For more information: Patricia B. Sweet
Senior Vice President
Corporate Communications
Phone: (203) 578-6296
Fax: (203) 578-6279
CENTER FINANCIAL CORPORATION ANNOUNCES 43% INCREASE
IN EARNINGS; CONTINUES EARNINGS MOMENTUM
Waterbury, CT - July 22, 1996 . . . Center Financial Corporation (CFCX/NASDAQ),
the holding company of Centerbank, today reported net income of $8.0 million, or
$0.54 per share, for the quarter ended June 30, 1996, an increase of $2.4
million over net income of $5.6 million, or $0.39 per share, for the second
quarter of 1995. Net income for the six months ended June 30, 1996 was $13.4
million, or $0.90 per share, compared with net income of $10.2 million, or $0.72
per share for the comparable 1995 period.
In making the announcement, Center Financial President and Chief Executive
Officer Robert J. Narkis commented, "The results reflected here are very much in
line with the performance projections announced in February of this year." He
continued, "Our focus over the past 18 months has been on redesigning our
business processes and reducing expenses. Our employees have done a yeoman's job
toward meeting these goals. During the remainder of 1996, our efforts will be
concentrated on maintaining this direction and delivering a vigorous franchise
to First Union." On June 17, Center Financial announced a definitive merger
agreement with First Union Corporation (FTU/NYSE) in which First Union would
purchase Center Financial for approximately $379 million. The merger is expected
to close before year end.
The company also announced that the Board of Directors declared a regular
quarterly dividend of $0.07 per share, payable August 12, 1996, to shareholders
of record on August 2, 1996. This is the company's seventh consecutive quarterly
dividend since restoring the dividend in the first quarter of 1995.
Noninterest income during the second quarter of 1996 was $12.7 million, down
$0.8 million or 6.1 percent from the comparable period in 1995. Excluding the
one-time gain of $4.9 million on the sale of branches realized in the second
quarter of 1995, noninterest income in that period would have been $8.6 million.
The 1996 second quarter noninterest income increased $4.1 million over the
adjusted 1995 amount, attributable in part to higher levels of mortgage banking
activity and gains on the sale of securities.
After adjusting for the $5.7 million restructuring charge incurred in the second
quarter of 1995, noninterest expenses for the company were down slightly, from
$27.2 million to the June 1996 level of $27.0 million. Remarking on the results,
Mr. Narkis stated, "While the company continued to realize benefits from the
expense reduction programs undertaken in 1995, these results were substantially
offset by required hires in the mortgage company occasioned by the
higher-than-anticipated level of mortgage production."
The net interest margin on average interest-earning assets for the quarter ended
June 30, 1996 was 3.14 percent, down 48 basis points from a year earlier.
Total shareholders' equity, at $233.9 million, was 5.82 percent of total assets
at June 30, 1996, representing a $26.9 million increase from $207.0 million at
June 30, 1995. Total assets were $4.0 billion at the close of the second quarter
of 1996, an increase of 16.5 percent over the second quarter of 1995. Book value
at June 30, 1996 was $15.58 per share.
Historical financials have been restated to reflect the effect of the December
1995 Great Country Bank transaction, but have not been restated to reflect the
April 1996 Heritage Bank merger.
Center Financial Corporation is the holding company for Centerbank, Centerbank
Mortgage Company, Center Capital Corporation and Affiliated Business Credit
Corporation. On June 17 it announced a definitive merger agreement with First
Union Corporation of Charlotte, N.C., the sixth largest United States banking
company with assets of $139.9 billion at June 30, 1996 and offices in 12 eastern
states, stretching from Connecticut to Florida, as well as in the District of
Columbia.
Centerbank delivers banking services throughout central Connecticut via 44
traditional branches in 27 communities, five supermarket branches and
alternative delivery systems, such as ATMs and telephone banking. It is insured
by the FDIC. Centerbank Mortgage Company is a full-service mortgage banking
company with a residential servicing portfolio of $7.8 billion. Center Capital
Corporation is an equipment leasing firm that provides lease financing services
nationwide to manufacturers and end-users of capital equipment. Affiliated
Business Credit Corporation is a commercial finance company serving the
Northeast.
CENTER FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except share amounts) June 30, December 31, June 30,
1996 1995 1995
------------ ------------ ------------
Assets
Cash and due from banks $ 67,920 $ 77,069 $ 87,529
Federal funds sold - - 5,400
Securities:
Federal Home Loan Bank stock, at cost 42,905 32,321 28,850
Available for sale (amortized cost: $414,246,
$208,823 and $39,132) 413,984 214,625 41,366
Held to maturity (fair value: $167,487, $160,437 and $404,994) 170,037 161,988 407,375
------------ ------------ ------------
Total securities 626,926 408,934 477,591
------------ ------------ ------------
Loans and leases:
Residential first mortgage loans available for sale 238,954 153,173 138,410
Residential first mortgage loans held for investment 1,846,922 1,732,253 1,575,443
Consumer home equity loans 230,400 247,127 261,971
Other consumer loans 158,808 131,293 101,869
Commercial first mortgage loans:
Permanent 333,335 295,202 299,111
Construction 27,285 33,896 14,041
Other commercial loans 120,677 123,026 118,189
Leases 171,591 193,762 204,754
Allowance for loan and lease losses (44,397) (43,025) (46,317)
------------ ------------ ------------
Total loans and leases, net 3,083,575 2,866,707 2,667,471
------------ ------------ ------------
Real estate owned, net 25,158 25,659 27,939
Premises and equipment, net 48,949 46,617 47,478
Accrued interest receivable 22,086 21,816 18,938
Mortgage servicing rights 78,100 65,461 56,868
Excess servicing fees receivable 16,022 15,264 12,248
Deferred tax assets, net 14,575 15,399 15,455
Acquisition related intangibles 14,356 15,277 12,069
Other assets 20,674 22,216 21,470
------------ ------------ ------------
$ 4,018,341 $ 3,580,419 $ 3,450,456
============ ============ ============
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand $ 210,568 $ 216,163 207,147
Savings 649,160 777,829 784,780
Money market 281,477 137,334 142,962
Time 1,417,479 1,345,298 1,254,475
------------ ------------ ------------
Total deposits 2,558,684 2,476,624 2,389,364
------------ ------------ ------------
Escrow on first mortgage loans 79,562 63,546 71,402
Borrowings 1,116,528 787,385 747,668
Other liabilities 29,631 31,438 35,034
------------ ------------ ------------
3,784,405 3,358,993 3,243,468
------------ ------------ ------------
Shareholders' equity:
Preferred stock - voting; no par value; 1,000,000 authorized - - -
shares; issued and outstanding - none
Preferred stock - nonvoting; no par value; 10,000,000 - - -
authorized shares; issued and outstanding - none
Common stock; par value $1; 75,000,000 authorized shares; 15,013,864, 14,445,649
and 14,293,690 shares issued and outstanding at June 30,1996, December 31,
1995 and June 30, 1995, respectively 15,014 14,446 14,294
Paid-in capital 183,453 176,048 175,130
Retained earnings 35,623 27,594 16,426
Net unrealized gain (loss) on securities available for sale,
net of tax effect (154) 3,338 1,138
------------ ------------ ------------
233,936 221,426 206,988
------------ ------------ ------------
$ 4,018,341 $ 3,580,419 $ 3,450,456
============ ============ ============
CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENT of OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
------------------------ -------------------------
1996 1995 1996 1995
------------ ----------- ------------ ------------
Interest and Dividend Income
Residential first mortgage loans $ 36,458 $ 31,018 $ 73,371 $ 59,984
Other loans 18,603 20,080 37,286 38,878
Leases 3,644 4,287 7,504 8,631
------------ ----------- ------------ ------------
Total interest and fees on loans and leases 58,705 55,385 118,161 107,493
------------ ----------- ------------ ------------
Interest on mortgage-backed securities 7,661 7,250 13,704 15,413
Interest and dividends on other earning assets 1,448 837 2,362 1,512
------------ ----------- ------------ ------------
Total interest income 67,814 63,472 134,227 124,418
------------ ----------- ------------ ------------
Interest Expense
Interest on deposits 24,785 22,539 49,557 42,819
Escrow on first mortgage loans 297 253 486 433
Interest on borrowings 14,342 11,719 27,116 23,061
------------ ----------- ------------ ------------
Total interest expense 39,424 34,511 77,159 66,313
------------ ----------- ------------ ------------
Net interest income 28,390 28,961 57,068 58,105
Provision for loan and lease losses 2,085 1,248 3,737 2,496
------------ ----------- ------------ ------------
Net interest income after provision for loan and lease losses 26,305 27,713 53,331 55,609
------------ ----------- ------------ ------------
Noninterest Income
Customer service fees 1,706 1,594 3,396 3,168
Mortgage servicing income, net 3,181 2,579 5,460 5,569
Gain on sale of loans and servicing rights, net 5,056 2,787 7,643 4,009
Gain on sale of securities, net 1,259 905 3,156 1,346
Gain on sale of branches 4,889 4,889
Other income 1,457 734 2,564 1,213
------------ ----------- ------------ ------------
Total noninterest income 12,659 13,488 22,219 20,194
------------ ----------- ------------ ------------
Noninterest Expenses
Salaries and employee benefits 13,554 12,893 26,883 26,093
Occupancy and equipment 3,986 4,276 8,442 8,876
Professional and other services 3,410 3,243 7,068 6,748
Net cost of real estate owned 1,332 1,488 2,844 2,940
FDIC and state assessment (155) 1,772 14 3,545
Advertising and public relations 1,003 926 2,217 1,906
Restructuring charge 5,689 5,689
Other expenses 3,916 2,570 8,060 5,190
------------ ----------- ------------ ------------
Total noninterest expenses 27,046 32,857 55,528 60,987
------------ ----------- ------------ ------------
Income before income taxes 11,918 8,344 20,022 14,816
Income tax expense 3,881 2,741 6,593 4,615
------------ ----------- ------------ ------------
Net income $ 8,037 $ 5,603 $ 13,429 $ 10,201
============ =========== ============ ============
Net income per common share $ 0.54 $ 0.39 $ 0.90 $ 0.72
============ =========== ============ ============
Average common shares outstanding 14,957,763 14,275,977 14,928,977 14,263,835
============ =========== ============ ============
CENTER FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(In thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
------------------------ -------------------------
1996 1995 1996 1995
------------ ----------- ------------ ------------
Statement of Operations
Interest and dividend income $ 67,814 $ 63,472 $ 134,227 $ 124,418
Interest expense 39,424 34,511 77,159 66,313
------------ ----------- ------------ ------------
Net interest income 28,390 28,961 57,068 58,105
Provision for loan and lease losses 2,085 1,248 3,737 2,496
Noninterest income 12,659 13,488 22,219 20,194
Noninterest expense 27,046 32,857 55,528 60,987
------------ ----------- ------------ ------------
Income before income taxes 11,918 8,344 20,022 14,816
Income tax expense 3,881 2,741 6,593 4,615
------------ ----------- ------------ ------------
Net income $ 8,037 $ 5,603 $ 13,429 $ 10,201
============ =========== ============ ============
Net income per common share $ 0.54 $ 0.39 $ 0.90 $ 0.72
============ =========== ============ ============
Average Balance Sheet
Loans and leases, net $ 2,987,008 $ 2,675,773 $ 2,961,751 $ 2,629,347
Securities and other interest-earning assets 581,626 522,431 515,411 542,441
Total average interest-earning assets 3,568,634 3,198,204 3,477,162 3,171,788
Cash and due from banks 65,862 56,425 63,211 58,143
Other assets 229,429 209,060 228,170 213,897
Total average assets $ 3,863,925 $ 3,463,689 $ 3,768,543 $ 3,443,828
Deposits $ 2,562,558 $ 2,410,345 $ 2,552,995 $ 2,409,918
Escrow on first mortgage loans 67,364 60,669 59,443 54,357
Borrowings 981,325 755,776 912,090 745,307
Other liabilities 24,717 32,530 19,042 32,188
Shareholders' equity 227,961 204,369 224,973 202,058
Total average liabilities and shareholders' equity $ 3,863,925 $ 3,463,689 $ 3,768,543 $ 3,443,828
Selected Ratios and Other Data
Return on average assets 0.83% 0.65% 0.71% 0.59%
Return on average shareholders' equity 14.10 10.97 11.94 10.10
Dividend payout ratio 12.96 12.82 15.56 13.89
Average shareholders' equity to average assets 5.90 5.90 5.97 5.87
Total shareholders' equity to total assets 5.82 6.00
Yield on interest-earning assets 7.51 7.82 7.62 7.73
Cost of interest-bearing liabilities 4.65 4.53 4.68 4.38
Net interest spread 2.86 3.29 2.94 3.35
Net interest margin 3.14% 3.57% 3.24% 3.61%
Per common share at June 30:
Book value $ 15.58 $ 14.48
Market value (close) 24.16 14.50
Regulatory Ratios
Centerbank:
Leverage ratio 5.68% 5.64%
Tier 1 capital to risk-weighted assets 8.87 8.76
Total capital to risk-weighted assets 11.14 11.15
Center Financial Corporation: (as successor to Centerbank)
Leverage ratio 5.71 5.64
Tier 1 capital to risk-weighted assets 8.92 8.76
Total capital to risk-weighted assets 11.19% 11.15%
CENTER FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS
(Unaudited)
(In thousands)
Summary of Nonperforming Assets
June 30, December 31, June 30,
1996 1995 1995
------------ ------------ ------------
Nonaccruing loans and leases:
Residential first mortgage loans:
1 - 4 family $ 27,657 $ 24,495 $ 23,275
Other 3,860 3,650 2,422
Home equity and other consumer loans 4,203 3,678 3,193
Commercial first mortgage loans 28,239 20,639 24,166
Other commercial loans 12,441 7,755 8,644
Leases 2,295 3,777 2,619
------------ ------------ ------------
Total nonaccruing loans and leases, net 78,695 63,994 64,319
------------ ------------ ------------
Real estate owned ("REO"):
Commercial 24,204 23,682 29,449
Residential 5,049 6,517 5,320
------------ ------------ ------------
Total real estate owned 29,253 30,199 34,769
------------ ------------ ------------
Total nonperforming assets $ 107,948 $ 94,193 $ 99,088
============ ============ ============
Net loan and lease charge-offs during the quarter $ 1,264 $ 3,201 $ 1,520
Allowance for loan and lease losses (1) 44,397 43,025 46,317
Allowance for losses on REO 4,095 4,540 6,830
Net loan and lease charge-offs to average loans and 0.04% 0.11% 0.06%
Allowance for loan and lease losses to average loan 1.50 1.53 1.73
Allowance for loan and lease losses to nonaccruing
loans and leases 56.42 67.23 72.01
Allowances for loan, lease and REO losses to nonperforming
assets 44.92 50.50 53.64
Nonperforming assets to related asset categories 3.42 3.20 3.61
Nonperforming assets to total assets 2.69% 2.63% 2.87%
<FN>
Summary of Impaired Loans
Center Financial reported $40,680 of impaired loans at June 30, 1996. The components of the impaired loan balance were as
follows: $28,239 of commercial mortgage loans and $12,441 of other commercial loans.
Summary of Restructured Loans
The total in the "Total nonaccruing loans and leases, net" category listed above includes $1,466, $1,005 and $158 of loans
that were restructured as of June 30, 1996, December 31, 1995 and June 30, 1995, respectively.
(1 The amount reported for June 30, 1996 includes $1,498 as an allowance for credit losses on impaired loans totaling
$21,232 in accordance with SFAS Nos. 114 and 118.
</FN>