,785  $         32,491,819
 
 
 
- 9 -
 
 
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) (continued)
3. Investment Securities (Continued)
The table below shows the gross unrealized losses and fair value of securities that are in an unrealized loss position as of September 30, 2011, aggregated by length of time that individual securities have been in a continuous unrealized loss position.
 
  Less than 12 months 12 months or more Total
  Fair Unrealized Fair Unrealized Fair Unrealized
  value losses value losses value losses
             
U. S. Treasury  $      9,001,846  $       7,795  $             -    $             -    $      9,001,846  $      7,795
U. S. Government Agency          2,998,550           1,450                 -                   -            2,998,550          1,450
State and municipal             425,313           1,131        104,454               372             529,767          1,503
Equity securities             144,996         27,000        210,185        375,815             355,181      402,815
   $    12,570,705  $     37,376  $    314,639  $    376,187  $    12,885,344  $  413,563
The debt securities for which an unrealized loss is recorded are issues of the U. S. Treasury, Federal Home Loan Bank (a U. S. government agency), and general and highly rated revenue obligations of states and municipalities. The Company has the ability and the intent to hold these securities until they are called or mature at face value. Equity securities for which an unrealized loss is recorded are issued by local community banks or bank holding companies. Management believes that these fluctuations in fair value reflect market conditions, and are not indicative of other-than-temporary impairment of the investments.
In the third quarter of 2011, the Company recorded expense of $10,669 related to the other than temporary impairment of value of an equity holding. For the year to date, the Company has recorded expense of $188,994 related to the other than temporary impairment of value of two equity holdings.
The amortized cost and estimated fair value of debt securities, by contractual maturity and the amount of pledged securities, follow. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
  September 30, 2011 December 31, 2010
  Amortized Fair Amortized Fair
  cost value cost value
         
Available for sale        
  Within one year  $        33,101,270  $        33,206,951  $        35,163,533  $        35,292,775
  After one year        
   through five years            10,212,361            10,305,414            19,355,802            19,481,248
  After ten years              1,996,858              3,027,600              1,996,642              2,691,562
   $        45,310,489  $        46,539,965  $        56,515,977  $        57,465,585
         
Held to maturity        
  Within one year  $        29,097,016  $        29,194,028  $          8,758,541  $          8,789,063
  After one year        
   through five years            31,752,791            31,988,548            23,545,031            23,702,756
   $        60,849,807  $        61,182,576  $        32,303,572  $        32,491,819
         
Pledged securities  $        21,056,656  $        21,247,730  $        26,567,879  $        27,558,868
 
Investments are pledged to secure deposits of federal and local governments. Pledged securities also serve as collateral for securities sold under agreements to repurchase.
 
- 10 -
 
 
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) (continued)
4. Loans and Allowance for Loan Losses
 
Major classifications of loans are as follows:
 
  •   September 30, 2011 December 31, 2010
    Real estate mortgages    
    Construction, land development, and land  $             13,886,724  $             21,792,060
    Residential 1 to 4 family                 89,660,287                 94,296,749
    Commercial properties               111,668,960               102,578,171
    Commercial                  11,882,732                 17,596,451
    Consumer                   1,694,321                   1,720,966
                    228,793,024               237,984,397
    Allowance for loan losses                      700,036                      983,178
    Loans, net  $           228,092,988  $           237,001,219
     
     
  • Nonperforming loans are loans past due 90 or more days and still accruing plus nonaccrual loans. Nonperforming assets are comprised of nonperforming loans combined with real estate acquired in foreclosure and held for sale. The following table details the composition of nonperforming assets:
      September 30, December 31,
      2011 2010
    Loans 90 days or more past due and still accruing    
    Real estate mortgages    
    Construction, land development, and land  $                       -    $                       -  
    Residential 1 to 4 family                 124,355                           -  
    Commercial properties                 719,450                 684,422
    Commercial                            -                             -  
    Consumer                           -                             -  
                      843,805                 684,422
    Nonaccruing loans    
    Real estate mortgages    
    Construction, land development, and land              1,655,580              1,171,127
    Residential 1 to 4 family                 548,352                 318,076
    Commercial properties              1,089,239              2,610,204
    Commercial                            -                       7,114
    Consumer                           -                             -  
                   3,293,171              4,106,521
         
    Total nonperforming loans              4,136,976              4,790,943
    Other real estate owned              1,526,151                 779,500
    Total nonperforming assets  $          5,663,127  $          5,570,443
         
    Interest not accrued on nonaccruing loans  $             257,550  $             156,805
         
    Interest included in net income on nonaccruing loans,    
    year-to-date  $                       -    $               93,033
 
- 11 -
 
 
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) (continued)
4. Loans and Allowance for Loan Losses (continued)
The following is a schedule of transactions in the allowance for loan losses by type of loan. The Company did not acquire any loans with deteriorated credit quality during the periods presented.
 
  Real estate mortgages        
  Construction            
September 30, 2011 and Land Residential Commercial Commercial Consumer Unallocated Total
Beginning balance  $           235,437  $             50,602  $            356,993  $          194,946  $           119,228  $        25,972 $                     983,178
Loans charged off                (131,562)             (347,886)               (835,000)               (3,011)              (14,756)                      -                     (1,332,215)
Recoveries                    39,071                          300                                -                     410                  4,892                         -                           44,673
Provision charged to operations                    61,002               325,000                 705,000             (16,878)              (52,252)            (17,472)                     1,004,400
Ending balance  $            203,948  $              28,016  $            226,993  $          175,467  $            57,112  $           8,500  $                    700,036
               
Individually evaluated for impairment:            
Balance in allowance  $              46,088  $                7,000  $                15,000  $                   -    $                    -      $                     68,088
Related loan balance  $          1,660,623  $           571,457  $            1,842,227  $                   -    $                    -      $                 4,074,307
               
Collectively evaluated for impairment:            
Balance in allowance  $            157,860  $               21,016  $              211,993  $          175,467  $            57,112  $           8,500  $                    631,948
Related loan balance  $      12,226,101  $   89,088,830  $   109,826,733  $    11,882,732  $       1,694,321    $              224,718,717
               
               
December 31, 2010              
Beginning balance  $            145,262  $             48,034  $                   2,192  $          380,161  $            53,638  $           8,474  $                    637,761
Loans charged off               (100,000)              (190,093)                                -             (354,854)              (52,935))                      -                       (697,882)
Recoveries                               -                         1,100                                -                   1,073                29,126                      -                           31,299
Provision charged to operations                  190,175                  191,561                  354,801             168,566                89,399              17,498                     1,012,000
Ending balance  $           235,437  $             50,602  $            356,993  $          194,946  $           119,228  $        25,972  $                    983,178
               
Individually evaluated for impairment:            
Balance in allowance  $                          -    $                         -    $            330,759  $                   -    $                    -      $                    330,759
Related loan balance  $          1,171,127  $           361,743  $        2,566,537  $             7,114  $                    -      $                 4,106,521
               
Collectively evaluated for impairment:            
Balance in allowance  $           235,437  $             50,602  $               26,234  $          194,946  $           119,228  $        25,972  $                    652,419
Related loan balance  $   20,620,933  $   93,935,006  $     100,011,634  $   17,589,337  $      1,720,966    $             233,877,876
               
               
September 30, 2010              
Beginning balance  $            145,262  $             48,034  $                   2,192  $          380,161  $            53,638  $           8,474  $                    637,761
Loans charged off               (100,000)              (190,093)                                -             (353,251)             (45,866))                      -                       (689,210)
Recoveries                               -                        1,000                                -                     774               24,940                      -                           26,714
Provision charged to operations                 124,950                149,985                  199,945             145,116                13,943              19,561                       653,500
Ending balance  $             170,212  $                8,926  $             202,137  $          172,800  $            46,655  $        28,035  $                    628,765
               
Individually evaluated for impairment:            
Balance in allowance  $                          -    $                         -    $             130,007  $                   -    $                    -      $                    130,007
Related loan balance  $                          -    $          380,632  $        2,492,760  $                        $                           $                 2,873,392
               
Collectively evaluated for impairment:            
Balance in allowance  $             170,212  $                8,926  $                72,130  $          172,800  $            46,655  $        28,035  $                    498,758
Related loan balance  $   23,703,865  $    95,390,216  $     98,559,332  $    16,397,917  $        1,915,511    $              235,966,841
 
- 12 -
 
 
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) (continued))
4. Loans and Allowance for Loan Losses (continued)
    The table below shows the relationship of net charged-off loans and the balance in the allowance to gross loans and average loans.
Allowance for Loan Losses      
  For nine months ended   For the year ended  
  September 30   December 31  
  2011 2010   2010  
           
Net loans charged off  $     1,287,542  $        662,496    $        666,583  
           
Balance at end of period  $        700,036  $        628,765    $        983,178  
           
Gross loans outstanding at the end of the period  $ 228,793,024  $ 238,840,233    $ 237,984,397  
Allowance for loan loses to gross loans          
outstanding at the end of the period 0.31% 0.26%   0.41%  
           
Average loans outstanding during the period  $ 235,721,580  $ 244,677,984    $ 244,189,000  
Annualized net charge-offs as a percentage of          
average loans outstanding during the period 0.73% 0.36%   0.27%  
    Loans are considered past due when either principal or interest is not paid by the date on which payment is due. The following table is an analysis of past due loans by days past due and type of loan.
Age Analysis of Past Due Loans
      Greater than       > 90 Days
  30-59 Days 60-89 Days 90 Days Total   Total Past Due and
September 30, 2011 Past Due Past Due Past Due Past Due Current Loans Accruing
Real Estate              
Construction, land development,              
and land  $                 -    $       666,260  $       668,703  $    1,334,963           12,551,761           13,886,724  $                 -  
Residential 1 to 4 family        1,190,294           369,264           426,761        1,986,319           87,673,968           89,660,287            124,355
Commercial properties             15,798             28,639        1,808,689        1,853,126         109,815,834         111,668,960            719,450
Commercial              54,862                     -                       -               54,862           11,827,870           11,882,732                     -  
Consumer             27,121                     -                       -               27,121             1,667,200             1,694,321                     -  
Total  $    1,288,075  $    1,064,163  $    2,904,153  $    5,256,391  $     223,536,633  $     228,793,024  $        843,805
               
December 31, 2010              
Real Estate              
Construction, land development,              
and land  $       474,843  $       234,719  $    1,089,719  $    1,799,281  $       19,992,779  $       21,792,060  $                 -  
Residential 1 to 4 family        1,390,288           336,134                     -          1,726,422           92,570,327           94,296,749                     -  
Commercial properties                     -               37,957        2,508,675        2,546,632         100,031,539         102,578,171            684,422
Commercial            103,759               7,114                     -             110,873           17,485,578           17,596,451                     -  
Consumer                     -               19,415                     -               19,415             1,701,551             1,720,966                     -  
Total  $    1,968,890  $       635,339  $    3,598,394  $    6,202,623  $     231,781,774  $     237,984,397  $        684,422
 
 
- 13 -
 
 
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) (continued)
4. Loans and Allowance for Loan Losses (continued)
    Loans are considered impaired when management considers it unlikely that collection of principal and interest payments will be made according to contractual terms, including principal and interest payments. A performing loan may be categorized as impaired based on knowledge of circumstances that are deemed relevant to loan collection. Not all impaired loans are past due nor are losses expected for every impaired loan. If a loss is expected, an impaired loan may have specific reserves allocated to it in the allowance for loan losses. A schedule of impaired loans at period ends and their average balances for the year follows:
 
  Unpaid     Average
  Principal Recorded Related Recorded
September 30, 2011 Balance Investment Allowance Investment
With no related allowance recorded        
Construction, land development, and land  $        1,499,535  $        1,499,535  $                    -    $        1,117,347
Residential 1 to 4 family               545,105               545,105                        -                 574,283
Commercial properties            1,753,738            1,753,738                        -              2,113,473
With an allowance recorded        
Construction, land development, and land               161,088               161,088                 46,088               162,388
Residential 1 to 4 family                 26,352                 26,352                   7,000                 26,419
Commercial properties                 88,488                 88,488                 15,000                 87,884
Total:        
Construction, land development, and land            1,660,623            1,660,623                 46,088            1,279,735
Residential 1 to 4 family               571,457               571,457                   7,000               600,702
Commercial properties            1,842,226            1,842,226                 15,000            2,201,357
Total, all categories  $        4,074,306  $        4,074,306  $             68,088  $        4,081,794
 
December 31, 2010        
With no related allowance recorded        
Construction, land development, and land  $        1,171,127  $        1,171,127  $                    -    $        1,194,397
Residential 1 to 4 family               361,743               361,743                        -                 379,546
Commercial properties                 88,488                 88,488                        -                   93,244
Commercial                    7,114                   7,114                        -                     8,122
With an allowance recorded        
Commercial properties            2,478,049            2,478,049               330,759            2,484,804
Total:        
Construction, land development, and land            1,171,127            1,171,127                        -              1,194,397
Residential 1 to 4 family               361,743               361,743                        -                 379,546
Commercial properties            2,566,537            2,566,537               330,759            2,578,048
Commercial                    7,114                   7,114                        -                     8,122
Total, all categories  $        4,106,521  $        4,106,521  $           330,759  $        4,160,113
 
 
- 14 -
 
 
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) (continued)
4. Loans and Allowance for Loan Losses (continued)
    Credit risk is measured based on an internally designed grading scale. The grades correspond to regulatory rating categories of pass, special mention, substandard, and doubtful. Evaluation of grades assigned to individual loans is completed no less than quarterly. Credit quality, as measured by internally assigned grades, is an important component in the calculation of an adequate allowance for loan losses. The following table summarizes loans by credit quality indicator.
  September 30, 2011 December 31, 2010
Real Estate Credit Risk Profile by Internally Assigned Grade  
Construction, land development, and land    
Pass  $                7,498,446  $                 16,063,618
Substandard                    4,732,698                       4,557,315
Doubtful    
Less than 90 days past due and accruing                                 -                            761,189
Nonperforming: 90 days or more    
past due and/or non-accruing                    1,655,580                          409,938
Total  $              13,886,724  $                 21,792,060
     
Residential 1 to 4 family    
Pass  $              85,094,786  $                 90,393,936
Substandard                    3,892,793                       3,584,737
Doubtful    
Less than 90 days past due and accruing                                 -                            292,091
Nonperforming: 90 days or more    
past due and/or non-accruing                       672,708                            25,985
Total  $              89,660,287  $                 94,296,749
     
Commercial properties    
Pass  $            105,053,359  $                 95,620,813
Substandard                    4,806,912                       4,347,154
Doubtful    
Less than 90 days past due and accruing                                 -                            132,155
Nonperforming: 90 days or more    
past due and/or non-accruing                    1,808,689                       2,478,049
Total  $            111,668,960  $               102,578,171
     
Commercial Credit Risk Profile by Internally Assigned Grade  
Pass  $              11,882,732  $                 17,589,337
Doubtful    
Less than 90 days past due and accruing                                 -                                7,114
Total  $              11,882,732  $                 17,596,451
     
Consumer Credit Risk Profile by Internally Assigned Grade    
Pass  $                1,694,321  $                   1,720,966
Total  $                1,694,321  $                   1,720,966
 
- 15 -
 
 
Calvin B. Taylor Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) (continued)
4. Loans and Allowance for Loan Losses (continued)
    The modification of terms on a loan (restructuring) is considered a "troubled debt" restructuring if it is done to accommodate a borrower who is experiencing financial difficulties. The lender may forgive principal, lower the interest rate or payment amount, or may modify the payment due dates or maturity date of a loan for a troubled borrower.
    Troubled debt restructures as of September 30, 2011 were as follows:
      Paying as agreed Past due
  Number of   under 30 days or more
  contracts Current balance