1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1997
-------------------------------------------------
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. 0-15752
--------------------------------------------------------
CENTURY BANCORP, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF MASSACHUSETTS 04-2498617
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 MYSTIC AVENUE, MEDFORD, MA 02155
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617)391-4000
- -------------------------------------------------------------------------------
(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 and 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.
X Yes No
----- -----
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of March 31, 1997:
CLASS A COMMON STOCK, $1.00 PAR VALUE 3,472,997 SHARES
CLASS B COMMON STOCK, $1.00 PAR VALUE 2,292,470 SHARES
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.
Date: MAY 5, 1997 CENTURY BANCORP, INC.
-------------------------- -------------------------------------
(Registrant)
/s/ Paul V. Cusick, Jr. /s/ Kenneth A. Samuelian
- -------------------------------- -------------------------------------
PAUL V. CUSICK, JR. KENNETH A. SAMUELIAN
VICE PRESIDENT AND TREASURER VICE PRESIDENT AND CONTROLLER,
(PRINCIPAL FINANCIAL OFFICER) CENTURY BANK & TRUST COMPANY
(CHIEF ACCOUNTING OFFICER)
1 of 15
2
Century Bancorp, Inc.
Page
Index Number
----- ------
Part I. Financial Information
- ------- ---------------------
Item 1. Financial Statements
--------------------
Consolidated Balance Sheets:
March 31, 1997 and 1996;
December 31, 1996. 3
Consolidated Statements of Income:
Three (3) Months Ended March 31, 1997
and 1996. 4
Consolidated Statements of Cash Flows:
Three (3) Months Ended March 31, 1997
and 1996. 5
Consolidated Changes in Stockholders
Equity: December 31, 1995 through
March 31, 1997. 6
Notes to Consolidated Financial
Statements 7-11
Item 2. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of
----------------------------------
Operations 12-14
----------
Part II. Other Information
- -------- -----------------
Item 1 through Item 6 15
2 of 15
3
PART I - Item 1
- ------
Century Bancorp, Inc. - Consolidated Balance Sheets (unaudited)
- ----------------------------------------------------------------------------------------------------------------------
(000's) Mar 31, Dec 31, Mar 31,
Assets 1997 1996 1996
- ------ -------- -------- --------
Cash and due from banks $ 38,371 $ 46,681 $ 33,210
Federal funds sold 0 21,000 12,000
Interest-bearing deposits in other banks 0 0 77
-------- -------- --------
Total cash and cash equivalents 38,371 67,681 45,287
-------- -------- --------
Securities available-for-sale, amortized cost $83,230;
$81,140; $91,153, respectively 82,544 81,015 90,925
Securities held-to-maturity, market value $111,483;
$107,331; $84,920, respectively 113,168 107,715 85,693
Loans, net of unearned discount:
Commercial & industrial 44,857 41,006 38,582
Construction & land development 6,025 3,576 1,388
Commercial real estate 132,909 133,757 130,535
Industrial revenue bonds 2,948 3,030 3,293
Residential real estate 77,335 76,081 78,039
Residential real estate held-for-sale 309 557 1,906
Consumer 15,642 12,749 8,661
Home equity 16,703 17,330 18,550
Overdrafts 305 194 318
-------- -------- --------
Total loans, net of unearned discount 297,033 288,280 281,272
Less allowance for loan losses (4,348) (4,179) (4,163)
-------- -------- --------
Net loans 292,685 284,101 277,109
Bank premises and equipment, net 8,528 8,265 8,602
Accrued interest receivable 4,874 4,283 4,507
Other real estate owned 134 182 474
Other assets 8,171 7,615 10,639
-------- -------- --------
Total assets $548,475 $560,857 $523,236
======== ======== ========
Liabilities
- -----------
Deposits:
Demand deposits $ 95,631 $111,704 $ 87,906
Savings and NOW deposits 132,554 129,792 134,020
Money market accounts 70,570 69,772 73,578
Time deposits 152,448 164,867 152,937
-------- -------- --------
Total deposits 451,203 476,135 448,441
Securities sold under agreements to repurchase 19,980 17,790 17,480
Federal Home Loan Bank (FHLB) borrowings and other borrowed funds 21,474 12,353 1,049
Other liabilities 7,444 7,090 12,749
-------- -------- --------
Total liabilities 500,101 513,368 479,719
Stockholders' equity
- --------------------
Class A common stock, $1.00 par value per share; 3,503 3,488 3,415
authorized 10,000,000 shares; issued 3,502,997
Class B common stock, $1.00 par value per share; 2,340 2,348 2,393
authorized 5,000,000 shares; issued 2,340,020
Additional paid-in capital 10,806 10,786 10,704
Retained earnings 32,304 31,117 27,314
Treasury stock, 77,550 shares (177) (177) (177)
-------- -------- --------
Realized stockholders' equity 48,776 47,562 43,649
Unrealized (losses) gains on securities available-for-sale, net of taxes (402) (73) (132)
-------- -------- --------
Total stockholders' equity 48,374 47,489 43,517
-------- -------- --------
Total liabilities and stockholders' equity $548,475 $560,857 $523,236
======== ======== ========
3 of 15
4
Century Bancorp, Inc. - Consolidated Statements of Income (unaudited)
- ----------------------------------------------------------------------------------
(000's except share data) Three months ended March 31,
1997 1996
---------- ----------
Interest income
Loans $ 6,665 $ 6,537
Securities held-to-maturity 1,813 1,139
Securities available-for-sale 1,243 1,463
Interest-bearing deposits in other banks 0 0
Federal funds sold 175 256
---------- ----------
Total interest income 9,896 9,395
Interest expense
Savings and NOW deposits 945 941
Money market accounts 484 531
Time deposits 2,130 2,217
Securities sold under agreements to repurchase 201 201
FHLB borrowings and other borrowed funds 85 13
---------- ----------
Total interest expense 3,845 3,903
---------- ----------
Net interest income 6,051 5,492
Provision for loan losses 255 255
---------- ----------
Net interest income after provision
for loan losses 5,796 5,237
Other operating income
Service charges on deposit accounts 411 388
Lockbox fees 309 370
Brokerage commissions 294 339
Gain on sales of loans 21 88
Other income 109 103
---------- ----------
Total other operating income 1,144 1,288
---------- ----------
Operating expenses
Salaries and employee benefits 3,013 2,994
Occupancy 319 392
Equipment 273 297
Other real estate owned 14 22
Other 1,011 913
---------- ----------
Total operating expenses 4,630 4,618
---------- ----------
Income before income taxes 2,310 1,907
Provision for income taxes 934 723
---------- ----------
Net income $ 1,376 $ 1,184
========== ==========
- ----------------------------------------------------------------------------------
Share data:
Weighted average number of shares outstanding 5,761,278 5,726,227
Net income per share $ 0.24 $ 0.21
Cash dividends declared:
Class A common stock $ 0.0500 $ 0.0400
Class B common stock $ 0.0070 $ 0.0056
4 of 15
5
Century Bancorp, Inc. - Consolidated Statements of Cash Flows (unaudited) 1997 1996
- ------------------------------------------------------------------------------------------------------------
For the three months ended
March 31,
(000's)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,376 $ 1,184
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 255 255
Deferred income taxes (110) (155)
Net depreciation and amortization 147 197
Increase in accrued interest receivable (591) (215)
Increase in other assets (265) (3,215)
Loans originated for sale (1,006) (6,456)
Proceeds from sales of loans 1,410 5,898
Gain on sales of loans (21) (88)
Loss (gain) on sales of real estate owned 4 (13)
Increase in other liabilities 354 5,848
-------- --------
Net cash provided by operating activities 1,553 3,240
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available-for-sale 9,250 18,165
Purchase of securities available-for-sale (11,299) (9,119)
Proceeds from maturities of securities held-to-maturity 1,500 19,250
Purchase of securities held-to-maturity (6,925) (26,979)
Net (increase) decrease in loans (9,254) 4,503
Proceeds from sales of real estate owned 180 514
Capital expenditures (532) (154)
-------- --------
Net cash (used in) provided by investing activities (17,080) 6,180
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in time deposits (12,419) (2,081)
Net decrease in demand, savings,money market and NOW deposits (12,513) (8,093)
Net proceeds from the issuance of common stock 27 23
Cash Dividends (189) (148)
Net increase (decrease) in securities sold under agreements to repurchase 2,190 (4,100)
Net increase (decrease) in FHLB borrowings and other borrowed funds 9,121 (848)
-------- --------
Net cash used in financing activities (13,783) (15,247)
-------- --------
Net decrease in cash and cash equivalents (29,310) (5,827)
Cash and cash equivalents at beginning of year 67,681 51,114
-------- --------
Cash and cash equivalents at end of period $ 38,371 $ 45,287
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 3,708 $ 3,764
Income taxes 602 738
Noncash transactions:
Property acquired through foreclosure $ 136 $ 130
Change in unrealized losses on securities available-for-sale, net of taxes $ (561) $ (477)
5 of 15
6
Century Bancorp, Inc. - Consolidated Statement of Changes in Stockholders' Equity (unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 through March 31, 1997
(000's) Unrealized
Treasury Treasury Gains(losses)
Stock Stock on Securities
Class A Class B Additional Class A, Class B, available- Total
Common Common Paid-In Retained 30,000 47,550 for-sale Stockholders'
Stock Stock Capital Earnings Shares Shares net of taxes, Equity
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 $3,406 $2,396 $10,687 $26,278 ($136) ($41) $345 $42,935
Conversion of Class B common stock to
Class A common stock, 3,000 shares 3 (3) -- -- -- -- -- --
Stock options exercised, 6,000 shares 6 -- 17 -- -- -- -- 23
Net income, 1st quarter 1996 -- -- -- 1,184 -- -- -- 1,184
Cash dividends, Class A common stock
$.040 per share -- -- -- (135) -- -- -- (135)
Cash dividends, Class B common stock
$.0056 per share -- -- -- (13) -- -- -- (13)
Net change in unrealized gains(losses)
on securities available-for-sale,
net of taxes -- -- -- -- -- -- (477) (477)
--------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1996 $3,415 $2,393 $10,704 $27,314 ($136) ($41) ($132) $43,517
Conversion of Class B common stock to
Class A common stock, 45,200 shares 45 (45) -- -- -- -- -- --
Stock options exercised, 28,350 shares 28 -- 82 -- -- -- -- 110
Net income, 2nd quarter 1996 -- -- -- 1,298 -- -- -- 1,298
Net income, 3rd quarter 1996 -- -- -- 1,404 -- -- -- 1,404
Net income, 4th quarter 1996 -- -- -- 1,548 -- -- -- 1,548
Cash dividends, Class A common stock
$.040 per share, per quarter -- -- -- (408) -- -- -- (408)
Cash dividends, Class B common stock
$.0056 per share, per quarter -- -- -- (39) -- -- -- (39)
Net change in unrealized gains(losses)
on securities available-for-sale,
net of taxes -- -- -- -- -- -- 59 59
--------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $3,488 $2,348 $10,786 $31,117 ($136) ($41) ($73) $47,489
Conversion of Class B common stock to
Class A common stock, 7,700 shares 8 (8) -- -- -- -- -- --
Stock options exercised, 7,000 shares 7 -- 20 -- -- -- -- 27
Net income, 1st quarter 1997 -- -- -- 1,376 -- -- -- 1,376
Cash dividends, Class A common stock
$.050 per share -- -- -- (173) -- -- -- (173)
Cash dividends, Class B common stock
$.0070 per share -- -- -- (16) -- -- -- (16)
Net change in unrealized gains(losses)
on securities available-for-sale,
net of taxes -- -- -- -- -- -- (329) (329)
--------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1997 $3,503 $2,340 $10,806 $32,304 ($136) ($41) ($402) $48,374
======================================================================================
6 of 15
7
Century Bancorp Inc.
Notes to Consolidated Financial Statements
BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited
- --------------------- interim consolidated financial statements reflect all
adjustments, consisting of normal recurring adjustments,
which are necessary to present a fair statement of the
results for the interim period presented of Century
Bancorp, Inc. (the "Company"). The results of operations
for the interim period ended March 31, 1997, are not
necessarily indicative of results for the entire year.
It is suggested that these statements be read in
conjunction with the consolidated financial statements
and the notes thereto included in the Company's Annual
Report.
As of January 1, 1997, the Company adopted Financial
Accounting Standards Board Statement of Financial
Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities." This statement provides
accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of
liabilities based on consistent application of a
financial-components approach that focuses on control.
It distinguishes transfers of financial assets that are
sales from transfers that are secured borrowings. Under
the financial-components approach, after a transfer of
financial assets, an entity recognizes all financial and
servicing assets it controls and liabilities it has
incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished.
The financial-components approach focuses on assets and
liabilities that exist after the transfer. Many of these
assets and liabilities are components of financial
assets that existed prior to the transfer. If a transfer
does not meet the criteria for a sale, the transfer is
accounted for as a secured borrowing with pledge of
collateral. SFAS No. 127, "Deferral of the effective
Date of Certain Provisions of SFAS No. 125," requires
the deferral of implementation as it relates to
repurchase agreements, dollar-rolls, securities lending
and similar transactions until after December 31, 1997.
Earlier or retroactive applications of this statement is
not permitted. The Company has determined that the
adoption of this statement will not have a material
impact on its consolidated financial statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------
The consolidated financial statements include the
accounts of Century Bancorp, Inc. (the "Company") and
its wholly-owned subsidiary, Century Bank and Trust
Company (the "Bank"). The Company provides a full range
of banking services to individual, business and
municipal customers in Massachusetts. As a bank holding
company, the Company is subject to the regulation and
supervision of the Federal Reserve Board. The Bank, a
state chartered financial institution, is subject to
supervision and regulation by applicable state and
federal banking agencies, including the Federal Reserve
Board, the Office of the Comptroller of the Currency
(the "Comptroller") and the Federal Deposit Insurance
Corporation (the "FDIC").
7 of 15
8
The Bank is also subject to various requirements and
restrictions under federal and state law, including
requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may
be granted and the interest that may be charged thereon,
and limitations on the types of investments that may be
made and the types of services that may be offered.
Various consumer laws and regulations also affect the
operations of the Bank. In addition to the impact of
regulation, commercial banks are affected significantly
by the actions of the Federal Reserve Board as it
attempts to control the money supply and credit
availability in order to influence the economy. All
aspects of the Company's business are highly
competitive. The Company faces aggressive competition
from other lending institutions and from numerous other
providers of financial services.
BASIS OF FINANCIAL STATEMENT PRESENTATION
- -----------------------------------------
The financial statements have been prepared in
conformity with generally accepted accounting principles
and to general practices within the banking industry. In
preparing the financial statements, management is
required to make estimates and assumptions that affect
the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for
the period. Actual results could differ from those
estimates.
Material estimates that are susceptible to change in the
near-term relate to the allowance for losses on loans.
Management believes that the allowance for losses on
loans is adequate based on independent appraisals and
review of other factors associated with the assets.
While management uses available information to recognize
losses on loans, future additions to the allowance for
loans may be necessary based on changes in economic
conditions. In addition, regulatory agencies
periodically review the Company's allowance for losses
on loans. Such agencies may require the Company to
recognize additions to the allowance for loans based on
their judgements about information available to them at
the time of their examination.
INVESTMENT SECURITIES
- ---------------------
Debt securities that the Company has the positive intent
and ability to hold to maturity are classified as
held-to-maturity and reported at amortized cost; debt
and equity securities that are bought and held
principally for the purpose of selling are classified as
trading and reported at fair value, with unrealized
gains and losses included in earnings; and debt and
equity securities not classified as either
held-to-maturity or trading are classified as
available-for-sale and reported at fair value, with
unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders'
equity, net of estimated related income taxes. The
Company has no securities held for trading.
Premiums and discounts on investment securities are
amortized or accreted into income by use of the
level-yield method. If a decline in fair value below the
amortized cost basis of an investment is judged to be
other than temporary, the cost basis of the investment
is written down to fair value. The amount of the
writedown is included as a charge to earnings. Gains and
losses on the sale of investment securities are
recognized at the time of sale on a specific
identification basis.
8 of 15
9
LOANS
- -----
Interest on loans is recognized based on the daily
principal amount outstanding. Accrual of interest is
discontinued when loans become 90 days delinquent unless
the collateral is sufficient to cover both principal and
interest and the loan is in the process of collection.
Loans, including impaired loans, on which the accrual of
interest has been discontinued are designated
non-accrual loans. When a loan is placed on non-accrual,
all income which has been accrued but remains unpaid is
reversed against current period income and all
amortization of deferred loan fees is discontinued.
Non-accrual loans may be returned to an accrual status
when principal and interest payments are not delinquent
and the risk characteristics of the loan have improved
to the extent that there no longer exists a concern as
to the collectibility of principal and income. Income
received on non-accrual loans is either recorded in
income or applied to the principal balance of the loan
depending on management's evaluation as to the
collectibility of principal.
Loans held for sale are carried at the lower of
aggregate cost or market value. Gain or loss on sales of
loans is recognized at the time of sale when the sales
proceeds exceed or are less than the Bank's investment
in the loans. Additionally, gains and losses are
recognized when the average interest rate on the loans
sold, adjusted for normal servicing fee, differs from
the agreed yield to the buyer. The resulting excess
service fee receivables, if any, are amortized using the
interest method over the estimated life of the loans,
adjusted for estimated prepayments.
Discounts and premiums on loans purchased from failed
financial institutions that represent market yield
adjustments are accreted or amortized to interest income
over the estimated lives of the loans using the
level-yield method.
Loan origination fees and related direct incremental
loan origination costs are offset and the resulting net
amount is deferred and amortized over the life of the
related loans using the level-yield method.
The Bank accounts for impaired loans, except those loans
that are accounted for at fair value or at lower of cost
or fair value, at he present value of the expected
future cash flows discounted at the loan's effective
interest rate. This method applies to all loans,
uncollateralized as well as collateralized, except large
groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment, loans that are
measured at fair value and leases and debt securities.
Management considers the payment status, net worth and
earnings potential of the borrower, and the value and
cash flow of the collateral as factors to determine if a
loan will be paid in accordance with its contractual
terms. Management does not set any minimum delay of
payments as a factor in reviewing for impaired
classification. Impaired loans are charged-off when
management believes that the collectibility of the
loan's principal is remote. In addition, criteria for
classification of a loan as in-substance foreclosure has
been modified so that such classification need be made
only when a lender is in possession of the collateral.
The Bank measures the impairment of troubled debt
restructurings using the pre-modification rate of
interest.
9 of 15
10
ALLOWANCE FOR LOAN LOSSES
- -------------------------
The allowance for loan losses is based on management's
evaluation of the quality of the loan portfolio and is
used to absorb losses resulting from loans which
ultimately prove uncollectible. In determining the level
of the allowance, periodic evaluations are made of the
loan portfolio which take into account such factors as
the character of the loans, loan status, financial
posture of the borrowers, value of collateral securing
the loans and other relevant information sufficient to
reach an informed judgement. The allowance is increased
by provisions charged to income and reduced by loan
charge-offs, net of recoveries.
While management uses available information in
establishing the allowance for loan losses, future
adjustments to the allowance may be necessary if
economic conditions differ substantially from the
assumptions used in making the evaluations. Loans are
charged off in whole or in part when, in management's
opinion, collectibility is not probable.
Management believes that the allowance for loan losses
is adequate. In addition, various regulatory agencies,
as part of their examination process, periodically
review the Company's allowance for loan losses. Such
agencies may require the Company to recognize additions
to the allowance based on their judgements about
information available to them at the time of their
examination.
OTHER REAL ESTATE OWNED
- -----------------------
Other real estate owned ("OREO") includes real estate
acquired by foreclosure and real estate substantively
repossessed. Real estate acquired by foreclosure is
comprised of properties acquired through foreclosure
proceedings or acceptance of a deed in lieu of
foreclosure. Real estate substantively repossessed
includes only those loans for which the Company has
taken possession of the collateral, but has not
completed legal foreclosure proceedings. Both
in-substance foreclosures and real estate formally
acquired in settlement of loans are recorded at the
lower of the carrying value of the loan or the fair
value of the property constructively or actually
received. Loan losses from the acquisition of such
properties are charged against the allowance for loan
losses. After foreclosure, if the fair value of an asset
minus its estimated cost to sell is less than the
carrying value of the asset, such amount is recognized
as a valuation allowance. If the fair value of an asset
less its estimated cost to sell subsequently increases
so that the resulting amount is more than the asset's
current carrying value, the valuation allowance is
reversed by the amount of the increase. Increases or
decreases in the valuation allowance are charged or
credited to income. Gains upon disposition of OREO are
reflected in the statement of income as realized.
Realized losses are charged to the valuation allowance.
10 of 15
11
BANK PREMISES AND EQUIPMENT
- ---------------------------
Bank premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation
is computed using the straight-line method over the
estimated useful lives of the assets or the terms of
leases, if shorter.
It is general practice to charge the cost of maintenance
and repairs to operations when incurred; major
expenditures for improvements are capitalized and
depreciated.
INCOME TAXES
- ------------
The Company uses the asset and liability method of
accounting for income taxes. Under the asset and
liability method, deferred tax assets and liabilities
are recognized for the future tax consequences
attributable to differences between the financial
statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years
in which temporary differences are expected to be
recovered or settled. Under this method, the effect on
deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that
includes the enactment date.
------------------------------------------------------------
11 of 15
12
Item 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Overview For the quarter ended and year-to-date ended March 31, 1997.
- --------
Earnings for the first quarter ended March 31, 1997 were $1,376
thousand, an increase of 16.2% when compared with the first
quarter 1996 earnings of $1,184 thousand. Earnings per share for
the first quarter 1997 were $.24 versus $.21 for the first
quarter of 1996.
FINANCIAL CONDITION
- -------------------
Loans On March 31, 1997 loans outstanding, net of unearned discount,
- ----- were $297.0 million an increase of 5.6% from the total on March
31, 1996. At March 31, 1997 Commercial Real Estate loans
accounted for 44.7% and Residential Real Estate loans accounted
for 26.1% of total loans. Construction loans increased to $6.0
million.
Allowance for Loan Losses
- -------------------------
The allowance for loan losses was 1.46% of total loans on March
31, 1997 compared with 1.48% on March 31, 1996. Net charge-offs
for the three month period ended March 31, 1997, were $86
thousand, compared with $285 thousand for the same period in
1996. The allowance for loan losses is based on management's
overview of the quality of the loan portfolio, previous loan
loss experience and current economic conditions.
As of March 31, 1997, loans on non-accrual status totaled $1.8
million or .61% of loans; loans past due 90 days or more totaled
$249 thousand; restructured performing loans totaled $2.7
million.
Securities Held-to-Maturity
- ---------------------------
The securities held-to-maturity portfolio totaled $113.2 million
on March 31, 1997, an increase of 32.1% from the total on March
31, 1996. The portfolio is concentrated in United States
Treasury and Agency securities and had a weighted average
maturity of 3.8 years.
Securities Available-for-Sale
- -----------------------------
The securities available-for-sale portfolio totaled $82.5
million at March 31, 1997, a decrease of 9.2 % from March 31,
1996. The portfolio is concentrated in United States Treasury
and Agency securities and had a weighted average maturity of 2.1
years.
12 of 15
13
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CON'T.)
Other Assets
- ------------
On March 31, 1997 other real estate owned ("OREO") totaled $134
thousand, a decrease of $340 thousand from March 31, 1996.
During the third quarter $136 thousand was added to OREO and
$180 thousand of OREO was sold.
Deposits and Borrowed Funds
- ---------------------------
On March 31, 1997 deposits totaled $451.2 million, which is .6%
above total deposits on March 31, 1996. Borrowed funds totaled
$41.5 million compared to $18.5 million last year. The majority
of the increase was a borrowing from the Federal Home Loan Bank
of $20.4 million.
RESULTS OF OPERATIONS
- ---------------------
Net Interest Income
- -------------------
For the three month period ended March 31, 1997 net interest
income totaled $6.1 million, an increase of 10.2% from the
comparable period in 1996.
Provision for Loan Losses
- -------------------------
Loan loss provision for the three months ended March 31, 1997
was $255 thousand compared with $255 thousand for the same
period in 1996.
Non-Interest Income and Expense
- -------------------------------
Fee income for the quarter ended March 31, 1997 was $1.1
million, a 11.2% decrease from the first quarter of 1996. Income
from the gain on sales of loans decreased because of a decrease
in mortgage loan originations. Brokerage commissions decreased
because of decreased activity in that line of business. The
lockbox fee decrease was due to a decrease in lockbox related
volume.
During the third quarter 1996, operating expenses, exclusive of
OREO expenses, increased by .4% from the same quarter last year.
Expenses associated with OREO decreased by $8 thousand for the
same period.
13 of 15
14
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CON'T.)
Income Taxes
- ------------
For the first quarter of 1997, the Company's income taxes
totaled $934 thousand on pretax income of $2,310 thousand for an
effective tax rate of 40.4%. For last year's corresponding
quarter, the Company's income taxes totalled $723 thousand on
pretax income of $1,907 thousand for an effective rate of 37.9%.
The major contribution to the increase in the effective tax rate
for the first quarter 1997 compared with the first quarter 1996
was a reduction of the deferred tax asset valuation allowance
during 1996. The reduction of this allowance for the first
quarter of 1996 was $75 thousand.
14 of 15
15
Part II - Other Information
Item 1 Legal proceedings - Not applicable
Item 2 Change in securities - Not applicable
Item 3 Defaults upon senior securities - Not applicable
Item 4 Submission of matters to a vote - Not applicable
Item 5 Other information - Not applicable
Item 6 Exhibits and reports on form 8-K - Not applicable
15 of 15