FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ______________________
Commission File Number 0-10915
CENTRAL CORPORATION
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(Exact name of Registrant as Registrant as Specified in its Charter)
LOUISIANA 72-0921566
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
300 DeSiard Street, Monroe, Louisiana 71201
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(Address of principal executive offices)
(Zip Code)
(318) 362-8500
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(Registrant's telephone number, including area code)
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 require-
ments for the past 90 days.
Yes X No
--- ---
Common stock, $1.00 par value, 4,066,731 shares outstanding as of July 31, 1995.
Total number of pages in this report 11.
The exhibit index is on page 11.
INDEX
Part I - Financial Information
Financial Statements
Consolidated Statements of Condition
June 30, 1995 and December 31, 1994 ......................... 3
Consolidated Statements of Income
Quarters Ended June 30, 1995 and 1994
Six Months Ended June 30, 1995 and 1994 ..................... 4
Consolidated Statements of Cash Flow
Six Months Ended June 30, 1995 and 1994 ..................... 5
Notes to Consolidated Financial Statements .................... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 7
Part II - Other Information ................................................. 11
Signatures ........................................................ 11
2
Part I - Financial Information
Item 1. Financial Statements
CENTRAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(dollar amounts in thousands)
(unaudited)
June 30, December 31,
1995 1994*
Assets
Cash and due from banks $ 40,016 $ 40,585
Federal funds sold 8,350 78,000
Securities available for sale, at fair value 53,239 9,921
Investment securities (fair value $88,532
and $73,139) 88,688 76,198
Loans 606,050 593,689
Less: Allowance for possible loan losses 9,481 9,836
Net loans 596,569 583,853
Bank premises and equipment 17,359 16,339
Other real estate 1,112 1,527
Accrued interest receivable 8,306 5,721
Other assets 11,746 8,006
Total assets $825,385 $820,150
======== ========
Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing $115,121 $124,471
Interest bearing 623,279 589,657
Total deposits 738,400 714,128
Federal funds purchased 3,369 29,602
Accrued interest payable 3,028 2,215
Other liabilities 3,943 2,991
Dividends payable 407 407
Capital lease obligations 739 701
Total liabilities 749,886 750,044
Stockholders' equity:
Capital stock of $1.00 par value -
20,000,000 shares authorized; 4,066,731 shares
issued and outstanding 4,067 4,067
Surplus 15,904 15,904
Retained earnings 55,433 50,419
Unrealized gains on securities available
for sale, net of deferred taxes 95 (284)
Total stockholders' equity 75,499 70,106
Total liabilities and stockholders' equity $825,385 $820,150
======== ========
<FN>
* The statement of condition at December 31, 1994 has been taken from the audited
statement of condition as of that date.
</FN>
3
CENTRAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
Quarters Ended Six Months Ended
June 30 June 30
------------------- -------------------
1995 1994 1995 1994
Interest income:
Loans:
Taxable $13,839 $11,439 $27,730 $22,753
Nontaxable 161 172 311 327
Investment securities:
Taxable 1,904 1,338 2,976 2,817
Nontaxable 52 120 114 222
Federal funds sold 579 544 1,698 890
Other 1 --- 2 ---
Total interest income 16,536 13,613 32,831 27,009
Interest expense:
Deposits 7,165 4,954 13,581 9,619
Federal funds purchased 93 75 210 151
Capital lease obligations 19 12 37 25
Total interest expense 7,277 5,041 13,828 9,795
Net interest income 9,259 8,572 19,003 17,214
Provision for possible loan losses 90 375 320 975
Net interest income after provision
for possible loan losses 9,169 8,197 18,683 16,239
Other revenues:
Service charges on deposit accounts 1,891 1,682 3,715 3,296
Loan fees 1,482 1,369 2,860 2,847
Trust income 479 467 934 905
Miscellaneous income 424 573 968 1,023
Total other revenues 4,276 4,091 8,477 8,071
Other expenses:
Salaries and employee benefits 4,548 4,231 9,037 8,382
Data processing 1,015 811 2,006 1,620
Postage and supplies 502 438 1,050 882
Occupancy 501 450 1,028 885
Marketing 420 391 864 756
FDIC deposit insurance 394 377 788 754
Communications 326 304 643 584
Other equipment 314 291 648 598
Other 1,585 1,169 2,541 2,281
Total other expenses 9,605 8,462 18,605 16,742
Income before federal income taxes 3,840 3,826 8,555 7,568
Federal income taxes 976 1,248 2,728 2,563
Net income $ 2,864 $ 2,578 $ 5,827 $ 5,005
======= ======= ======= =======
Net income per share $ .70 $ .63 $ 1.43 $ 1.23
======= ======= ======= =======
Cash dividends per share $ .10 $ .10 $ .20 $ .18
======= ======= ======= =======
4
CENTRAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
(unaudited)
Six Months Ended
June 30
1995 1994
------ ------
Cash flow provided by operations $ 2,680 $ 8,807
Cash flow from investing activities:
Maturities of investment securities 14,163 33,609
Purchases of investment securities (69,394) (17,708)
Net change in loans (excluding sales) (43,256) (24,995)
Sales of loans 30,310 30,534
Capital expenditures (2,263) (1,422)
Proceeds from sale of other real estate 277 1,616
Net cash (used in) provided by
investing activities (70,163) 21,634
Cash flow from financing activities:
Net change in deposits 24,272 5,950
Net change in federal funds purchased (26,233) (12,746)
Dividends paid (813) (650)
Increase in capital lease obligations 170 ---
Payments on capital lease obligations (132) (114)
Net cash used in financing activities (2,736) ( 7,560)
Change in cash and federal funds sold (70,219) 22,881
Beginning cash and federal funds sold 118,585 63,340
Ending cash and federal funds sold $48,366 $86,221
======= =======
5
CENTRAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited financial statements reflect all adjustments
which are, in the opinion of management, necessary to present fairly the
consolidated financial position and results of operations of Central Corporation
(the Corporation) and its wholly-owned subsidiary, Central Bank (Central), in
accordance with generally accepted accounting principles consistently applied
for the dates and periods indicated. All such adjustments are of a normal
recurring nature. Users of these financial statements are presumed to be
familiar with the audited financial statements included in previous reports to
the Securities and Exchange Commission.
2. Certain 1994 balances have been reclassified to conform to the current
year's presentation.
6
CENTRAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(dollar amounts in thousands)
FIRST COMMERCE CORPORATION MERGER UPDATE
The second quarter marked the announcement of the Corporation's proposed
merger with First Commerce Corporation (FCC), a $7 billion multi-bank holding
company headquartered in New Orleans, Louisiana. Details previously disclosed
in an 8-K filing with the Securities and Exchange Commission on May 25, 1995,
outlined the proposed exchange of 6,791,441 shares of FCC for all the
outstanding shares of Central, an indicated exchange ratio of 1.67 shares of FCC
for every share of Central.
The merger remains subject to regulatory approval as well as approval by
both companies' shareholders. A joint proxy solicitation can be expected in
the near-term with plans for shareholder meetings for the respective companies
in September. While there can be no assurance that the merger will be
completed, it is anticipated that all necessary approvals will be obtained and
a merger will be effected sometime in the fourth quarter of 1995.
CHANGES IN FINANCIAL CONDITION
Total assets for the first half of 1995 increased $5,235, or .64%, from the
level reported at December 31, 1994 due to continued gains in market share as
discussed in previous filings. Balance sheet mix changes since year-end
include: a $24,272 increase in deposits offset by a $26,233 decline in federal
funds purchased; a $5,393 increase in stockholders' equity; and a $55,808
increase in investment securities. Total loans (net of unearned discount)
increased $12,361 or 2.1% in the same period. Overall, earning assets increased
1.1% to $766,327.
Loan demand remains strong despite seasonal commercial line of credit
repayments. Although period-end loan totals are up nearly $12 million since
year-end, the increase is net of some $30 million of student loans that have
been sold year-do-date.
Stockholders' equity as a percent of total assets increased to 9.1% on the
strength of earnings retained in excess of dividends paid.
The allowance for possible loan losses at June 30, 1995, totaled $9,481
compared with $9,836 at year-end 1994. The allowance as a percent of total
loans (net of unearned discount) decreased slightly to 1.56%. The lower cover-
age ratio is justified by a sustained trend toward lower non-performing loans
balanced against management's continued cautiousness on credit quality in the
wake of rising loan volumes. Nonperforming loans at June 30, 1995, including
non-accruing loans and those loans 90 days or more past due that are still
accruing, represented .35% of total loans (net of unearned discount) and .26%
of total assets, compared to the year-end levels of .37% and .27%, respectively.
As credit quality has continued to improve, the provision for possible loan
losses has been all but eliminated.
As previously disclosed, the Corporation adopted Statement of Accounting
Standard (SFAS) No. 114 et al, "Accounting by Creditors for Impairment of a
Loan," effective January 1, 1995. The change in accounting method had no effect
on reported earnings.
Impaired loans amounted to less than $1 million at June 30, 1995 with
minimal reserves relating thereto. There were no significant changes in the
level of impaired loans or their related reserves during the six months ended
June 30, 1995. Interest income recognized on these loans was not material.
7
RESULTS OF OPERATIONS
Summary
Net income for the first half of 1995 was $5,827, 16.4% above the same
period in 1994. When compared with the same period a year ago, net interest
income was up $1,789, or 10.4%, while non-interest income increased $406 or
5.0%. Non-interest expenses increased by $1,863, or 11.1%. The provision for
possible loan losses was $320 for the period down $655, or 67.2% from 1994.
Net Interest Income
Year-to-date net interest income increased 10.4% from the same period in
1994. Average asset volumes, led by a $47.6 million increase in average loans,
accounted for much of the increase as maturities of lower yielding short-term
investments have been used to fund relatively higher yielding loan products.
A rising interest rate environment had a positive effect on earnings as the
overall net interest margin improved some fifteen basis points to 5.01% when
compared with the prior year-to-date. However, the margin declined from the
first quarter to the second quarter due to increases in the cost of funds
associated with selected promotional pricing of deposits. Nonperforming loans
and repossessed assets continued to decline thereby further supporting the
increase in net interest income.
The following tables present on a tax equivalent basis an analysis of
changes in net interest margin by comparing changes in average earning assets
and average interest bearing liabilities.
SECOND QUARTER
1995 1994
------------------------- -------------------------
Average Yield/ Average Yield/
balance Interest Rate balance Interest Rate
------- -------- ----- ------- -------- -----
Earning assets:
Taxable loans $583,727 $13,839 9.48% $530,633 $11,438 8.62%
Nontaxable loans 9,788 241 9.85 16,859 252 5.98
Taxable investment securities 134,271 1,905 5.68 114,476 1,337 4.67
Nontaxable investment
securities 2,959 75 10.14 6,105 181 11.86
Other 126 1 3.18 122 --- ---
Federal funds sold 38,305 579 6.05 54,452 545 4.00
-------- ------- ----- -------- ------- -----
Total earning assets $769,176 $16,640 8.65% $722,647 $13,753 7.61%
Interest bearing liabilities:
Savings (incl. NOW) deposits $207,506 $ 1,566 3.02% $250,044 $ 1,543 2.47%
Time deposits 419,612 5,598 5.34 329,875 3,411 4.14
Federal funds purchased 6,438 93 5.78 9,379 75 3.20
Capital lease obligations 768 19 9.89 719 12 6.67
-------- ------- ----- -------- ------- -----
Total interest bearing
liabilities $634,324 $ 7,276 4.59% $590,017 $ 5,041 3.42%
----- -----
Net yield on earning assets 4.87% 4.82%
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8
FIRST HALF
1995 1994
------------------------- -------------------------
Average Yield/ Average Yield/
balance Interest Rate balance Interest Rate
------- -------- ----- ------- -------- -----
Earnings assets:
Taxable loans $584,058 $27,730 9.50% $535,119 $22,753 8.50%
Nontaxable loans 9,874 468 9.48 11,239 484 8.61
Taxable investment securities 111,461 2,977 5.34 117,559 2,817 4.79
Nontaxable investment
securities 3,266 169 10.35 6,255 336 10.74
Other 123 2 3.25 124 1 1.61
Federal funds sold 57,793 1,698 5.88 48,919 889 3.63
-------- ------- ----- -------- ------- -----
Total earning assets $766,575 $33,044 8.62% $719,215 $27,280 7.59%
Interest bearing liabilities:
Savings (incl. NOW) deposits $211,822 $ 3,161 2.98% $255,899 $ 3,075 2.40%
Time deposits 411,534 10,420 5.06 322,755 6,544 4.06
Federal funds purchased 7,558 210 5.56 10,538 151 2.87
Capital lease obligations 789 37 9.38 746 25 6.70
-------- ------- ----- -------- ------- -----
Total interest bearing
liabilities $631,703 $13,828 4.38% $589,938 $ 9,795 3.32%
----- -----
Net yield on earning assets 5.01% 4.86%
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The following tables present on a tax equivalent basis an analysis of the
changes in interest income and interest expense resulting from rate and volume
movements.
Second Quarter 1995 Change From
Second Quarter 1994
-------------------------------
Due to:
------------------
Volume Rate Total
------------------ -----
Interest income on:
Taxable loans $1,202 $1,199 $2,401
Nontaxable loans (193) 182 (11)
Taxable investment securities 240 328 568
Nontaxable investment
securities (82) (24) (106)
Other 1 1 2
Federal funds sold (199) 232 33
------ ------ ------
Total 969 1,918 2,887
Interest expense on:
Savings (incl. NOW) deposits (288) 311 23
Time deposits 1,060 1,127 2,187
Federal funds purchased (28) 46 18
Capital lease obligations --- 7 7
------ ------ ------
Total 744 1,491 2,235
------ ------ ------
Net interest income $ 225 $ 427 $ 652
====== ====== ======
9
First Half 1995 Change From
Second Half 1994
---------------------------
Due to:
------------------
Volume Rate Total
------------------ -----
Interest income on:
Taxable loans $2,188 $2,789 $4,977
Nontaxable loans (62) 46 (16)
Taxable investment securities (151) 311 160
Nontaxable investment
securities (155) (12) (167)
Other 1 1 2
Federal funds sold 181 627 808
------ ------ ------
Total 2,002 3,762 5,764
Interest expense on:
Savings (incl. NOW) deposits (583) 669 86
Time deposits 2,035 1,841 3,876
Federal funds purchased (52) 111 59
Capital lease obligations 1 11 12
------ ------ ------
Total 1,401 2,632 4,033
------ ------ ------
Net interest income $ 601 $1,130 $1,731
====== ====== ======
Other Revenues
Non-interest sources of income for the first half of 1995 were up 5.0% when
compared with 1994 with growth seen in most areas particularly service charges
on deposit accounts. These increases reflect a general increase in the
utilization of services offered to our customers in light of continued growth
in the deposit base. Second quarter loan fees reflected a modest increase in
residential loan origination activity following the recent decline in long-term
interest rates. The Corporation continues to actively seek further increases in
revenue from its non-interest related operations.
Other Expenses
Non-interest expenses increased 11.1% when compared to 1994. The largest
increases occurred in salaries and benefits (up 7.8%), data processing expense
(up 23.8%), postage and supplies (up 19.0%), occupancy expense (up 16.2%), and
marketing (up 14.3%) as a result of continued expansion of our delivery systems
and modernization of existing facilities and communications networks. The past
year (as discussed more fully in our December 31, 1994 filing) has been marked
by expansion into new markets through the addition of several new branch
facilities along with significant upgrades to our internal data processing
capabilities. A new main office in Ruston was opened during the first half with
a new main office expected to be open for service in Alexandria in early August.
Construction of a new facility to replace our Highland branch in West Monroe was
begun during the second quarter.
LIQUIDITY
For a financial institution, "liquidity" can be defined as the ability to
fund increases in loan demand and/or to compensate for decreases in deposits and
other sources of funds. With an effective asset/liability management program,
most loan and deposit changes can be anticipated and are provided for without
an adverse impact on earnings.
10
The Corporation continues to maintain a high level of liquidity with
short-term liquid assets (cash, federal funds sold and investment securities
having maturities of one year or less) composing 10.4% of total assets at
June 30, 1995.
CAPITAL RESOURCES
There are basically two sources of capital available to the Corporation: (1)
internally generated capital through earnings; and (2) externally generated
capital through the sale of additional stock or the issuance of long-term
debt. The Corporation has relied primarily on internally generated capital
to fund its capital needs. At June 30, 1995, the Corporation's total capital
to risk assets ratio stood at 13.95% and its leverage ratio was 8.95%. Both
ratios are higher than at year-end and were well in excess of capital
guidelines established by regulatory agencies.
Part II - Other Information
Item 1. Legal Proceedings - Previously reported
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K dated May 25, 1995, was filed by
the registrant reporting Item 5, Other Events. This
report announced the proposed merger of Central
Corporation with First Commerce Corporation.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the under-
signed thereunto duly authorized.
CENTRAL CORPORATION
/s/ Ed Pennington
Date: August 14, 1995 -------------------------------------
Edmond L. Pennington
Chief Financial Officer
/s/ Larry Beach
-------------------------------------
Larry G. Beach
Controller
11