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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 March 31, 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
(Exact name of REgistrant as Registrant as Specified in its Charter)
LOUISIANA 72-0921566
- -------------------------- --------------------
(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
(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 April 30,
1995.
Total number of pages in this report 10.
The exhibit index is on page 10.
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INDEX
Part I - Financial Information
Financial Statements
Consolidated Statements of Condition
March 31, 1995 and December 31, 1994 ........................ 3
Consolidated Statements of Income
Quarters Ended March 31, 1995 and 1994 ...................... 4
Consolidated Statements of Cash Flow
Quarters Ended March 31, 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 ................................................. 10
Signatures ........................................................ 10
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<TABLE>
Part I - Financial Information
Item 1. Financial Statements
<CAPTION>
CENTRAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(dollar amounts in thousands)
(unaudited)
March 31, December 31,
1995 1994*
<S> <C> <C>
Assets
Cash and due from banks $ 38,545 $ 40,585
Federal funds sold 56,035 78,000
Securities available for sale, at fair value 35,742 9,921
Investment securities (fair value $83,135
and $73,139) 84,751 76,198
Loans 594,709 593,689
Less: Allowance for possible loan losses 9,929 9,836
Net loans 584,780 583,853
Bank premises and equipment 19,199 16,339
Other real estate 1,144 1,527
Accrued interest receivable 6,234 5,721
Other assets 7,622 8,006
Total assets $834,052 $820,150
======== ========
Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing $114,959 $124,471
Interest bearing 629,035 589,657
Total deposits 743,994 714,128
Federal funds purchased 8,179 29,602
Accrued interest payable 2,707 2,215
Other liabilities 5,208 2,991
Dividends payable 407 407
Capital lease obligations 774 701
Total liabilities 761,269 750,044
Stockholders' equity:
Capital stock of $1.00 par value - authorized
20,000,000 shares; issued and outstanding 4,066,731
(2,711,154 in 1994) 4,067 4,067
Surplus 15,904 15,904
Retained earnings 52,975 50,419
Unrealized gains on securities available
for sale, net (163) (284)
Total stockholders' equity 72,783 70,106
Total liabilities and stockholders' equity $834,052 $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>
</TABLE> 3
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<TABLE>
<CAPTION>
CENTRAL CORPROATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
Quarters Ended
March 31
-----------------------
1995 1994
<S> <C> <C>
Interest income:
Loans:
Taxable $13,891 $11,314
Nontaxable 150 155
Investment securities:
Taxable 1,072 1,479
Nontaxable 62 102
Federal funds sold 1,119 345
Other 1 1
Total interest income 16,295 13,396
Interest expense:
Deposits 6,416 4,665
Federal funds purchased 117 76
Capital lease obligations 18 13
Total interest expense 6,551 4,754
Net interest income 9,744 8,642
Provision for possible loan losses 230 600
Net interest income after provision
for possible loan losses 9,514 8,042
Other revenues:
Service charges on deposit accounts 1,824 1,614
Loan fees 1,378 1,478
Trust income 455 438
Insurance income 186 204
Miscellaneous income 358 246
Total other revenues 4,201 3,980
Other expenses:
Salaries and employee benefits 4,489 4,151
Data processing 991 809
Postage and supplies 548 444
Occupancy 527 435
FDIC deposit insurance 394 377
Marketing 444 365
Communications 317 280
Other equipment 334 307
Other 956 1,112
Total other expenses 9,000 8,280
Income before federal income taxes 4,715 3,742
Federal income taxes 1,752 1,315
Net income $ 2,963 $ 2,427
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Net income per share (See note 2) $ .73 $ .60
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Cash dividends per share (See note 2) $ .10 $ .08
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<TABLE>
<CAPTION>
CENTRAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
(unaudited)
Quarters Ended
March 31
1995 1994
------ ------
<S> <C> <C>
Cash flow provided by operations $ 6,333 $ 6,959
Cash flow from investing activities:
Maturities of investment securities 7,560 15,992
Purchases of investment securities (41,754) ---
Net change in loans (excluding sales) (19,886) (15,916)
Sales of loans 18,918 21,378
Capital expenditures (3,490) (219)
Proceeds from sale of other real estate 205 193
Net cash (used in) provided by
investing activities (38,447) 21,428
Cash flow from financing activities:
Net change in deposits 29,866 (506)
Net change in federal funds purchased (21,423) (12,273)
Dividends paid (407) (325)
Payments on capital lease obligations (67) (56)
Increase in capital lease obligations 140 ---
Net cash (used in) provided by
financing activities 8,109 (13,160)
Change in cash and federal funds sold (24,005) 15,227
Beginning cash and federal funds sold 118,585 63,340
Ending cash and federal funds sold $94,580 $78,567
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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. Per share calculations have been restated to reflect a three-for-two stock
split which occurred during the second quarter of 1994.
3. Certain 1994 balances have been reclassified to conform to current year
presentation.
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CENTRAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(dollar amounts in thousands)
CHANGES IN FINANCIAL CONDITION
Total assets for the first quarter of 1995 increased $13,902, or 1.7%, 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 $29,866 increase in deposits offset by a $21,423 decline in federal
funds purchased; a $2,677 increase in stockholders' equity; and a $34,374
increase in investment securities. Total loans (net of unearned discount)
increased $927 or .2% in the same period. Earning assets increased 1.8% to
$771,237.
Loan demand remains strong despite seasonal commercial line of credit repay-
ments. Although period-end loan totals were relatively unchanged since year-end,
nearly $19 million of student loans have been sold year-to-date.
Stockholders' equity as a percent of total assets increased to 8.7% on the
strength of earnings retained in excess of dividends paid. Subsequent to the
3-for-2 stock split during the second quarter of 1994, the regular quarterly
dividend was increased by 25%.
The allowance for possible loan losses at March 31, 1995, totaled $9,929
compared with $9,836 at year-end 1994. The allowance as a percent of total
loans (net of unearned discount) remained steady at 1.66%. The level is
reflective of management's continued cautiousness on credit quality in the wake
of rising loan volumes. Nonperforming loans at March 31, 1995, including
non-accruing loans and those loans 90 days or more past due that are still
accruing, represented .39% of total loans (net of unearned discount) and .27%
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.
The Corporation adopted Statement of Accounting Standard (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan," effective January 1, 1995.
SFAS No. 114 requires the measurement of impaired loans be based on the present
value of expected future cash flows discounted at the loan's effective interest
rate, or at the loan's observable market price or the fair value of its
collateral. SFAS No. 114 does not apply to large groups of smaller balance
homogeneous loans that are collectively evaluated for impairment. For the
Corporation, these loans include all single family mortgage loans, consumer
purpose loans, and certain commercial and industrial real estate loans. The
adoption of SFAS No. 114 did not result in additional provisions for possible
losses due to the Corporation's historically conservative stance towards
evaluating credit quality and the favorable condition of the loan portfolio.
A loan is considered to be impaired when, based upon current information
and events, full collection of all amounts due according to the contractual
terms of the loan agreement is not probable. This would include troubled debt
restructurings, and both performing and nonperforming loans in which full pay-
ment of principal or interest is not expected.
The Corporation also adopted Statement of Financial Accounting Standards
No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition
and Disclosures", effective January 1, 1995. This Statement allows a creditor
to use existing methods for recognizing interest income on impaired loans.
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Impaired loans amounted to less than $1 million at March 31, 1995 with
minimal reserves relating. There was no significant change in the level of
impaired loans during the three months ended March 31, 1995. Interest income
recognized on these loans was not material.
RESULTS OF OPERATIONS
Summary
Net income for the first quarter of 1995 was $2,963, 22.1% above the same
period in 1994. When compared with the same period a year ago, net interest
income was up $1,102, or 12.7%, while non-interest income increased $221 or
5.6%. Non-interest expenses increased by $720, or 8.7%. The provision for
possible loan losses was $230 for the period down $370, or 61.7% from 1994.
Net Interest Income
Year-to-date net interest income increased 12.7% from the same period in
1994. Average asset volumes, led by a $59.1 million increase in average loans,
accounted for much of the increase as maturities of lower yielding investments
have been used to fund relatively higher yielding loan products. Rising rates
had a positive effect on earnings as the overall net interest margin improved
some twenty-five basis points to 5.16%. Nonperforming loans and repossessed
assets continued to decline thereby further supporting the increase in net
interest income.
<TABLE>
<CAPTION>
The table below presents 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.
1995 1994
------------------------ -------------------------
Average Yield Average Yield
Balance Interest Rate Balance Interest Rate
------- -------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Taxable loans $584,393 $13,891 9.51% $539,655 $11,315 8.39%
Nontaxable loans 9,961 227 9.12 5,557 232 16.70
Taxable investment securities 88,398 1,072 4.85 120,676 1,480 4.91
Nontaxable investment
securities 3,576 94 10.51 6,407 155 9.68
Other 120 1 3.33 126 1 3.17
Federal funds sold 77,498 1,119 5.78 43,325 344 3.18
-------- ------- ----- -------- ------- -----
Total earning assets $763,946 $16,404 8.59% $715,746 $13,527 7.56%
Interest baring liabilities:
Savings (incl. NOW) deposits $216,186 $ 1,595 2.95% $261,819 $ 1,532 2.34%
Time deposits 403,366 4,822 4.78 315,556 3,133 3.97
Federal funds purchased 8,690 117 5.39 11,710 76 2.60
Capital lease obligations 810 18 8.89 773 13 6.73
-------- ------- ----- -------- ------- -----
Total interest bearing
liabilities $629,052 $ 6,552 4.17% $589,858 $ 4,754 3.22%
----- -----
Net yield on earning assets 5.16% 4.90%
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</TABLE>
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<TABLE>
<CAPTION>
The table below presents on a tax equivalent basis an analysis of the changes in
interest income and interest expense resulting from rate and volume changes.
First Quarter 1995 Change From
First Quarter 1994
------------------------------
Volume Rate Total
------ ------- -----
<S> <C> <C> <C>
Interest income on:
Taxable loans $ 986 $1,590 $2,576
Nontaxable loans 131 (136) (5)
Taxable investment securities (391) (17) (408)
Nontaxable investment securities (73) 12 (61)
Other --- --- ---
Federal funds sold 380 395 775
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Total 1,033 1,844 2,877
Interest expense on:
Savings (including NOW deposits) (295) 358 63
Time deposits 975 714 1,689
Federal funds purchased (24) 65 41
Capital lease obligations 1 4 5
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Total 657 1,141 1,798
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Net interest income $ 376 $ 703 $1,079
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</TABLE>
Other Revenues
Non-interest sources of income for the first quarter of 1995 were up 5.6%
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. The decline in loan fees reflects a slowing in residential
loan originations following the general rise in interest rates over the past
year. The Corporation continues to actively seek further increases in revenue
from its non-interest related operations.
Other Expenses
Non-interest expenses increased 8.7% when compared to 1994. The largest
increases occurred in salaries and benefits (up 8.1%), data processing expense
(up 22.5%), postage & supplies (up 23.4%), occupancy expense (up 21.1%), and
marketing (up 21.6%) 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.
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.
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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 15.5% of total assets at
March 31, 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 March 31, 1995, the Corporation's total capital to risk
assets ratio stood at 13.66% and its leverage ratio was 8.65%. 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 5. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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: May 12, 1995 ------------------------
Edmond L. Pennington
Chief Financial Officer
/s/ Larry G. Beach
------------------------
Larry G. Beach
Controller
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