<PAGE>
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, 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 0-10489
-----------
CENTENNIAL BANCORP
(Exact name of registrant as specified in its charter)
OREGON 93-0792841
(State of Incorporation) (I.R.S. Employer
Identification Number)
675 Oak Street
Eugene, Oregon 97401
(Address of principal executive offices)
(Zip Code)
(503) 342-3970
(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
requirements for the past 90 days.
Yes /X/ No / /
<PAGE>
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of latest practicable date.
3,994,114 shares as of April 28, 1995.
-2-
<PAGE>
CENTENNIAL BANCORP
FORM 10-Q
MARCH 31, 1995
INDEX
-----
Page
PART I - FINANCIAL INFORMATION Reference
- ------------------------------ ---------
Condensed Consolidated Balance Sheets as of 4
March 31, 1995 and December 31, 1994.
Condensed Consolidated Statements of Income for 5
the three months ended March 31, 1995 and 1994.
Condensed Consolidated Statements of Cash Flows 6
for the three months ended March 31,
1995 and 1994.
Notes to Condensed Consolidated Financial Statements 7 - 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations:
Overview 11
Material Changes in Financial Condition 11
Material Changes in Results of Operations 12 - 13
Loan Loss Provision 13
Liquidity and Capital Resources 14
PART II - OTHER INFORMATION
- ---------------------------
Item 6 - Exhibits and Reports on Form 8-K. 15
Signatures 16
-3-
<PAGE>
CENTENNIAL BANCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents:
Cash and due from banks $ 17,388,010 $ 19,783,038
Interest bearing balances due from banks 6,000,000 5,575,000
Federal funds sold 2,965,000 --
------------ ------------
Total cash and cash equivalents 26,353,010 25,358,038
Available-for-sale securities 59,716,814 58,794,836
Loans 164,802,254 160,136,068
Reserve for loan losses (1,778,576) (1,700,130)
------------ ------------
Loans, net 163,023,678 158,435,938
Loans held for sale 861,040 1,874,728
Accrued interest receivable 1,886,967 1,827,406
Premises and equipment, net 7,828,893 6,763,983
Intangible assets 841,116 876,655
Other assets 1,803,230 1,984,048
Deferred tax asset 1,130,904 1,721,129
------------ ------------
$263,445,652 $257,636,761
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits:
Demand $ 55,616,974 $ 63,699,442
Interest-bearing demand 83,901,054 79,942,836
Savings 15,310,565 15,888,076
Time 63,956,068 56,789,446
------------ ------------
Total deposits 218,784,661 216,319,800
Short-term borrowings 12,364,172 11,839,608
Accrued interest and other liabilities 1,965,640 1,072,022
Long-term debt 9,200,000 9,200,000
------------ ------------
Total liabilities 242,314,473 238,431,430
Shareholders' equity:
Preferred stock, $5.00 par value; none issued
Non-voting, 5,000,000 shares authorized -- --
Voting, 5,000,000 shares authorized -- --
Common stock, $2.00 par value; 10,000,000 shares
authorized, 3,994,114 issued and outstanding
(3,974,225 at December 31, 1994) 7,988,228 7,948,450
Surplus 7,052,102 7,067,963
Retained earnings 7,045,354 6,106,378
Net unrealized loss on securities available-
for-sale, net of deferred income taxes (954,505) (1,917,460)
------------ ------------
Total shareholders' equity 21,131,179 19,205,331
------------ ------------
$263,445,652 $257,636,761
============ ============
</TABLE>
See accompanying notes.
-4-
<PAGE>
CENTENNIAL BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
The Three Months Ended
March 31,
--------------------------
1995 1994
----------- ----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $4,746,165 $3,156,296
Interest on investment securities 848,506 774,033
Other interest income 26,104 36,547
---------- ----------
Total interest income 5,620,775 3,966,876
INTEREST EXPENSE
Interest on deposits 1,527,649 980,591
Interest on short-term borrowings 210,157 10,618
Interest on long-term debt 161,725 50,599
---------- ----------
Total interest expense 1,899,531 1,041,808
---------- ----------
NET INTEREST INCOME 3,721,244 2,925,068
Loan loss provision 75,000 82,500
---------- ----------
Net interest income after loan loss provision 3,646,244 2,842,568
NONINTEREST INCOME
Service charges on deposit accounts 226,634 203,341
Other 153,522 213,327
Loan servicing fees 113,492 131,145
Gains on sales of loans 39,498 238,027
Gains on sales of investment securities -- 14,659
---------- ---------
Total noninterest income 533,146 800,499
NONINTEREST EXPENSE
Salaries and employee benefits 1,615,083 1,442,757
Premises and equipment 384,268 315,463
Legal and professional 110,429 170,236
Insurance 145,060 129,109
Advertising 88,298 83,511
Printing and stationery 66,296 59,585
Communications 77,008 77,878
Other 312,213 325,954
---------- ----------
Total noninterest expense 2,798,655 2,604,493
---------- ----------
Income before income taxes 1,380,735 1,038,574
Provision for income taxes 441,800 330,612
---------- ----------
NET INCOME $ 938,935 $ 707,962
========== ==========
Earnings per common share:
Primary $ .23 $ .17
Fully diluted $ .22 $ .17
Weighted average shares outstanding:
Primary 4,125,879 4,065,399
Fully diluted 4,898,663 4,065,399
</TABLE>
See accompanying notes.
-5-
<PAGE>
CENTENNIAL BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
The Three Months Ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net cash provided by operating activities $ 4,776,591 $ 900,096
Cash flows from investing activities:
Net increase in loans (4,662,740) (1,582,022)
Investment security purchases (1,615,128) (6,572,499)
Proceeds from investment securities:
Maturities 693,150 4,479,361
Sales -- 1,516,748
Purchases of premises and equipment (1,210,284) (43,409)
----------- -----------
Net cash used by investing activities (6,795,002) (2,201,821)
Cash flows from financing activities:
Net increase in deposits 2,464,861 8,747,644
Net increase (decrease) in short-term borrowings 524,564 (200,000)
Principal payments on long-term debt -- (4,072,698)
Proceeds from issuance of common stock 23,958 --
----------- -----------
Net cash provided by financing activities 3,013,383 4,474,946
----------- -----------
Net increase in cash and cash equivalents 994,972 3,173,221
Cash and cash equivalents at beginning of period 25,358,038 24,820,005
----------- -----------
Cash and cash equivalents at end of period $26,353,010 $27,993,226
=========== ===========
</TABLE>
See accompanying notes.
-6-
<PAGE>
CENTENNIAL BANCORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The interim condensed consolidated financial statements
include the accounts of Centennial Bancorp, a bank
holding company ("Bancorp"), and its wholly owned
subsidiaries, Centennial Bank ("Bank"), Centennial Mortgage
Co. ("Mortgage Co.") and Harding Fletcher Co. ("Harding
Fletcher"). The Bank is an Oregon state-chartered bank
which provides commercial banking services. Mortgage Co.
originates residential mortgage loans for resale in the
secondary market, and Harding Fletcher is a commercial
mortgage banker.
The interim condensed consolidated financial statements are
unaudited, but include all adjustments, consisting only of
normal accruals, which Bancorp considers necessary for a
fair presentation of the results of operations for such
interim periods.
All significant intercompany balances and transactions have
been eliminated in consolidation.
The interim condensed consolidated financial statements
should be read in conjunction with the consolidated
financial statements, including the notes thereto, included
in Bancorp's 1994 Annual Report to Shareholders.
Certain amounts for 1994 have been reclassified to conform
with the 1995 presentation.
2. Business Combination
--------------------
On November 15, 1994, the shareholders of CG Bancorp
approved the merger of CG Bancorp with and into Bancorp.
The merger occurred December 2, 1994. Under the terms of
the agreement, CG Bancorp shareholders received 1.2694
shares of Bancorp common stock for each CG Bancorp share.
Accordingly, Bancorp issued 253,223 shares of its common
stock for all of the outstanding shares of CG Bancorp common
stock.
The merger has been accounted for as a pooling of interests.
-7-
<PAGE>
Accordingly, Bancorp's financial statements have been
restated to include the financial position, results of
operations and cash flows of CG Bancorp for all periods
presented.
Interest income and net income (in thousands) of the
separate companies for the periods preceding the acquisition
were:
Centennial CG
Bancorp Bancorp Combined
---------- ------- --------
Three months ended
March 31, 1994
(unaudited):
Interest income $ 3,512 $ 455 $ 3,967
Net income 646 62 708
Year ended
December 31, 1993:
Interest income 13,083 1,766 14,849
Net income 2,506 257 2,763
Year ended
December 31, 1992:
Interest income 11,562 1,757 13,319
Net income 1,802 203 2,005
3. Loans and Reserve for Loan Losses
---------------------------------
The composition of the loan portfolio was as follows:
-8-
<PAGE>
March 31, December 31,
1995 1994
------------ ------------
Real estate-mortgage $ 50,850,032 $ 54,916,880
Real estate-construction 32,433,652 29,337,387
Commercial 71,529,946 66,514,955
Installment 6,491,566 6,950,813
Lease financing 3,828,921 2,686,227
Other 218,259 329,899
------------ ------------
165,352,376 160,736,161
Less deferred loan fees (550,122) (600,093)
------------ ------------
$164,802,254 $160,136,068
============ ============
Loans held for sale of $861,040 and $1,874,728 at March 31,
1995 and December 31, 1994, respectively, represent real
estate mortgage loans. These loans are recorded at cost
which approximates market.
Transactions in the reserve for loan losses were as follows
for the three months ended March 31:
1995 1994
----------- -----------
Balance at beginning of period $1,700,130 $1,514,314
Provision charged to operations 75,000 82,500
Recoveries 8,573 3,864
Loans charged off (5,127) (11,877)
---------- ----------
Balance at end of period $1,778,576 $1,588,801
========== ==========
It is Bancorp's policy to place loans on nonaccrual status
whenever the collection of all or a part of the principal
balance is in doubt. Loans placed on nonaccrual status may
or may not be contractually past due at the time of such
determination, and may or may not be secured by collateral.
Loans on nonaccrual status at March 31, 1995 and December
31, 1994 were approximately $743,000 and $693,000,
respectively.
-9-
<PAGE>
Loans past due 90 days or more on which Bancorp continued to
accrue interest were approximately $200,000 at March 31,
1995, and approximately $190,000 at December 31, 1994.
There were no loans on which the interest rate or payment
schedule were modified from their original terms to
accommodate a borrower's weakened financial position at
March 31, 1995 and December 31, 1994.
4. Earnings per Common Share
-------------------------
Primary earnings per common share is calculated by dividing
net income by the weighted average shares outstanding.
Weighted average shares outstanding consist of common shares
outstanding and common stock equivalents attributable to
outstanding stock options.
Fully diluted earnings per share is calculated by dividing
net income plus after tax interest incurred on the 7%
Convertible Debentures ($9,200,000 issued in April 1994), by
common shares outstanding, common stock equivalents
attributable to outstanding stock options, and shares
assumed to be issued on conversion of the Convertible
Debentures.
The weighted average number of shares and common share
equivalents have been adjusted to give retroactive effect to
the 1994 acquisition of CG Bancorp and stock splits and
stock dividends declared prior to March 31, 1995.
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
- --------
Centennial Bancorp reported net income of $938,935, or $.23
per share (primary), for the three months ended March 31, 1995.
This represented a 33% increase in net income, as compared to
$707,962, or $.17 per share, for the three months ended March 31,
1994. The increased earnings reflected primarily the expansion
of Bancorp's interest-earning assets and increased net interest
income.
The net income added to shareholders' equity during the
first quarter of 1995 was augmented by an increase in the
valuation of Bancorp's investment portfolio of securities
available-for-sale. This increase in the value of the securities
available-for-sale resulted from a slight decrease in interest
rates which caused bond prices to increase. Management believes
that the net unrealized loss on securities available-for-sale,
net of deferred income taxes, will be reduced during the
remainder of 1995 as interest rates and the bond market
stabilize.
MATERIAL CHANGES IN FINANCIAL CONDITION
- ---------------------------------------
Material changes in financial condition for the three months
ended March 31, 1995 include an increase in loans which was
offset in part by a decrease in loans held for sale, and an
increase in premises and equipment. Funds were provided for
these changes primarily by an increase in total deposits.
Bancorp experienced an increase in loans of $4.7 million at
March 31, 1995 as compared to December 31, 1994. This increase
was primarily due to real estate construction and commercial loan
activity at the Pacific Corporate Center Branch of the Bank,
which opened in July 1994. This increase in loans was offset in
part by a decrease in loans held for sale, which decreased $1.0
million at March 31, 1995 as compared to December 31, 1994.
Premises and equipment increased $1.1 million at March 31,
1995 as compared to December 31, 1994. This increase was
primarily attributed to construction of the permanent facility to
house the Pacific Corporate Center Branch of the Bank, but was
also due in part to remodelling of a floor of the Eugene Main
Branch to house two departments of the Bank. Management
anticipates that an additional $1.0 million will be expended to
complete this construction and to purchase related furniture and
equipment.
-11-<PAGE>
Bancorp experienced an increase in deposits during the first
quarter of 1995 of $2.5 million. This increase resulted from
increases in time deposits ($7.2 million), and interest-bearing
demand deposits ($4.0 million), which was offset in part by a
decrease in demand deposits ($8.1 million). Management believes
that the increase in time deposits was due to the higher interest
rates generally paid on time deposits. Management also believes
that the increase in interest-bearing demand deposits is
temporary and represents customer accumulation of funds in
anticipation of tax payment deadlines.
Bancorp typically experiences a decrease in deposits during
the first quarter of each year. This decrease in deposits will
occasionally extend into the second quarter of a year, but will
then reverse itself so that increases in deposits are recognized
in the third and fourth quarters. Management attempts to
moderate the liquidity impacts of this historic decrease in
deposits during the first quarter of each year by increasing time
deposits that mature during other quarters of the year, and by
increasing short-term borrowings.
All other changes experienced in asset and liability
categories during the first quarter of 1995 were comparatively
modest.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
- -----------------------------------------
Total interest income increased approximately $1.7 million
for the three months ended March 31, 1995 as compared to the same
period in 1994. This increase was due in part to the increase in
loans held during the first quarter of 1995 as compared to the
first quarter of 1994, but was also due to the increase in
interest earned on loans and investment securities.
Total interest expense increased $857,200 for the three
months ended March 31, 1995 as compared to the 1994 period. This
increase was due to the increase in deposits held during the
first quarter of 1995 as compared to the first quarter of 1994,
increased short-term borrowings during the 1995 quarter, the
issuance of $9.2 million in Convertible Debentures during April
1994, and the higher interest rate market experienced during the
first quarter of 1995.
The increase in interest earned, offset in part by the
increase in interest paid, served to increase Bancorp's net
interest income by approximately $796,200 (or 27%) over the first
quarter of 1994. Net income per common share (primary) increased
to $.23 for first quarter 1995 from $.17 for first quarter 1994.
-12-
<PAGE>
Noninterest income decreased approximately $267,400 for the
three months ended March 31, 1995 as compared to the 1994 period.
This decrease was primarily attributable to the decrease in gains
on sales of loans by Mortgage Co., but was also attributable in
part to lease income received (approximately $51,000 for the
first quarter of 1994) from the former Bancorp and Bank head
office facility which was reclassified as an other asset,
available-for-sale, after Bancorp and the Bank vacated the
building to occupy a new head office facility. This building was
sold in September 1994.
Noninterest expense increased approximately $194,200 for the
three months ended March 31, 1995 as compared to the 1994 period.
This increase is primarily attributable to increases in salaries
and employee benefits and premises and equipment, which was
offset in part by a decrease in legal and professional fees.
Salaries and employee benefits increased approximately
$172,300 during the 1995 period as compared to the 1994 period,
which was primarily due to additions to the Bank's staff to
conduct the expanding business of the Pacific Corporate Center
Branch.
Premises and equipment expense increased approximately
$68,800 during the three months ended March 31, 1995 as compared
to the 1994 period. This increase was primarily due to the
additional expenses incurred in the Bank's occupancy of the
Pacific Corporate Center Branch temporary facility.
Legal and professional fees decreased during the three
months ended March 31, 1995 as compared to the 1994 period. This
decrease was due to the resolution of litigation outstanding
against the Bank during the latter quarters of 1994.
LOAN LOSS PROVISION
- -------------------
During the three months ended March 31, 1995, Bancorp
charged a $75,000 loan loss provision to operations, as compared
to $82,500 charged during the three months ended March 31, 1994.
Loans charged off, net of recoveries, during the three months
ended March 31, 1995 equalled net recoveries of $3,446, as
compared to net charge offs of $8,013 for the 1994 three month
period.
Management believes that the reserve for loan losses is
adequate for potential loan losses, based on management's
assessment of various factors, including present delinquent and
non-performing loans, past history of industry loan loss
experience, and present and anticipated future economic trends
impacting the area and customers served by Bancorp.
-13-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Bancorp's principal subsidiary, Centennial Bank, has adopted
policies to maintain a relatively liquid position to enable it to
respond to changes in the Bank's needs and financial environment.
Generally, the Bank's major sources of liquidity are customer
deposits, sales and maturities of investment securities, the use
of federal funds markets and net cash provided by operating
activities. Scheduled loan repayments are a relatively stable
source of funds, while deposit inflows and unscheduled loan
prepayments, which are influenced by general interest rate
levels, interest rates available on other investments,
competition, economic conditions and other factors, are not.
In July 1994, the Bank opened a branch in Tigard, Oregon in
a temporary facility. Management entered into a long-term ground
lease in the Tigard, Oregon area and anticipates completion of a
permanent facility to house the branch in June 1995. The
building is budgeted to cost $2.8 million to construct, of which
$1.7 million had been expended at March 31, 1995.
At March 31, 1994, Bancorp's Tier 1 and total risk-based
capital ratios under the Federal Reserve Board's ("FRB") risk-
based capital guidelines were approximately 10.8% and 11.7%,
respectively. The FRB's minimum risk-based capital ratio
guidelines for Tier 1 and total capital are 4% and 8%,
respectively.
At March 31, 1994, Bancorp's capital-to-assets ratio under
leverage ratio guidelines was approximately 8.1%. The FRB's
current minimum leverage capital ratio guideline is 3%.
-14-
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
- -----------------------------------------
None.
-15-
<PAGE>
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.
CENTENNIAL BANCORP
Dated: May 10, 1995 /s/ Richard C. Williams
-----------------------------------
Richard C. Williams
President & Chief Executive Officer
Dated: May 10, 1995 /s/ Michael J. Nysingh
-----------------------------------
Michael J. Nysingh
Chief Financial Officer
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CENTENNIAL BANCORP'S CONSOLIDATED FINANCIAL STATEMENTS
CONTAINED IN ITS QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD
ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 17,388,010
<INT-BEARING-DEPOSITS> 6,000,000
<FED-FUNDS-SOLD> 2,965,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 59,716,814
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 164,802,254
<ALLOWANCE> (1,778,576)
<TOTAL-ASSETS> 263,445,652
<DEPOSITS> 218,784,661
<SHORT-TERM> 12,364,172
<LIABILITIES-OTHER> 1,965,640
<LONG-TERM> 9,200,000
<COMMON> 7,988,228
0
0
<OTHER-SE> 13,142,951
<TOTAL-LIABILITIES-AND-EQUITY> 263,445,652
<INTEREST-LOAN> 4,746,165
<INTEREST-INVEST> 848,506
<INTEREST-OTHER> 26,104
<INTEREST-TOTAL> 5,620,775
<INTEREST-DEPOSIT> 1,527,649
<INTEREST-EXPENSE> 1,899,531
<INTEREST-INCOME-NET> 3,721,244
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,798,655
<INCOME-PRETAX> 1,380,735
<INCOME-PRE-EXTRAORDINARY> 1,380,735
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 938,935
<EPS-PRIMARY> .23
<EPS-DILUTED> .22
<YIELD-ACTUAL> 0<F1>
<LOANS-NON> 743,000
<LOANS-PAST> 200,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,700,130
<CHARGE-OFFS> 5,127
<RECOVERIES> 8,573
<ALLOWANCE-CLOSE> 1,778,576
<ALLOWANCE-DOMESTIC> 1,778,576
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> Information not calculated for interim reports.
</FN>
</TABLE>
