1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-16356
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CENTRAL BANCORPORATION
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
WASHINGTON 91-1203145
- --------------------------------- -----------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
301 NORTH CHELAN AVENUE
WENATCHEE, WASHINGTON 98801
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(509) 663-0733
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(ISSUER'S TELEPHONE NUMBER)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
------- -------
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date.
1,009,643 shares of common stock outstanding at June 30, 1995
Transitional Small Business Disclosure Format (check one):
Yes No X
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2
CENTRAL BANCORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following Consolidated Financial Statements are presented for
Registrant, Central Bancorporation, its wholly owned subsidiaries, Central
Washington Bank, North Central Washington Bank, and Central Financial Services,
Inc., the wholly owned subsidiary of Central Washington Bank.
1. Consolidated balance sheets for December 31, 1994 and June 30, 1995.
2. Consolidated statements of operations for the second quarter and first
six months ended June 30, 1995 and 1994.
3. Consolidated statements of cash flows for the six months ended June
30, 1995 and 1994.
4. Notes to consolidated financial statements.
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CENTRAL BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
- -------------------------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1995 1994
- -------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 11,847 $ 14,636
Interest bearing deposits in other banks 8,130 4,670
-------- --------
Cash and cash equivalents 19,977 19,306
Securities held to maturity (market value
of $19,180 in 1995 and $19,677 in 1994) 19,244 20,216
Securities available for sale, at market 20,958 27,142
Loans 132,522 122,150
Less allowance for loan losses 1,711 1,667
-------- --------
Loans, net 130,811 120,483
Premises and equipment, net 6,204 6,437
Accrued interest receivable 1,509 1,407
Other assets, net 771 669
-------- --------
Total assets $199,474 $195,660
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand $ 23,217 $ 27,245
Interest-bearing 154,004 147,945
-------- --------
Total deposits 177,221 175,190
Short-term borrowings 2,590 2,200
Notes payable 2,894 3,194
Accrued interest and other liabilities 2,043 1,678
-------- --------
Total liabilities 184,748 182,262
Stockholders' equity:
Common stock, $1.67 par value. Authorized
3,000,000 shares; issued and outstanding
1,009,643 in 1995 and 999,243 in 1994 1,683 1,665
Surplus 2,655 2,616
Retained earnings 10,458 9,507
Unrealized loss on securities available for sale (70) (390)
-------- --------
Total stockholders' equity 14,726 13,398
-------- --------
Total liabilities and stockholders' equity $199,474 $195,660
======== ========
See accompanying notes to consolidated financial statements.
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CENTRAL BANCORPORATION
CONSOLIDATED STATEMENTS Of OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
- --------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------
INTEREST INCOME:
Interest and fees on loans $3,176 $2,349 $6,175 $4,173
Interest on securities:
Taxable 526 468 1,102 865
Exempt from federal income tax 52 70 104 134
Other interest income 111 96 189 148
------ ------ ------ ------
Total interest income 3,865 2,983 7,570 5,320
INTEREST EXPENSE:
Interest on deposits 1,463 956 2,737 1,711
Interest on borrowings 96 67 198 88
------ ------ ------ ------
Total interest expense 1,559 1,023 2,935 1,799
------ ------ ------ ------
Net interest income 2,306 1,960 4,635 3,521
Provision for loan losses - - - -
------ ------ ------ ------
Net interest income after the
provision for loan loss 2,306 1,960 4,635 3,521
OTHER INCOME:
Mortgage loan servicing fees 49 52 98 102
Service charges on deposit accounts 253 216 502 361
Gain on sales of loans, net 101 (52) 139 (36)
Loss on securities available for sale - (144) - (244)
Other service charges and fees 157 152 290 333
------ ------ ------ ------
Total other income 560 224 1,029 516
OTHER EXPENSES:
Salaries and employee benefits 985 856 2,010 1,608
Occupancy expense of premises 122 116 238 216
Printing, stationery and supplies 87 79 176 119
Equipment and data processing 186 93 354 256
Legal and professional 48 34 102 66
Business and occupation taxes 53 39 98 69
Deposit insurance assessment 98 85 196 151
Other 308 441 616 626
----- ------ ------ ------
Total other expenses 1,887 1,743 3,790 3,111
------ ------ ------ ------
Income before income tax expense 979 441 1,874 926
Income tax expense 307 170 573 284
------ ------ ------ ------
Net income $ 672 $ 271 $1,301 $ 642
====== ====== ====== ======
Net income per share $ 0.65 $ 0.26 $ 1.25 $ 0.62
====== ====== ====== ======
See accompanying notes to consolidated financial statements.
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CENTRAL BANCORPORATION
CONSOLIDATED STATEMENTS Of CASH FLOWS
(Dollars in Thousands) (unaudited)
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30,
1995 1994
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,301 $ 642
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 256 260
Decrease (increase) in loans held for sale (37) 1,342
Net amortization of premiums (discounts) (82) 45
Loss on securities available for sale - 244
Loan fees deferred, net of amortization 111 72
Dividends on FHLB stock (25) (25)
Other (3) 530
-------- --------
Total adjustments 220 2,468
-------- --------
Net cash provided by operating activities 1,521 3,110
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing securities held to maturity 1,309 1,750
Purchase of securities held to maturity (317) (4,172)
Proceeds from sales of securities available for sale - 7,224
Proceeds from maturing securities available for sale 7,776 8,229
Purchase of securities available for sale (1,021) (7,476)
Cash used for acquisition costs - 7,281
Loans originations, net of principal repayments (10,402) (10,190)
Acquisition of premise and equipment (23) (67)
-------- --------
Net cash used in investing activities (2,678) 2,579
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 2,031 249
Net increase (decrease) in short-term borrowings 390 (474)
Proceeds from stock options exercised 57 -
Proceeds from borrowings - 2,993
Principal payments on notes payable (300) (3,000)
Cash dividends (350) (345)
-------- --------
Net cash provided by (used in) financing activities 1,828 (577)
Net increase in cash and cash equivalents 671 5,112
Cash and cash equivalents at beginning of year 19,306 11,758
-------- --------
Cash and cash equivalents at end of period $ 19,977 $ 16,870
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for: Interest $ 2,563 $ 1,629
Income tax 555 146
Supplemental schedule of noncash investing and financing activities:
Bancorp purchased all of the capital stock of First Bank Washington for
$4,119. In connection with the acquisition, liabilities were assumed
as follows:
Fair value of assets acquired $ 52,709
Cash paid for capital stock (4,119)
--------
Liabilities assumed $ 48,590
========
See accompanying notes to consolidated financial statements.
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CENTRAL BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six months ended June 30, 1995 are not necessarily
indicative of the results anticipated for the year ending December 31, 1995.
For additional information refer to the consolidated financial statements and
footnotes thereto included in Central Bancorporation's annual report on Form
10-KSB for the year ended December 31, 1994.
2. NET INCOME PER SHARE
Net income per share is computed using the weighted average number of
common stock outstanding, including shares issuable under stock options plans,
when dilutive, during the periods presented.
The weighted average number of shares outstanding used to compute net
income per share was 1,037,770 during the quarter and 1,038,438 during the six
month periods in 1995 and 1,031,730 during the quarter and 1,031,219 during the
six month periods in 1994, respectively.
3. STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks, interest bearing deposits, and federal funds sold.
4. CONSOLIDATION
The consolidated financial statements include the accounts of Central
Bancorporation, Central Washington Bank, North Central Washington Bank, and
Central Financial Services, Inc. All significant inter-company balances and
transactions have been eliminated in consolidation.
The consolidated statements of operations and the consolidated statements
of cash flows only reflect activity from North Central Washington Bank since
the date of acquisition, May 1, 1994.
5. PRO-FORMA STATEMENTS
Bancorp purchased North Central Washington Bank on April 30, 1994. Therefore
the Statements of Operation are not comparable. For purposes of comparability,
below is a condensed pro-forma income statement that assumes the acquisition
had occurred on January 1, 1994 and reflects pro-forma adjustments carried
forward through the periods presented. The pro-forma statements may not be
indicative of the results that would have occurred if the acquisition had been
effective on the dates indicated or of the results that may be obtained in the
future.
Condensed Pro-forma Three Months Ended Six Months Ended
Statements of Operations June 30, June 30,
----------------------- --------------------
(Dollars in thousands) 1995 1994 1995 1994
------ ------ ------ ------
Interest income $3,865 $3,274 $7,570 $6,416
Interest expense 1,559 1,120 2,935 2,189
------ ------ ------ ------
Net interest income 2,306 2,154 4,635 4,227
Other income 560 228 1,029 661
Other expense 1,887 1,942 3,790 3,763
Income tax expense 307 170 573 352
------ ------ ------ ------
Net income $ 672 $ 270 $1,301 $ 773
====== ====== ====== ======
Net income per share $ 0.65 $ 0.26 $ 1.25 $ 0.75
====== ====== ====== ======
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CENTRAL BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. IMPAIRED LOANS
Effective January 1, 1995, Bancorp adopted Statement 114, "Accounting by
Creditors for Impairment of a Loan" and Statement 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosure - an Amendment of
FASB Statement No. 114" which was issued by the Financial Accounting Standards
Board (FASB) in 1994. These Statements require that impaired loans that are
within their scope be measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or as a practical
expedient, at the loans observable market price, or the fair value of the
collateral if the loan is collateral dependent.
As of June 30, 1995 and during the first six months of 1995, Bancorp's
investment in impaired loans was not material.
Generally, when a loan becomes impaired Bancorp discontinues the accrual
of interest income. Future interest income is recognized using the cash basis
of accounting until the loan is no longer impaired.
6. ACCOUNTING FOR MORTGAGE SERVICING RIGHTS
In May 1995, the FASB issued Statement No. 122, "Accounting for Mortgage
Servicing Rights," which require Banks to allocate the cost of mortgage loans
sold between the loan principal and loan servicing rights based on their
relative fair values. Bancorp anticipates to adopt the provisions of Statement
No. 122 on a prospective basis beginning January 1, 1996. Management believes
there will be no material impact upon the adoption of this statement.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
GENERAL
This discussion is provided for Central Bancorporation ("Bancorp") and
wholly owned subsidiaries Central Washington Bank ("Central") and North Central
Washington Bank ("North Central"). Central and North Central operate in ten
locations, located in North Central Washington, and provide families and
businesses with a wide variety of financial services, primarily loans and
deposits. Central Washington Bank's wholly owned subsidiary, Central Financial
Services, Inc. provides banking customers with financial products, such as
annuities and mutual funds.
On April 30, 1994, Bancorp completed the cash purchase of 100 percent
of the stock of First Bank Washington, the wholly owned subsidiary of FBS
Washington Bancorporation and First Bank System, Inc. Because of the
acquisition, the statements of operations presented in this quarterly report
are not comparable. For a pro-forma presentation of the statements of
operations please see Note 5 to the Consolidated Financial Statements. The
pro-forma statements assume the acquisition occurred on January 1, 1994. It
should be noted that the pro-forma statements may not be indicative of the
results that would have occurred if the acquisition had been effective on the
dates indicated or of the results that may be obtained in the future.
RESULTS OF OPERATIONS
Net income
Net income for the second quarter of 1995 increased by 148 percent to
$672,000 or $.65 per share compared to $271,000 or $.26 per share during the
same period a year ago. Net income for the first six months increased by 103
percent to $1,301,000 or $1.25 per share compared to $642,000 or $.62 per share
a year ago. The annualized return on average assets during the first six months
of 1995 was 1.34 percent compared to .86 percent during the same period last
year.
The second quarter and six month improvement in earnings was the
result of an increase in net interest income and reduction in security and
mortgage loan losses, partially offset by higher expenses, which were related
to the operations of North Central. The impact on earnings related to the
purchase of North Central was the addition of approximately $338,000 during the
first six months of 1995, or $.33 per share.
The 1994 losses related to the sale of securities and mortgages were
attributable to managements decision to sell lower yielding assets resulting
from significant increases in both short term and long term interest rates
during the first six months of 1994. The increase in net interest income and
the increase in expenses was primarily related to the operation of Bancorp's
acquired Bank subsidiary, North Central Washington Bank, beginning May 1, 1994.
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Net interest income
Net interest income during the first six months of 1995 totaled
$4,635,000 a $1,114,000 (31.6 percent) increase over 1994 ($870,000 of the
increase was from North Central). The increase resulted from an increase in net
earning assets and from a slightly higher interest rate spread. The table below
(in thousands) is illustrative:
1995 1994
---- ----
Balance Yield * Balance Yield *
------- ------- ------- -------
Average earning assets:
Loans $126,434 9.85% $ 88,868 9.52%
Investments 46,080 5.48 41,478 5.17
Other 6,424 5.96 8,483 3.64
-------- ----- -------- -----
Total 178,938 8.58 138,829 7.86
Average interest-bearing
liabilities:
Deposits 149,413 3.70 112,227 3.07
Other 5,678 7.03 4,133 4.29
-------- ----- -------- -----
Total 155,091 3.82 116,360 3.12
-------- ----- -------- -----
Net earning assets $ 23,847 5.27% $ 22,469 5.23%
======== ===== ======== =====
*Annualized with a 34 percent tax equivalent adjustment.
Net interest income is influenced by changes in both interest rates
(rate) and changes in interest-bearing assets and liabilities (volume). The
table presented below (adjusted for tax equivalency and in thousands) is an
analysis of these changes for the second quarter and first six months of 1995
compared to the same period a year ago.
SECOND QUARTER YEAR-TO-DATE
------------------------------------ ----------------------------------
Interest Interest Net Int. Interest Interest Net Int.
Income Expense Income Income Expense Income
-------- -------- --------- -------- -------- ---------
Rate $ 195 $ 250 $ (55) $ 339 $ 348 $ ( 9)
Volume 684 328 356 1,896 788 1,108
------- ------- ------- ------- ------- -------
$ 879 $ 578 $ 301 $ 2,235 $ 1,136 $ 1,099
======= ======= ======= ======= ======= =======
Bancorp's average earning assets for the first six months of 1995
increased $40,109,000 ($32,720,000 from North Central) over the first six
months of 1995 while Bancorp's average interest-bearing liabilities increased
$38,731,000 ($27,842,000 from North Central). The increase in both earning
assets and interest bearing liabilities resulted primarily from the North
Central acquisition. Excluding the volume from the acquisition, Bancorp's
average earning assets and average interest bearing liabilities increased
$7,389,000 and $10,889,000 respectively during the periods presented and were
primarily the result of increases in both deposit and loan volumes. In
addition, Bancorp's notes payable increased in connection with the North
Central acquisition. The difference between the interest earned and the
interest paid on this increased volume resulted in approximately $356,000 and
$1,108,000 in additional net interest during the second quarter and first six
months of 1995, respectively.
The yield on earning assets increased 72 basis points during the first
six months of 1995 to 8.58 percent as compared to 7.86 percent during the same
period last year. An increase in yield was experienced in loans and investments
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securities. This increase is a reflection of the higher interest rate
experienced in 1994. Bancorp's cost of funds also increased 70 basis points
during the first six months of 1995 to 3.82 percent as compared to 3.12 percent
last year. Because the increase in the yield on earning assets was higher than
the increase in cost of funds, Bancorp's net interest margin increased from
5.23 percent during 1994 to 5.27 percent during 1995. Bancorp net interest
margin decreased from 5.40 percent during the first quarter of 1995 to 5.14
percent during the second quarter of 1995. This decrease in yield was a result
of higher deposit rates paid during the second quarter resulting from
increasing competitive pressure.
For the six month period, the higher interest rates experienced since
1994 have not impacted Bancorp's net interest margin significantly. However,
because Bancorp is liability sensitive (ie. liabilities are subject to
repricing faster than assets) a change in the direction of rates may have an
impact on net interest margin. Generally, when interest rates increase
Bancorp's net interest margin decreases and if interest rates decrease
Bancorp's net interest margin may increase. During July 1995, the Federal
Reserve changed the direction of interest rates by slightly lowering the
federal funds rate. This action would normally benefit Bancorp's net interest
margin. However, because of strong loan demand banks are likely to be more
competitive for deposits and therefore these rates may remain relatively high.
Bancorp has approximately $83.0 million in earning assets repricing or
maturing within the next year. As a repricing offset, Bancorp has approximately
$85.2 million in savings and checking accounts whose interest rates may
increase/decrease along with other market interest rates. Historically, the
interest rates paid on savings and checking accounts lag and do not increase as
far as the rates earned on loans and investments. These rates have been
relatively stable over the past year. Because these rates are already low any
decrease in interest rates may not lower these rates significantly. As
discussed above, because of competitive pressures to keep deposit rates
relatively high and because of the already low savings and checking interest
rates Bancorp may continue to experience a decrease in its net interest margin.
In the event interest rates increase, Bancorp has a significant
portion of its securities available for sale to protect Bancorp's margin. These
securities have maturities within one to three years and may be sold prior to
maturity in a rising interest rate environment. If they are sold prior to
maturity Bancorp my experience losses in these securities.
Provision and Allowance for Loan Losses
Bancorp did not provide for any loan losses during the first six
months of 1995 and 1994. Bancorp had net loan recoveries of $44,000 and $46,000
during the first six months of 1995 and 1994, respectively. The effect of the
net recoveries, was to increase the allowance for loan losses without making
any provisions. Bancorp anticipates loan recoveries to slow in the future which
may necessitate the resumption of loan loss provisions as Bancorp's loan
portfolio increases.
The allowance for loan losses totaled $1,711,000 (1.29 percent of
loans) at June 30, 1995, compared to $1,167,000 (1.36 percent of loans) at
December 31, 1994. Based upon management's continuing evaluation of inherent
risks in the loan portfolio, current levels of classified assets, and economic
factors, management believes the allowance is adequate to absorb potential
losses in the current portfolio.
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Other Income and Expense
Other income, excluding security losses, increased $197,000 or 54
percent during second quarter and increased $274,000 or 36 percent during the
first six months of 1995 when compared to the same period a year ago. An
increase in gain on sales of loans and an increase in service charges on
deposits were primarily responsible for both period increases. The increase in
service charges on deposit accounts resulted primarily from the purchase of
North Central.
The losses realized on securities available for sale during 1994 were
the result of the sale of Bancorp's longer term available for sale debt
securities. Consistent with Bancorp's internal policies these assets were sold
because of the increase in interest rates and the resulting negative impact on
capital which occurs as a result of the accounting provisions of SFAS No. 115
as well as the adverse impact on net interest margin.
The losses incurred on loans during 1994 were also the result of
higher interest rates. Bancorp sells loans to investors in the secondary market
at yields different than the originated or committed yield which results in
gains and losses. During the first six months of 1994, Bancorp sold
approximately $10.8 million in loans in the secondary market at a net gain of
$4,000. This compares to sales of $5.5 million in loans in 1995 at a gain of
$139,000. The 1994 gain was offset by a $40,000 provision for unrealized losses
incurred on committed but unfunded loans.
Other expenses increased $149,000 or 9 percent and increased $684,000
or 22 percent during the second quarter and first six months of 1995,
respectively, compared to the same period last year. Excluding the North
Central six month impact of $510,000, the increases occurred primarily in
Bancorp's salaries and employee benefits, legal and professional fees, and
equipment and data processing. Other expenses as a percent of average assets
(annualized) was 3.9 percent in 1995 and 4.1 percent in 1994. Bancorp's
efficiency ratio (operating expenses as a percent of operating income) improved
to 67 percent in 1995 compared to 73 percent last year. Bancorp anticipates
these ratios to continue improving as it's Leavenworth and Cashmere branch
facilities, which were started de novo during the past five years, gain
profitability as loan and deposit volumes increase and as efficiencies
associated with the acquisition of North Central continue to be realized.
FINANCIAL CONDITION
Bancorp as a financial intermediary attracts deposits and invests
those funds in earning assets, primarily loans and investment securities, with
expectations for profit. As of June 30, 1995, Bancorp's total loans increased
$10.4 million while Bancorp's total assets increased $3.8 million since
December 31, 1994. Bancorp's total deposits also increased $2.0 million during
the period. The increase in loans was primarily in both commercial and 1 to 4
family real estate loans and was funded with a increase in deposits and a
decrease in securities. The increase in deposits was primarily in certificates
of deposit partially offset by a decrease in both non-interest bearing demand
and savings accounts. For more information on the change in cash and cash
equivalents, see the Consolidated Statements of Cash Flows on page 5 of this
report.
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Loans and Deposits
Below are summaries of outstanding loans and deposits at June 30, 1995
compared to December 31, 1994 (in thousands):
1995 1994
---- ----
Loans
- -----
Commercial $ 19,297 $ 18,255
Real Estate
Construction 5,067 5,649
Commercial 28,632 25,736
1-4 Single family 41,779 38,801
Installment 20,090 18,727
Agricultural 13,736 12,750
Other 3,921 2,232
--------- ---------
Total loans $ 132,522 $ 122,150
========= =========
Deposits
- --------
Non-interest bearing $ 22,217 $ 27,245
Interest bearing demand 39,197 39,626
Money market accounts and
other savings accounts 47,062 50,948
Time deposits, $100,000 or more 16,595 12,155
Other time deposits 52,150 45,216
--------- --------
Total deposits $ 177,221 $ 175,190
========= =========
Non-accrual and Past Due Loans
Certain information regarding non-accrual, past due, and restructured
loans is set forth in the following table (in thousands):
JUNE 30, DECEMBER 31,
1995 1994 1994
---- ---- ----
Past due 30+ days and
still accruing $1,680 $1,525 $1,675
Non-accrual loans 168 217 388
Past due and non-accrual
loans as a percentage
of loans 1.4% 1.3% 1.7%
The total of past due loans and non-accrual loans decreased $215,000
to $1,848,000 at June 30, 1995 compared to $2,063,000 at December 31, 1994. The
decrease was primarily in non-accrual loans. Bancorp does not anticipate any
significant losses with respect to these loans or any other assets not reported
above.
Stockholders' Equity and Liquidity
Bancorp's stockholders' equity at June 30, 1995 was $14,725,000
compared to $13,398,000 at December 31, 1994. On a per share basis,
stockholders' equity totaled $14.58 compared to $13.41 on the same dates,
respectively. Bancorp's annualized return on average equity during the first
six months of 1995 totaled 18.9 percent compared to 10.3 percent during the
same period a year ago. The increase in stockholders' equity was the result of
the retention of earnings after payment of $350,000 in cash dividends, $57,000
from the exercise of 10,400 shares related to stock options, and by a $320,000,
net of tax, decrease in the unrealized loss on securities available for sale.
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Current regulatory capital adequacy guidelines require bank holding
companies and banks to maintain a minimum "leverage" ratio of core capital
(which excludes unrealized gain and losses on securities available for sale) to
total assets of at least 4 percent.
In addition to the leverage ratio requirements, the Bancorp is subject
to risked-based capital guidelines, under which risk percentages are assigned
to various categories of assets and off balance sheet items to calculate a
risk-adjusted capital ratio. They require, Tier I capital of 4 percent and
Total capital of 8 percent.
Below is a summary of the various capital ratios of Bancorp and
subsidiaries at June 30, 1995 compared to December 31, 1994.
North Regulatory
Ratio Bancorp Central Central Minimum
- ----- ------- ------- ------- ---------
Leverage 6/30/95 7.41% 8.35% 8.74% 4.0%
12/31/94 7.03% 8.58% 8.06%
Tier I capital 6/30/95 11.24% 12.15% 14.98% 4.0%
12/31/94 11.16% 13.02% 14.43%
Total capital 6/30/95 12.49% 13.39% 16.24% 8.0%
12/31/94 12.41% 14.28% 15.69%
The above ratios do not include unrealized gains and losses on
securities available for sale which are excluded from the ratios by the federal
regulatory agencies.
Bancorp's liquidity position decreased during the first six months of
1995 as a result of increased loan demand. However, Bancorp believes its
liquidity to be more than adequate to meet future funding needs. Liquidity
indicators include the loan to deposit ratio, which totaled 75 percent and 70
percent on June 30, 1995 and December 31, 1994, respectively, and the amount of
interest bearing deposits and investment securities maturing in one year, which
totaled $19,813,000 and $21,129,000 on the same dates, respectively. Deposits
in excess of $100,000 and short-term borrowing, considered by Bancorp as
volatile liabilities, increased from $14,355,000 at December 31, 1994 to
$19,185,000 at June 30, 1995.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Bancorp's 1995 Annual Meeting of Shareholders was held on
April 28, 1994.
(b) At the Annual Meeting the following Directors were duly
elected for a three-year term ending at the 1998 annual meeting; Alfred
Cordell, Courtney Guderian, and William Liddell. The Directors whose terms of
office expire in 1996 are Lonnie DeCamp and Gerald Cawdery. Don Wm. Telford,
Gary M. Bolyard, and Larry Carlson remain in office until 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No reports on Form 8-K were filed during the quarter ended
June 30, 1995.
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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
undersigned thereunto duly authorized.
CENTRAL BANCORPORATION
(Registrant)
Date July 31, 1995 By /s/ GARY M. BOLYARD
---------------------------- --------------------------
Gary M. Bolyard
President and
Chief Executive Officer
Date July 31, 1995 By /s/ JOSEPH E. RIORDAN
---------------------------- --------------------------
Joseph E. Riordan
Treasurer and Assistant Secretary
(Principal Financial Officer)
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