<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, 1996; 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: 0-15732
Central Bancorporation, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-1653291
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 West Rosedale, Fort Worth, Texas 76104
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(817) 347-8102
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
No Change
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
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
----- -----
The number of shares of common stock, $2.50 par value, outstanding at March
31, 1996 was 2,616,723 shares.
<PAGE>
CENTRAL BANCORPORATION, INC.
----------------------------
INDEX
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements
-------
Consolidated Balance Sheets at March 31, 1996 (unaudited)
and at December 31, 1995 (audited) 3
Consolidated Statements of Earnings for the Three Months
Ended March 31, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and 1995 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of
------- Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 22
-------
Item 2. Change in Securities 22
-------
Item 3. Defaults Upon Senior Securities 22
-------
Item 4. Submission of Matters to a Vote of
------- Security Holders 22
Item 5. Other Information 23
-------
Item 6. Exhibits and Reports on Form 8-K 23
-------
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
(FORMERLY TEXAS SECURITY BANCSHARES, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
Assets 1996 1995
- ------ -------------- ------------
<S> <C> <C>
Cash and due from banks $ 46,731,240 51,682,644
Interest-bearing deposits in other banks 1,293,747 172,617
Federal funds sold 6,000,000 -
-------------- -----------
Total cash and cash equivalents 54,024,987 51,855,261
-------------- -----------
Investment securities available-for-sale 163,059,809 155,601,882
Investment securities held-to-maturity 346,344,303 355,447,926
Loans:
Loans, net of unearned discount 465,529,805 331,146,028
Less allowance for loan losses 5,461,009 4,671,819
-------------- -----------
Net loans 460,068,796 326,474,209
-------------- -----------
Premises and equipment, net 26,647,522 22,281,915
Accrued interest receivable 9,392,677 9,443,032
Other real estate owned, net 1,046,058 129,160
Excess of cost over net assets acquired,
net of applicable amortization 10,896,934 741,068
Deferred income taxes 2,116,888 2,297,102
Other assets 3,524,610 2,362,212
-------------- -----------
$1,077,122,584 926,633,767
============== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits:
Noninterest-bearing demand $ 163,113,348 147,430,934
Interest-bearing demand 331,270,244 311,724,814
Savings 86,276,835 76,041,682
Time, $100,000 and over 79,674,358 56,675,896
Other time 287,140,063 212,626,503
-------------- -----------
Total deposits 947,474,848 804,499,829
-------------- -----------
Short-term borrowings 34,015,337 44,419,993
Note payable 12,500,000 2,500,000
Dividends payable 261,672 261,672
Accrued interest payable 2,598,354 2,502,361
Federal income taxes payable 438,179 39,476
Other liabilities 10,467,437 5,081,525
-------------- -----------
Total liabilities 1,007,755,827 859,304,856
-------------- -----------
Stockholders' equity:
Common stock, $2.50 par value,
5,000,000 shares authorized and 2,616,723
shares issued 6,541,808 6,541,808
Additional paid-in capital 16,578,010 16,578,010
Retained earnings 46,958,380 44,574,243
Unrealized loss on securities
available-for-sale (711,441) (365,150)
-------------- -----------
Total stockholders' equity 69,366,757 67,328,911
-------------- -----------
$1,077,122,584 926,633,767
============== ===========
</TABLE>
3
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
(FORMERLY TEXAS SECURITY BANCSHARES, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 8,554,452 6,203,620
Interest on investment securities:
Taxable securities 6,333,421 7,148,213
Tax-exempt securities 1,300,909 810,494
Interest on deposits in other banks 9,487 1,861
Interest on Federal funds sold 75,843 283,660
----------- ----------
Total interest income 16,274,112 14,447,848
----------- ----------
Interest expense:
Interest on interest-bearing demand deposits 2,349,689 1,919,937
Interest on savings deposits 543,894 357,046
Interest on time deposits 4,082,134 3,155,714
Interest on short-term borrowings 410,087 1,230,206
Interest on note payable 126,636 18,396
----------- ----------
Total interest expense 7,512,440 6,681,299
----------- ----------
Net interest income 8,761,672 7,766,549
Provision for loan losses 225,000 225,000
----------- ----------
Net interest income after provision
for loan losses 8,536,672 7,541,549
----------- ----------
Noninterest income:
Service charges and fees 2,613,401 2,199,352
Other income 281,899 148,199
----------- ----------
Total noninterest income 2,895,300 2,347,551
----------- ----------
Noninterest expenses:
Salaries and employee benefits 4,684,756 3,971,831
Net occupancy expense 701,416 657,208
Equipment and data processing expense 895,939 761,219
Communication expense 394,164 339,153
Other real estate owned expense (income), net 4,687 (46,748)
Federal deposit insurance fees 27,081 398,100
Legal and professional 326,387 233,263
Stationery and supplies 212,316 217,116
Marketing expense 227,381 208,104
Other operating expenses 571,244 410,807
----------- ----------
Total noninterest expenses 8,045,371 7,150,053
----------- ----------
Income before Federal income taxes 3,386,601 2,739,047
Provision for Federal income taxes 740,790 656,000
----------- ----------
Net income $ 2,645,811 2,083,047
=========== ==========
Net income per share $1.01 .80
=========== ==========
Weighted average number of shares outstanding 2,616,723 2,616,723
=========== ==========
</TABLE>
4
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
(FORMERLY TEXAS SECURITY BANCSHARES, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,645,811 2,083,047
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses and losses on other 255,290 225,000
real estate owned, net
Depreciation 648,453 648,512
Amortization of intangibles 71,827 49,368
Premium amortization and discount accretion, net 152,223 102,800
Net gain on sales of other real estate owned (38,971) (53,507)
Net gain on sales of premises and equipment - (1,948)
Deferred Federal income taxes, net 340,000 -
Changes in operating assets and liabilities:
Net increase in loans held for sale (7,651) (558,492)
Decrease in accrued interest receivable 1,124,167 321,341
Decrease in Federal income taxes receivable - 523,524
Decrease (increase) in other assets (149,331) 631,967
Increase (decrease) in accrued interest payable (502,101) 165,289
Increase in Federal income taxes payable 421,688 134,236
Increase (decrease) in other liabilities 3,218,599 (3,270,319)
------------ -----------
Net cash provided by
operating activities 8,180,004 1,000,818
------------ -----------
Cash flows from investing activities:
Cash and cash equivalents paid in acquisition,
net of cash and cash equivalents acquired (8,929,262) -
Proceeds from redemption of investment
securities available-for-sale - 829,100
Proceeds from maturities and principal reductions
of investment securities held-to-maturity 14,540,188 11,158,957
Proceeds from maturities and principal reductions
of investment securities available-for-sale 4,491,698 1,236,211
Purchases of investment securities held-to-maturity (5,491,435) (15,153,121)
Purchases of investment securities available-for-sale (5,192,184) (4,049,600)
Net increase in loans (9,476,164) (11,197,040)
Proceeds from sales of premises and equipment - 3,342
Purchases of premises and equipment (1,161,319) (1,003,232)
Proceeds from sales of other real estate owned 301,126 329,953
------------ -----------
Net cash used in
investing activities (10,917,352) (17,845,430)
------------ -----------
</TABLE>
5
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
(FORMERLY TEXAS SECURITY BANCSHARES, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits $ 6,696,800 14,674,692
Proceeds from note payable 10,000,000 500,000
Net decrease in short-term borrowings (11,528,052) (2,711,143)
Dividends paid (261,674) (261,672)
------------ ----------
Net cash provided by
financing activities 4,907,074 12,201,877
------------ ----------
Net increase (decrease) in cash and
cash equivalents 2,169,726 (4,642,735)
Cash and cash equivalents at beginning
of period 51,855,261 74,716,332
------------ ----------
Cash and cash equivalents at end of period $ 54,024,987 70,073,597
============ ==========
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash paid for interest $ 6,818,353 $ 6,516,010
Cash paid for Federal income taxes $ 100,000 -
Supplemental Disclosures of Non Cash Investing and Financing Activities:
- -----------------------------------------------------------------------
Loans transferred to other real estate owned $ 101,500 $ 13,627
The corporation purchased all of the common stock of First American Savings
Bank, S.S.B. for $20,238,497. In conjunction with the acquisition, liabilities
were assumed as follows:
Fair value of assets acquired, including $11,309,235
in cash and cash equivalents $160,382,534
Cash paid for the common stock (20,238,497)
------------
Liabilities assumed $140,144,037
</TABLE>
6
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
(FORMERLY TEXAS SECURITY BANCSHARES, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) Principles of Reporting and Consolidation
-----------------------------------------
The accounting and reporting policies of Central Bancorporation, Inc.
(the Corporation), formerly known as Texas Security Bancshares, Inc., and
subsidiaries conform to generally accepted accounting principles and to
general practices in the banking industry. All subsidiaries are included in
the consolidated financial statements, and all significant intercompany
accounts and transactions are eliminated in consolidation.
The consolidated financial information reflects all adjustments,
consisting of only normal recurring accruals, which are, in the opinion of
management, necessary for a fair presentation of the results of the interim
periods.
(2) Acquisition
-----------
At the close of business on February 29, 1996, Central Bancorporation,
Inc. acquired First American Savings Bank, S.S.B., a Texas savings bank with
its principal offices in Bedford, Texas ("First American"), pursuant to an
Agreement and Plan of Reorganization between the Corporation and First
American and joined in by Patsy R. Smith, dated November 9, 1995 (the
"Agreement").
Under the Agreement, Central Bancorporation of Delaware, Inc., a wholly-
owned subsidiary of the Corporation, formed a new bank subsidiary ("New Bank")
which was merged with and into First American (the "Merger"). Pursuant to the
Merger, the resulting bank acquired all of the assets and assumed all of the
liabilities of the constituent banks. In connection with the Merger, the
shareholders of First American received cash in the amount of $20,093,094 in
exchange for their shares of common stock of First American.
The acquisition was accounted for as a purchase with, to the extent
possible, the assets and liabilities recorded at their fair market values as
of assets purchase date. Accordingly, the accompanying consolidated financial
statements include the acquired assets and liabilities assumed from First
American as of March 31, 1996 and the results of operations from February 29,
1996.
The following proforma financial information combines the historical
results of the Corporation and First American as if the acquisition had
occurred January 1, 1995. The proforma information may not be indicative of
the results that actually would have occurred if the acquisition had been
effected on the date indicated. In addition, the proforma financial
information is not necessarily indicative of results which may be obtained in
the future (in thousands, except per share amounts).
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1996 1995
------ ------
<S> <C> <C>
Net interest income $9,355 $8,867
Net income 2,881 2,290
Earnings per share 1.10 0.88
</TABLE>
(3) Impairment of Long-Lived Assets
-------------------------------
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of "("Statement No.
121"), which establishes accounting standards for the impairment of long-lived
assets such as premises and equipment, certain identifiable intangibles and
goodwill. Statement No. 121 requires an impairment loss to be recognized to
the extent the carrying amount exceeds the fair value of the asset. The
Corporation adopted Statement No. 121 as of January 1, 1996. The provisions
of Statement No. 121 did not have a material effect on the consolidated
financial condition or operating results of the Corporation.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
ACQUISITION
As discussed in note 2 in Notes to Consolidated Financial Statements, on
February 29, 1996, the Corporation acquired First American Savings Bank, S.S.B..
The transaction increased total consolidated assets of the Corporation by
approximately $150 million at the date of closure. The acquisition has been
accounted for as a purchase with, to the extent possible, the assets and
liabilites of First American recorded at their fair market values as of the
purchase date.
The acquisition is expected to improve the Corporation's market share,
particularly in Northeast Tarrant County, provide real estate development and
interim construction lending expertise and enhance the Corporation's mortgage
servicing operation.
ANALYSIS OF EARNINGS
Net income for the first quarter of 1996 was $2,645,811 or $1.01 per
share compared to $2,083,047 or $0.80 per share for the first quarter of 1995.
Per share amounts are based on average shares outstanding of 2,616,723.
The following is a discussion of the significant changes in the results
of operations and financial condition for the periods indicated.
Net Interest Income
Net interest income on a taxable equivalent basis for the first quarter
of 1996 increased $1,316,000 or 15.9%, compared to the same period in 1995. The
increase in net interest income is attributable to the higher level of earning
assets provided by deposit growth and the acquisition of First American.
Additionally, the Corporation's net interest spread and net interest margin
increased 9 basis points and 16 basis points, respectively, from the first
quarter of 1995. Yields on earning assets and rates on interest-bearing
liabilities for the first quarter of 1996 increased from the same period last
year. The net interest spread on a taxable equivalent basis increased to 3.70%
for the first quarter of 1996 from 3.61% for the comparable period in 1995 and
the net interest margin on taxable equivalent basis increased to 4.36% for the
first quarter of 1996 from 4.20% for the same period in 1995.
The following table summarizes the effects of changes in interest rates
and average volume of earning assets on net interest income for the quarters
ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN NET INTEREST MARGIN
(Dollars in Thousands - Taxable Equivalent Basis)
1st Qtr. 1996 vs. 1st Qtr. 1995
-------------------------------
Due to Due to Changes
Net Changes Changes in Rates/
Increase In Volume In Rates Volume
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Earning assets $2,147 $1,583 $510 $ 54
Interest-bearing
liabilities 831 597 215 19
------ ------ ---- ----
Net interest margin before
allocation of
rates/volume 1,316 986 295 35
------ ------ ---- ----
Allocation of
rates/volume - 27 8 (35)
------ ------ ---- ----
Net interest margin $1,316 $1,013 $303 $ -
====== ====== ==== ====
</TABLE>
8
<PAGE>
Noninterest Income
Noninterest income increased $547,749 or 23.3% for the first quarter of
1996 from the same period last year. Increases in service charges and fees are
largely due to the increased customer deposit base. Due to the attractive yields
in the stock and bond markets, customers have increased their use of the
subsidiary banks investment services department. Mortgage services income
increased 105.8% for the first quarter of 1996 from the same period last year.
This increase is due to the lower interest rates on mortgage loans and resulting
increases in new loan volume. The following table summarizes the major
categories of noninterest income for the three months ended March 31, 1996 and
1995 (dollars in thousands).
<TABLE>
<CAPTION>
Three Months
Ended March 31, $ %
---------------
1996 1995 Change Change
------- ------ ------ -------
<S> <C> <C> <C> <C>
Service charges and fees $2,090 $1,876 $214 11.4%
Investment services income 317 174 143 82.2
Trust fees 262 192 70 36.5
Mortgage services income 212 103 109 105.8
Other income 14 3 11 366.7
------ ------ ---- -----
Total noninterest income $2,895 $2,348 $547 23.3%
====== ====== ==== =====
</TABLE>
Noninterest Expenses
Noninterest expenses were $8,045,371 for the first quarter of 1996
compared to $7,150,053 for the first quarter of 1995, an increase of $895,318 or
12.5%. The following table summarizes the major categories of noninterest
expense for the three months ended March 31, 1996 and 1995 (dollars in
thousands).
<TABLE>
<CAPTION>
Three Months
Ended March 31, $ %
----------------
1996 1995 Change Change
------- ------- ------- -------
<S> <C> <C> <C> <C>
Salaries and employee benefits $4,685 $3,972 $ 713 18.0%
Net occupancy expense 701 657 44 6.7
Equipment and data processing expense 896 761 135 17.7
Communication expense 394 339 55 16.2
Other real estate owned expense (income), net 5 (47) 52 -
Federal deposit insurances fees 27 398 (371) (93.2)
Legal and professional 326 233 93 39.9
Stationery and supplies 212 217 (5) (2.3)
Marketing expense 227 208 19 9.1
Other operating expenses 572 412 160 38.8
------ ------ ----- -----
Total noninterest expenses $8,045 $7,150 $ 895 12.5%
====== ====== ===== =====
</TABLE>
Salaries and employee benefits for the first quarter of 1996 increased
$712,925 or 18.0% over the same period in 1995 due to normal compensation
increases and expanded banking operations.
Equipment and data processing fees in the first quarter of 1996 increased
$134,720 or 17.7% over the first quarter of 1995. The increase is primarily
attributable to depreciation expense on new equipment and new furniture for new
and remodeled banking centers.
Federal deposit insurance fees for the first quarter of 1996 decreased
$371,019 or 93.2% over the same period in 1995. The decrease is attributable to
a reduction in the Federal deposit insurance premium.
9
<PAGE>
Legal and profesional fees in the first quarter of 1996 increased $93,124
or 39.9% over the first quarter of 1995 due to increased usage of outside
consultants and legal counsel.
Other operating expenses increased $160,437 or 38.8% from March 31, 1995
to March 1996 due to increases in fees and assessments, employee education and
operational losses.
Provision for Federal Income Taxes
The Corporation files a consolidated tax return under the consolidation
provisions of the Internal Revenue Code. Generally, the consolidated tax
liability is settled between the Corporation and its subsidiaries as if each had
filed a separate return. Payments are made to the Corporation by its
subsidiaries with net tax liabilities on a separate return basis. Subsidiaries
with losses or excess tax credits on a separate return basis receive payment for
these benefits when they are usable in the consolidated return.
As of March 31, 1996 the Corporation has a deferred tax asset in the
amount of $2,116,888. This deferred tax asset is determined based on net
deductible temporary differences, primarily relating to the allowance for loan
losses and unrealized loss on securities available-for-sale, approximating
$6,200,000. Based on the Corporation's historical ability to generate taxable
income exclusive of reversing timing differences, management of the Corporation
believes it is more likely than not that the entire deferred tax asset will be
realized or settled, and, accordingly, no valuation allowance has been recorded
as of March 31, 1996 and December 31, 1995.
Provision for Loan Losses, Allowance for Loan Losses and Credit Quality
The Texas economy, in general, continued a recovery which began in 1993.
Job growth remains strong in Texas, including the Dallas/Fort Worth area.
Unemployment in the area is below 5%, well below the national rate.
In 1995, the real estate market, as a whole, continued to improve. The
most encouraging news came from the areas of residential, retail and industrial
markets. The Dallas/Fort Worth area remains one of the top residential markets
in the U.S. with sales of single-family homes remaining strong. The apartment
market maintained over 90% occupancy in 1995, which resulted in higher rental
rates and new development. The retail market reported approximately 87%
occupancy in 1995 with new development continuing, but at a slower rate. The
industrial market has improved to 95% occupancy and the demand for industrial
space is at an all time high. However, the office market is still having
problems as many older buildings in downtown Dallas and downtown Fort Worth
remain completely vacant.
With the improving economy, the Corporation has continued to achieve
moderate loan growth. Most of the growth came from small and medium size
companies and from new or refinanced real estate mortgages. Additionally, with
the acquisition of First American, the Corporation has increased its expertise
and market share in real estate development and interim construction lending.
The Corporation's loan portfolio, although concentrated in real estate, does not
have any industry concentrations and is primarily extended to user occupied
property.
Based upon current information and conditions, management believes the
known risks in the existing loan portfolio have been properly evaluated and the
allowance is at a satisfactory level. Subsequent evaluations, however, could
necessitate changes in the balance of the allowance.
10
<PAGE>
The following table presents the provision for loan losses, loans charged
off, recoveries of loans previously charged-off, and amounts of the allowance
for loan losses, the loans outstanding and certain pertinent ratios for the
periods indicated (dollars in thousands).
<TABLE>
<CAPTION>
Three Months Year Ended
Ended March 31, December 31,
---------------------- -------------
1996 1995 1995
---------- ---------- -------------
<S> <C> <C> <C>
Balance at beginning of period $ 4,672 $ 3,872 $ 3,872
Allowance acquired from First American 685 - -
Charge-offs:
Commercial and financial loans 66 93 284
Real estate loans 76 312 414
Installment loans 92 42 268
-------- -------- --------
Total 234 447 966
-------- -------- --------
Recoveries:
Commercial and financial loans 52 111 493
Real estate loans 22 74 226
Installment loans 39 31 147
-------- -------- --------
Total 113 216 866
-------- -------- --------
Net charge-offs (recoveries):
Commercial and financial loans 14 (18) (209)
Real estate loans 54 238 188
Installment loans 53 11 121
-------- -------- --------
Total 121 231 100
-------- -------- --------
Provision charged to earnings 225 225 900
-------- -------- --------
Balance at end of period $ 5,461 $ 3,866 $ 4,672
======== ======== ========
Amount of outstanding loans at end of period $465,530 $284,449 $331,146
======== ======== ========
Average amount of loans outstanding:
Commercial and financial loans $129,632 $ 95,358 $109,606
Real estate loans 227,303 166,695 175,334
Installment loans 19,091 16,072 17,063
-------- -------- --------
Total $376,026 $278,125 $302,003
======== ======== ========
Ratios:
Annualized net charge-offs (recoveries) to average loans:
Commercial and financial loans 0.04% (0.08)% (0.19)%
Real estate loans 0.10 0.58 0.11
Installment loans 1.11 0.28 0.71
-------- -------- --------
Total 0.13% 0.34% 0.03%
======== ======== ========
Balance in allowance at end of period
to outstanding loans at end of period 1.17% 1.36% 1.41%
======== ======== ========
</TABLE>
At March 31, 1996, the allowance for loan losses was $5.461 million, or
1.17% of period-end loans, compared to $4.672 million and 1.41% at December 31,
1995 and $3.866 million or 1.36% at March 31, 1995.
11
<PAGE>
The following schedule presents the allowance for loan losses by loan
category at the dates indicated (dollars in thousands).
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Specific reserves by category:
Commercial and financial loans $ 345 $ 288
Real estate loans 1,323 1,270
Installment loans 90 26
Unallocated reserves 3,703 3,088
------ ------
Total allowance for loan losses $5,461 $4,672
====== ======
</TABLE>
Net charge-offs for the quarter ended March 31, 1996 were $121,000
compared to net of $231,000 in the first quarter of 1995.
A provision for loan losses of $225,000 was charged to earnings for the
quarters ended March 31, 1996 and 1995.
Nonperforming assets (loans accounted for on a nonaccrual basis,
restructured loans and foreclosed real estate) at March 31, 1996 totaled $5.011
million, a 172.9% increase from the $1.836 million reported at December 31, 1995
and an increase of $1.701 million or 51.4% compared to March 31, 1995 totals.
The increase in nonperforming assets from March 31, 1995 to March 31, 1996 is
primarily attributable to nonperforming assets acquired from First American.
The following table summarizes the nonperforming assets and loans 90 days
or more past due that are still accruing interest (dollars in thousands).
<TABLE>
<CAPTION>
March 31, December 31, September 30, June 30, March 31,
1996 1995 1995 1995 1995
--------- ------------ ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $3,740 $1,480 $1,642 $1,985 $2,986
Other real estate
owned 1,046 129 614 939 89
Restructured loans 225 227 228 231 235
------ ------ ------ ------ ------
Total nonperforming
assets $5,011 $1,836 $2,484 $3,155 $3,310
====== ====== ====== ====== ======
Loans over 90 days
past due but not
on nonaccrual $1,464 $ 366 $ 233 $ 112 $ -
====== ====== ====== ====== ======
</TABLE>
The Corporation's problem loan monitoring program examines on a monthly
basis the status and specific action plan for resolution or liquidation of all
major nonperforming assets.
12
<PAGE>
BALANCE SHEET ANALYSIS
Loans
The following schedule presents the Corporation's loan balances at the
dates indicated according to loan type.
DISTRIBUTION OF LOANS
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
--------------- ------------------
<S> <C> <C>
Commercial and financial $131,794 $124,364
Purchased receivables 2,291 2,158
Real Estate:
Construction 47,028 9,324
Mortgage 261,925 180,266
Installment 24,514 17,764
Overdrafts 115 126
-------- --------
Total loans 467,667 334,002
Less unearned discount (2,137) (2,856)
-------- --------
Total loans, net
of unearned discount $465,530 $331,146
======== ========
</TABLE>
Net loans increased by $134.384 million or 40.6% from December 31, 1995.
Loans, totaling $125.077 million, primarily real estate construction and real
estate mortgage, were recorded as part of the First American acquisition.
Additional growth is primarily from commercial loans and from new and
refinanced real estate mortgages.
Deposits
The most important source of the Corporation's funds is the deposits of
the subsidiary bank. The types of deposits that were in the subsidiary bank on a
daily average basis are shown in the following table (dollars in thousands).
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, 1996 December 31, 1995
------------------ -------------------
<S> <C> <C>
Noninterest-bearing demand $147,878 $141,975
Interest-bearing demand 316,775 286,634
Savings 79,888 66,740
Time, $100,000 and over 60,322 55,261
Other time 242,768 217,636
-------- --------
Total deposits $847,631 $768,246
======== ========
</TABLE>
Total average deposits increased $79.385 million or 10.3% from the
average for the year ended December 31, 1995. Approximately $45.5 million of the
increase is attributable to deposits acquired from First American as of the
close of business on February 29, 1996. The remaining growth is attributable to
the Corporation's expanding banking operations and favorable economic
conditions.
13
<PAGE>
Investment Portfolio
Management of the investment portfolio remains very important as the
loan-to-deposit ratio remains below 40% and alternative investments are examined
to protect the Corporation's net interest margin. Significant investments have
been made in mortgage-backed securities that provide attractive yields, minimal
credit risk and a balance to the asset and liability management strategy. The
principal mortgage-backed investments have been Federal Home Loan Mortgage
Corporation adjustable rate mortgages and balloon mortgages, and government-
backed collateralized mortgage obligations.
Effective January 1, 1994, the Corporation adopted the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities". Under
Statement No. 115, all securities must be classified as held-to-maturity,
trading, or available-for-sale.
Management determines the appropriate classification of securities at the
time of purchase and reevaluates the designation as of each balance sheet date.
Debt securities are classified as held-to-maturity when the Corporation has the
positive intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost. Trading securities, consisting of debt
and marketable equity securities are held for resale in anticipation of short-
term market movements. Trading securities are stated at fair value and gains and
losses, both realized and unrealized, are included in earnings. Debt securities
not classified as held-to-maturity or trading and marketable equity securities
not classified as trading are classified as available-for-sale. Available-for-
sale securities are stated at fair value, with the unrealized gains and losses,
net of tax, reported in a separate component of stockholders' equity. The
Corporation does not have any securities classified as trading as of March 31,
1996.
The following schedule presents the amortized cost and fair value of the
available-for-sale and held-to-maturity investment securities as of March 31,
1996 (dollars in thousands).
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Available-for-sale
------------------
U. S. Treasury $120,570 488 (471) 120,587
U. S. Government agencies 22,507 142 (40) 22,609
FHLB stock 3,984 - - 3,984
Mortgage-backed securities 2,640 - (34) 2,606
Collateralized mortgage obligations 13,297 18 (41) 13,274
-------- ----- ------ -------
$162,998 648 (586) 163,060
======== ===== ====== =======
Held-to-maturity
----------------
U.S. Treasury $ 5,019 23 - 5,042
State and political subdivisions 95,092 2,399 (262) 97,229
Mortgage-backed securities 67,690 506 (907) 67,289
Collateralized mortgage obligations 178,543 520 (3,068) 175,995
-------- ----- ------ -------
$346,344 3,448 (4,237) 345,555
======== ===== ====== =======
</TABLE>
14
<PAGE>
The following schedule presents the amortized cost and fair value of the
investment securities as of December 31, 1995 (dollars in thousands).
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Available-for-sale
------------------
U. S. Treasury $113,578 740 (336) 113,982
U. S. Government agencies 26,024 203 (36) 26,191
FHLB stock 2,838 - - 2,838
Collateralized mortgage obligations 12,604 15 (28) 12,591
-------- ----- ------ -------
$155,044 958 (400) 155,602
======== ===== ====== =======
Held-to-maturity
----------------
U.S. Treasury $ 5,028 31 - 5,059
State and political subdivisions 96,654 3,621 (137) 100,138
Mortgage-backed securities 70,688 529 (528) 70,689
Collateralized mortgage obligations 183,078 708 (2,492) 181,294
-------- ----- ------ -------
$355,448 4,889 (3,157) 357,180
======== ===== ====== =======
</TABLE>
Short-term Borrowings
In May 1994, the Corporation began borrowing by offering repurchase
agreements to customers. As of March 31, 1996, through this funding source, the
Corporation has $30,318,655 in securities sold under agreement to repurchase.
These agreements have a maturity of one day and are repricable on a daily basis.
The weighted average interest rate of the agreements on March 31, 1996 was
4.44%. These agreements were collateralized by U.S. Government securities with a
market value of $43,713,660 as of March 31, 1996.
Interest Rate Sensitivity
Asset/liability management involves the maintenance of an appropriate
balance between interest-sensitive assets and interest-sensitive liabilities to
reduce interest rate exposure while also providing liquidity to satisfy the cash
flow requiremnt of operations to meet customers' fluctuating demands for funds,
either in terms of loan requests or deposit withdrawals.
A volatile interest rate environment combined with industry deregulation
has placed has placed an increased emphasis on interest rate sensitivity
management. Interest-senstive earning assets and interest-bearing liabilities
are those which have yields or rates which are subject to change within a future
time period due to maturity of the instrument or changes in the rate
environment. Gap refers to the difference between the rate sensitive assets and
rate sensitive liabilities.
Interest rate sensitivity management seeks to protect earnings by
maintaining an appropriate balance between interest-sensitive earning assets and
interest-bearing liabilities in order to minimize fluctuations in the net
interest margin and net earnings in periods of volatile interest rates. The
Corporation uses a simulation model to assist in managing interest rate risk.
The model projects future net interest income based on the balance sheet
structure and varying interest rate scenarios. Results are compared to limits
the Asset/Liability Committee has established on the amount of earnings that may
be put at risk due to changes in interest rates. The simulation results are
generally well within the established limits.
15
<PAGE>
The following table quantifies the interest rate sensitivity of both
earning assets and interest-bearing liabilities as of March 31, 1996.
INTEREST RATE SENSITIVITY ANALYSIS AT MARCH 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Repriced
Due in After One
Due in Due in 91 Days Total Year or
30 Days 31 to 90 to Rate Non-Rate
or Less Days One Year Sensitive Sensitive Total
---------- ---------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans $ 154,498 $ 24,557 $ 56,643 $ 235,698 $229,832 $465,530
Interest-bearing deposits
in other banks 1,294 - - 1,294 - 1,294
Federal funds sold 6,000 - - 6,000 - 6,000
Investment securities:
Taxable 48,413 31,988 77,266 157,667 256,645 414,312
Tax-exempt - - 2,566 2,566 92,526 95,092
--------- --------- --------- --------- -------- --------
Total investment securities 48,413 31,988 79,832 160,233 349,171 509,404
--------- --------- --------- --------- -------- --------
Total earning assets 210,205 56,545 136,475 403,225 579,003 982,228
--------- --------- --------- --------- -------- --------
Interest-bearing liabilities:
Interest-bearing demand 331,270 - - 331,270 - 331,270
Savings 67,238 2,131 5,682 75,051 11,226 86,277
Time deposits less than $100,000 33,745 59,143 114,322 207,210 79,955 287,165
Time deposits greater than
$100,000 5,341 14,552 28,347 48,240 31,410 79,650
Other borrowings 45,393 - - 45,393 1,122 46,515
--------- --------- --------- --------- -------- --------
Total interest-bearing
liabilities 482,987 75,826 148,351 707,164 123,713 830,877
--------- --------- --------- --------- -------- --------
Interest sensitivity gap $(272,782) $ (19,281) $ (11,876) $(303,939) $455,290 $151,351
========= ========= ========= ========= ======== ========
Cumulative gap $(272,782) $(292,063) $(303,939)
========= ========= =========
Relationship of gap to
total earning assets (27.7)% (29.7)% (30.9)%
========= ========= =========
</TABLE>
In developing the classifications used for this table, it was necessary to
make certain assumptions in assigning assets and liabilities to different
maturity categories. For example, interest-bearing demand and savings are
subject to immediate withdrawal and as such are presented as repricing in 30
days or less even though their balances have historically not shown significant
sensitivity to changes in interest rates.
16
<PAGE>
Capital
The Corporation recognizes the importance of proper capitalization. The
continuing philosophy is to maintain a highly capitalized organization operating
with capital levels well in excess of those required by regulatory agencies.
The Federal Reserve Board's guidelines to United States banking
organizations provide for the application of a risk-based capital framework. The
guidelines classify capital into two tiers, referred to as Tier 1 and Tier 2.
Tier 1 consists of core capital elements less certain intangible assets, while
Tier 2 includes the allowance for loan losses, but is limited to 100% of Tier 1
and 1.25% of risk-weighted adjusted assets. The denominator or asset portion of
risk-based capital aggregates generic classes of balance sheet and off-balance-
sheet exposures, each weighted by one of four factors, ranging from 0% to 100%,
based upon the relative risk of the exposure class. The Federal Reserve Board
guidelines require a minimum capital of 8%, of which at least 4% must be Tier 1.
Amendments to the capital rules for the adoption of Statement No. 115
have not yet been adopted and as such, net unrealized gains on available-for-
sale securities resulting from the accounting change have been excluded from the
computation of Tier 1 (and total) capital.
The Federal Reserve Board has also established guidelines that set forth
the leverage standards to be applied to banking organizations in conjunction
with the risk-based capital framework. The leverage standard requires a minimum
ratio of 3% Tier 1 capital to average total adjusted assets, as defined.
However, regulators are given wide discretion to set a level appropriate for
each bank, with most banks expected to maintain a leverage capital ratio of 4%
to 5%.
The following table presents the Corporation's risk-based and leverage
capital ratios (dollars in thousands).
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Tier 1 (Core Capital)
Stockholders' equity $ 69,367 $ 67,329
Plus: Unrealized loss on securities
available-for-sale 711 365
Less: Excess cost over
net assets acquired (10,897) (741)
-------- --------
Total Tier 1 Capital 59,181 66,953
-------- --------
Tier 2 (Supplementary Capital)
Eligible portion of allowance
for loan losses 5,461 4,672
-------- --------
Total risk-based capital $ 64,642 $ 71,625
======== ========
Total risk-weighted assets $542,593 $417,727
======== ========
Tier 1 capital ratio 10.91% 16.03%
Total risk-based capital ratio 11.91% 17.15%
======== ========
Leverage capital ratio 5.55% 7.23%
======== ========
</TABLE>
The above capital ratios, under all regulatory measurements, are in
excess of required minimum levels. The Texas Department of Banking issued a 6%
minimum leverage capital ratio standard for all state banks during 1991.
17
<PAGE>
Liquidity
Liquidity ratios are in excess of regulatory guidelines. The
Corporation's primary internal source of liquidity is its short-term marketable
assets, primarily Federal funds sold and United States Government and agency
securities maturing within the next twelve months.
The Corporation has drawn on its revolving line of credit to meet its
liquidity needs in 1996 and 1995, and in particular, to fund the acquisition of
First American. Dividends may also be received from the subsidiary bank, as
discussed below.
Dividends
Central Bank & Trust is subject to various restrictions imposed by the
Texas Banking Code relating to the declaration and payment of dividends to the
Corporation, including continued capital adequacy. As of March 31, 1996, Central
Bank & Trust could declare dividends up to approximately $5,300,000 without
prior regulatory approval. The Corporation believes that the policies and
procedures currently in place comply with regulatory requirements.
Cash dividends are paid to the Corporation's shareholders at the
discretion of the Corporation's Board of Directors and depend upon a number of
factors, including future earnings of the Corporation, the financial condition
of the Corporation, the Corporation's cash needs, general business conditions
and the amount of dividends paid to the Corporation by the subsidiary bank.
Under its loan agreement with The Frost National Bank, pursuant to which
the Corporation obtained a $12,500,000 line of credit for the purpose of
financing the acquisition of financial institutions in Texas and for general
corporate purposes, the Corporation may not declare or pay any dividends which
are in excess of $1,500,000 in the aggregate per year.
18
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
(FORMERLY TEXAS SECURITY BANCSHARES, INC. AND SUBSIDIARIES)
CONSOLIDATED AVERAGE BALANCE SHEETS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---------- ----------
<S> <C> <C>
Earning assets:
Loans $376,026 $278,125
Interest-bearing deposits in banks 555 258
Federal funds sold 6,059 19,347
Investment securities:
Taxable 406,181 448,894
Tax-exempt 95,705 53,335
-------- --------
Total investment securities 501,886 502,229
Total earning assets 884,526 799,959
-------- --------
Cash and due from banks 42,273 42,159
Other real estate 460 290
Other assets 44,024 37,004
Less allowance for possible loan losses (4,940) (3,886)
-------- --------
Total assets $966,343 $875,526
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing liabilities:
Deposits $699,754 $592,959
Other borrowings 42,740 88,677
-------- --------
Total interest-bearing liabilities 742,494 681,636
-------- --------
Noninterest-bearing demand deposits 147,878 132,418
Other liabilities 7,240 4,562
Stockholders' equity 68,731 56,910
-------- --------
Total liabilities and stockholders' equity $966,343 $875,526
======== ========
</TABLE>
19
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
(FORMERLY TEXAS SECURITY BANCSHARES, INC. AND SUBSIDIARIES)
CONSOLIDATED TAXABLE EQUIVALENT STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Interest income:
Interest and fees on loans (1) $ 8,729 $ 6,309
Interest on investment securities:
Taxable securities 6,333 7,149
Tax-exempt (1) 1,971 1,227
Interest on deposits in other banks 9 2
Interest on Federal funds sold 76 284
------- -------
Total interest income 17,118 14,971
------- -------
Interest expense:
Interest on interest-bearing demand deposits 2,350 1,920
Interest on savings deposits 544 357
Interest on time deposits 4,082 3,156
Interest on other borrowings 536 1,248
------- -------
Total interest expense 7,512 6,681
------- -------
Net interest income 9,606 8,290
Provision for possible loan losses 225 225
------- -------
Net interest income after provision
for possible loan losses 9,381 8,065
------- -------
Other income:
Service charges and fees 2,613 2,200
Other income 282 148
------- -------
Total other income 2,895 2,348
------- -------
Other expenses:
Salaries and employee benefits 4,685 3,972
Net occupancy expense 702 657
Equipment and data processing expense 895 761
Communications expense 394 339
Other real estate owned expense 5 (47)
Federal deposit insurance fees 27 398
Legal and professional 326 233
Stationery and supplies 212 217
Marketing expense 227 208
Other operating expenses 572 412
------- -------
Total other expenses 8,045 7,150
------- -------
Income before Federal income tax 4,231 3,263
Tax equivalent adjustment 844 524
------- -------
Income before Federal income taxes 3,387 2,739
Provision for Federal income taxes 741 656
------- -------
Net income $ 2,646 $ 2,083
======= =======
</TABLE>
(1) Presented on a taxable equivalent basis using a 34% Federal income tax
rate for 1996 and 1995.
20
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
(FORMERLY TEXAS SECURITY BANCSHARES, INC. AND SUBSIDIARIES)
AVERAGE INTEREST RATES AND SELECTED RATIOS
(TAX EQUIVALENT BASIS)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Yields on earning assets:
Loans (1) 9.31% 9.20%
Interest-bearing deposits
in other banks 6.50 3.14
Federal funds sold 5.03 5.95
Investment securities:
Taxable 6.25 6.46
Tax-exempt (1) 8.26 9.33
----- -----
Total investment securities 6.63 6.76
----- -----
Total earning assets 7.76 7.59
----- -----
Rates on interest-bearing liabilities:
Deposits 4.00 3.78
Other borrowings 5.03 5.71
----- -----
Total interest-bearing liabilities 4.06 3.98
----- -----
Net interest spread 3.70% 3.61%
===== =====
Net interest margin 4.36% 4.20%
===== =====
Selected ratios:
Net income as a percent of:
Average total assets 1.10% 0.96%
===== =====
Average stockholders' equity 15.44% 14.84%
===== =====
</TABLE>
(1) Presented on a taxable equivalent basis using a 34% Federal income tax
rate for 1996 and 1995.
21
<PAGE>
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 of Security Holders.
- -------------------------------------------------------------
The Annual Meeting of the Shareholders of the Corporation was held on April 3,
1996. The shareholders voted to elect eight directors of the Corporation and
to approve the appointment of KPMG Peat Marwick as the independent public
accountants of the Corporation for the fiscal year ending December 31, 1996.
The results of the voting were as follows:
<TABLE>
<CAPTION>
Election of Directors:
<S> <C> <C>
Name of Director For Against
---------------- --- -------
J. Andy Thompson 2,210,357 344
Robert M. Doby, Jr. 2,210,357 344
Ervin D. Cruce 2,210,357 344
Stuart W. Murff 2,203,557 7,144
Nancy W. Smith 2,210,357 344
C. Rhea Thompson 2,210,357 344
Kelly R. Thompson 2,210,357 344
F.D. Thompson, Jr. 2,206,287 4,414
</TABLE>
There were no abstentions or broker non-votes regarding the election of
directors.
22
<PAGE>
The results of the other vote was as follows:
<TABLE>
<CAPTION>
Description For Against
----------- --- -------
<S> <C> <C>
Approval of KPMG Peat Marwick as the 2,209,197 1,504
Corporation's independent auditors
for the fiscal year ending
December 31, 1996
</TABLE>
There were no abstentions or broker non-votes on this item.
Item 5. Other Information.
---------------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
------------------------------------------
(a) Exhibits
--------
10(a) Agreement and Plan of Reorganization by and between Central
Bancorporation, Inc. and First American Savings Bank, S.S.B. and
joined in by Patsy R. Smith, dated November 9, 1995 (1)
10(b) Agreement and Plan of Merger between New Bedford Bank, S.S.B. and
First American Savings Bank, S.S.B. and joined in by Central
Bancorporation, Inc., dated January 23, 1996 (1)
10(c) Form of Buy-Sell Agreement between the Corporation and Stuart W.
Murff, Michael J. Tyler, James Prunty and Danny K. Coleman, dated
March 28, 1996; and form of related Subscription Agreement
between the Corporation and Stuart W. Murff, Michael J. Tyler,
James Prunty and Danny K. Coleman, with dates ranging from April
26 to May 1, 1996 *
11 Computation of Earning Per Common Share *
27 Financial Data Schedule *
- --------------------
* Filed herewith.
(1) Incorporated by reference fromthe Corporation's Current Report on
Form 8-K for event dated February 29, 1996 and filed March 15,
1996.
(b) Reports on Form 8-K
-------------------
On March 15, 1996 the Corporation filed a Current Report on Form 8-K to
report that on February 29,1996, Central Bancorporation, Inc. acquired First
American Savings Bank, S.S.B. This filing was amended on April 1, 1996.
23
<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 hereunto duly authorized.
CENTRAL BANCORPORATION, INC.
---------------------------------
Registrant
DATE: May 13, 1996 By: /s/ J. Andy Thompson
---------------------------------------------
J. Andy Thompson, Chairman of the Board
and Chief Executive Officer
DATE: May 13, 1996 By: /s/ Michael J. Tyler
---------------------------------------------
Michael J. Tyler, Senior Vice President
and Chief Financial Officer
24
<PAGE>
EXHIBIT 10(C)
BUY-SELL AGREEMENT BETWEEN
CENTRAL BANCORPORATION, INC.
AND ____________________
THIS AGREEMENT ("Agreement") is made by and between Central Bancorporation,
Inc., a corporation organized under the laws of the state of Texas (the
"Company"), and ______________________, of _____________________ (the
"Shareholder"), and joined in by the Shareholder's spouse (the "Spouse").
WITNESSETH:
WHEREAS, the Company has determined that it would be in the best interest
of the Company and its shareholders to provide certain key employees, who have
substantial responsibility for the management and growth of the Company and its
subsidiaries, with additional incentive by offering such key employees an
opportunity to increase their proprietary interest in the Company; and
WHEREAS, the Company has further determined that it would be in the best
interest of the Company and its shareholders to effect this objective by the
offer for sale of up to a maximum of 6,654 shares of common stock, $2.50 par
value, of the Company (the "CBI Common Stock") to such key employees of the
Company at a per share price of $26.00; and
WHEREAS, the Company has further determined to offer such shares of CBI
Common Stock to such key employees pursuant to a limited offering in compliance
with applicable federal and state securities laws (the "Offering"); and
WHEREAS, the Shareholder has been designated by the Company as a key
employee entitled to participate in the Offering; and
WHEREAS, pursuant to such Offering, the Company has offered to the
Shareholder, and the Shareholder has accepted, an offer from the Company to
purchase __________ shares of CBI Common Stock (the "Shares") at $26.00 per
share, subject to the restrictions on transfer herein set forth; and
WHEREAS, the Shareholder understands that the Company would not have
offered to sell the Shares to the Shareholder but for the Shareholder's and the
Spouse's agreement to the restrictions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by all parties to this Agreement,
the parties to this Agreement do hereby agree and bind themselves as follows:
BUY-SELL AGREEMENT PAGE 1
<PAGE>
SECTION 1. RESTRICTIONS AGAINST TRANSFER.
The Shareholder agrees that he will not, without the prior written consent
of the Company, sell, transfer, exchange, pledge, assign, collaterally assign,
hypothecate or otherwise dispose of any of the Shares, or any right or interest
therein, whether voluntarily or by operation of law, or by gift or otherwise,
except in accordance with the terms and provisions of this Agreement. The
Company may withhold its consent to any transfer of the Shares for any reason
whatsoever, with or without cause. Any purported transfer in violation of any
provision of this Agreement shall be void and without effect and shall not
operate to transfer any interest or title in the Shares to the purported
transferee.
SECTION 2. TRANSFERS BY THE SHAREHOLDER.
(A) In the event the Shareholder receives a bona fide offer for the
purchase of all or a portion of the Shares, the Shareholder shall give written
notice thereof to the Secretary of the Company in the manner and at the address
set forth in SECTION 10. The notice shall set forth the name of the proposed
transferee, the number of shares to be transferred, the price per share, and all
other material terms and conditions of the proposed offer, together with a copy
of any agreement executed or to be executed in connection with such third party
offer.
(B) On receipt of the notice, the Company shall have the option (the
"Company Option"), and, in the event of the exercise of such Company Option by
the Company, the Shareholder shall be obligated to sell the Shares in the manner
and on the terms and conditions as set forth in SECTIONS 7 AND 8. The Company
Option shall be effective on the date of receipt of the notice by the Company
and shall continue for a period of thirty (30) days from the date of receipt of
such notice by the Company.
SECTION 3. DIVORCE OR LEGAL SEPARATION OF THE SHAREHOLDER; DEATH OF SPOUSE
OF THE SHAREHOLDER.
(A) In the event of the divorce or legal separation of the Shareholder
from his Spouse or in the event of the death of the Spouse, the Shareholder
shall have the option to purchase (the "Shareholder Option"), and in the event
of the exercise of such Shareholder Option by the Shareholder, the Spouse or the
personal representative of the Spouse, as the case may be, shall be obligated to
sell, in the manner and on the terms and conditions as set forth in SECTIONS 7
AND 8, all of the Shares to which the Spouse, or the estate of the deceased
Spouse, as the case may be, is entitled by virtue of any law, court order,
bequest, settlement agreement, or otherwise. The Shareholder Option shall be
effective in the event of divorce or legal separation for a period of thirty
(30) days from the date of entry of a decree of divorce or legal separation and,
in the event of the Spouse's death, for a period of sixty (60) days after the
date of qualification of the personal representative of the Spouse's estate.
Notwithstanding the above,
BUY-SELL AGREEMENT PAGE 2
<PAGE>
the Shareholder Option shall not apply to any Shares to which the Spouse of the
Shareholder would be entitled but which are (1) set apart to the Shareholder in
a property settlement agreement or by a court in the event of divorce or legal
separation, or (2) devised to or inherited by the Shareholder in the event of
the death of the Spouse.
(B) If the Shareholder shall fail for any reason to exercise the
Shareholder Option provided in SECTION 3(A), the Company shall have the option
to purchase (the "Company Option"), and, in the event of the exercise of such
Company Option by the Company, the Spouse or the heirs or personal
representative of the Spouse, as the case may be, shall be obligated to sell, in
the manner and on the terms and conditions as set forth in SECTIONS 7 AND 8, all
of the Shares to which the Spouse, or the estate of the deceased Spouse, as the
case may be, is entitled by virtue of any law, court order, bequest, settlement
agreement, or otherwise. The Company Option shall be effective on the date of
termination of the Shareholder Option and shall continue until the expiration of
thirty (30) days following receipt of actual, written notice by the Company of
the failure of the Shareholder to exercise same.
SECTION 4. TERMINATION OF EMPLOYMENT OF THE SHAREHOLDER. Upon the
termination of employment of the Shareholder by the Company and any of its
subsidiaries for any reason whatsoever, whether with or without cause, whether
by the Company or the Shareholder, whether as a result of the death, disability
or retirement of the Shareholder, the Company shall have the option to purchase
(the "Company Option"), and, in the event of the exercise of such Company Option
by the Company, the Shareholder or the personal representative of the
Shareholder, as the case may be, shall be obligated to sell, in the manner and
on the terms and conditions as set forth in SECTIONS 7 AND 8, all of the Shares
owned by the Shareholder. The Company Option shall be effective on the date of
termination of employment and shall continue for a period of sixty (60) days
from the date of such termination.
SECTION 5. SHARES SUBJECT TO AGREEMENT. This Agreement, and all Company
and Shareholder Options created hereunder, shall extend and apply to all shares
of CBI Common Stock that are acquired by the Shareholder and the Spouse under
the terms of this Agreement, whether such shares of CBI Common Stock constitute
the separate property or community property of the Shareholder or the Spouse and
regardless of the capacity in which title to such shares of CBI Common Stock is
held or taken. Additionally, this Agreement, and all Company and Shareholder
Options created hereunder, shall extend and apply to all shares of CBI Common
Stock which are acquired by the Shareholder as a dividend on the Shares,
pursuant to a stock split or reverse stock split involving the Shares, or as a
result of the surrender of any Shares in connection with a recapitalization.
This Agreement, and all Company and Shareholder Options created hereunder, shall
not extend and apply to any shares of CBI Common Stock that are owned of record
on beneficiary by the Shareholder or the Spouse prior to the consummation of
this
BUY-SELL AGREEMENT PAGE 3
<PAGE>
Agreement or that may be acquired hereafter by means other than this Agreement.
SECTION 6. AVAILABILITY OF EQUITABLE REMEDIES. Each party to this
Agreement agrees that a breach of the provisions of this Agreement could not
adequately be compensated by monetary damages, and that each party shall be
entitled in addition to any other right or remedy available to it or him, to a
temporary restraining order and/or an injunction restraining such breach or
threatened breach and to specific performance of any such provision of this
Agreement, and in either case no bond or other security shall be required in
connection therewith. The parties hereby consent to the issuance of such
temporary restraining order and/or injunction and to the ordering of specific
performance.
SECTION 7. DETERMINATION OF PURCHASE PRICE.
(A) The per share purchase price of any Shares purchased pursuant to
SECTIONS 2, 3 OR 4 shall be the per share Book Value thereof (as hereinafter
defined), as determined pursuant to this SECTION 7, as of the last day of the
calendar quarter immediately preceding the closing (the "Valuation Date").
(B) The per share book value (the "Book Value") shall be the sum of the
Company's total stockholders' equity (defined as capital stock, surplus,
undivided profits and retained earnings) as of the Valuation Date, determined in
accordance with generally accepted accounting principles applied on a consistent
basis, with reserves acceptable to the Company, divided by the total number of
shares of CBI Common Stock issued and outstanding as of the Valuation Date. The
Book Value shall be determined by the Company's independent public accountants
and shall be binding on all parties to this Agreement.
SECTION 8. PAYMENT AND TRANSFER OF SHARES.
(A) The Shareholder Option shall be exercised by the Shareholder by giving
written notice of such intent, in the manner and at the address as set forth in
SECTION 10, to (i) the Company and (ii) the Spouse, or her heirs or personal
representatives, as the case may be, within the period of time such Shareholder
Option is in effect. The Company Option created hereunder shall be exercised by
the Company by giving written notice of such intent, in the manner and at the
address as set forth in SECTION 10, to the Shareholder or the Spouse, or the
heirs or personal representatives of either, as the case may be, within the
period of time such Company Option is in effect.
(B) Payment of the purchase price for the Shares shall be made by certified
check at the closing of the purchase and sale of the Shares.
(C) The Company and the Shareholder or the Spouse, as the case may be,
shall agree as to the time and place of the closing of
BUY-SELL AGREEMENT PAGE 4
<PAGE>
the purchase and sale of any Shares pursuant to the exercise of any Company
Option or Shareholder Option under this Agreement and, if the Company and the
Shareholder or the Spouse, as the case may be, cannot so agree as to the time
and place of the closing, the Company shall establish and set the time and place
of the closing hereunder; provided, however, the date of closing shall be no
earlier than fifteen (15) days or later than forty-five (45) days after the date
on which any such Company Option or Shareholder Option is exercised.
(D) At the closing the Shareholder or the Spouse, or the heirs or personal
representatives of either, as the case may be, shall deliver the certificates
for the Shares sold, along with stock powers, duly endorsed in blank, and any
other transfer documentation as may be reasonably requested, to the Company or
the Shareholder, as the case may be, exercising any Company Option or
Shareholder Option under this Agreement.
SECTION 9. FAILURE TO EXERCISE COMPANY OPTION. If the Company fails to
exercise in full any of the Company Options permitted under this Agreement
within the applicable time period, the Shareholder or the Spouse, or an heir or
personal representative, as the case may be, may, during the period of sixty
(60) days immediately following the expiration of the Company Option, transfer
the Shares to a third party who shall take and hold the Shares free and clear of
all of the terms and conditions of this Agreement.
SECTION 10. NOTICES.
(A) Any notice required to be given to the Company hereunder shall be in
writing and may be delivered personally to the Company or by registered or
certified mail, return receipt requested, at the Company's address indicated
below, and any such notice will be effective upon delivery, in the case of
personal delivery and upon deposit in the mail, postage prepaid, in the case of
delivery by mail:
Central Bancorporation, Inc.
777 West Rosedale
Fort Worth, Texas 76104
Attention: Mr. J. Andy Thompson
(B) Any notice required to be given to the Shareholder or to the Spouse
hereunder shall be in writing and may be delivered personally to such party or
by registered or certified mail, return receipt requested, at such party's
address as set forth on the signature page of this Agreement, and any such
notice will be effective upon delivery in the case of personal delivery and upon
deposit in the mail, postage prepaid, in the case of delivery by mail.
BUY-SELL AGREEMENT PAGE 5
<PAGE>
(C) The names and addresses of parties to receive notice as stated in
SECTIONS 10(A) AND 10(B) may be changed by notice given in accordance with such
Sections.
SECTION 11. COPY OF AGREEMENT; RESTRICTIVE LEGEND. A counterpart of this
Agreement shall be placed on file at the principal place of business of the
Company and at its registered office. Each certificate representing Shares
subject to this Agreement shall bear a restrictive legend (in addition to any
other legends deemed appropriate by the Company) to the following effect:
"The shares of stock represented by this certificate and the transfer
thereof are subject to the terms of an Agreement dated March 28, 1996,
between the holder of this certificate and the issuer, a copy of which
is available for inspection at the principal place of business and the
registered office of the issuer."
SECTION 12. INVALID PROVISION. In the event any of the provisions, or
portions thereof, of this Agreement are held to be unenforceable or invalid by
any court of competent jurisdiction, the validity and enforceability of the
remaining provisions, or portions thereof, shall not be affected thereby.
SECTION 13. CONSTRUCTION.
(A) Whenever used herein the singular number shall include the plural and
the plural number shall include the singular. Whenever used herein the
masculine gender shall include the feminine and neuter genders and the neuter
gender shall refer to any gender.
(B) Section headings used in this Agreement are intended for convenience
only and not necessarily to describe the intent of a particular section and
therefore shall not be construed as limiting the effect of any provision of this
Agreement.
SECTION 14. GOVERNING LAW. This Agreement has been executed in, and shall
be governed by, the laws of the state of Texas.
SECTION 15. TERMINATION. This Agreement shall terminate upon the earliest
to occur of any of the following events:
(A) the written agreement of all the parties hereto;
(B) the bankruptcy or receivership of the Company;
(C) the expiration of one (1) year following the termination of employment
of the Shareholder by the Company;
(D) the expiration of three (3) years following the date of this Agreement;
BUY-SELL AGREEMENT PAGE 6
<PAGE>
(E) the date of effectiveness of a Change in Control (as defined below);
(F) the date of effectiveness of a Qualified Public Offering (as defined
below); or
(G) at such time as either the Shareholder or the Spouse shall no longer
have any interest in the Shares, or any portion thereof.
For purposes of this SECTION 15, a "Change in Control" shall be deemed to
have occurred upon (i) the acquisition of beneficial ownership within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended
("Beneficial Ownership"), of an aggregate of more than fifty percent (50%) of
the voting power of the Company's outstanding voting securities by any person or
group (as such term is used in Rule 13d-5 under such Act) whose Beneficial
Ownership is less than ten percent (10%) of the voting power of the Company's
outstanding voting securities on the date hereof or (ii) the individuals who at
the beginning of any period of two (2) consecutive years constituting the
Company's Board of Directors cease for any reason to constitute a majority of
such Board of Directors at any time during such two (2) year period.
Additionally, for purposes of this SECTION 15, the term "Qualified Public
Offering" shall mean an underwritten public offering covering the sale of CBI
Common Stock in which the gross proceeds to the Company are at least Ten Million
Dollars ($10,000,000).
SECTION 16. INUREMENT. This Agreement shall extend to and be binding upon
the Shareholder and the Spouse, their heirs, legatees, legal representatives,
successors and permitted assigns and upon the Company, its successors and
assigns.
SECTION 17. AMENDMENT. This Agreement may be waived, altered, amended or
repealed, in whole or in part, only by written consent of the Company and the
Shareholder.
SECTION 18. FURTHER ACTIONS. At any time and from time to time, each
party agrees, without further consideration, to take such further actions and to
execute and deliver such additional documents as may be reasonably necessary to
effect the purposes of this Agreement.
SECTION 19. AUTHORIZATION OF SHAREHOLDER. The Spouse, who by execution of
the Consent of Spouse hereinbelow, which is incorporated herein in its entirety
for all purposes, does hereby irrevocably designate, appoint and authorize the
Shareholder as her limited attorney in fact to exercise all rights related to
the Shares, including, but not limited to, the power to vote the Shares and to
sell or otherwise dispose of the Shares, and to execute all consents, stock
powers, assignments or other documents or agreements that are hereafter required
by or contemplated by this Agreement and to take and perform all actions and
obligations required by or contemplated by this Agreement. This limited power
BUY-SELL AGREEMENT PAGE 7
<PAGE>
of attorney is coupled with an interest, is irrevocable, and shall survive the
disability of the Spouse.
SECTION 20. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto concerning the subject matter contained
herein. There are no representations, agreements, arrangements or
understanding, oral or written, between or among the parties hereto relating to
the subject matter of this Agreement, which are not fully expressed herein.
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto and is
effective this the 28th day of March, 1996.
COMPANY: CENTRAL BANCORPORATION, INC.
By:
-----------------------------------------------
J. Andy Thompson, Chairman of the
Board and Chief Executive Officer
SHAREHOLDER:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
BUY-SELL AGREEMENT PAGE 6
<PAGE>
CONSENT OF SPOUSE
I, _________________, wife of __________________ who as a Shareholder
executed the foregoing Buy-Sell Agreement between Central Bancorporation, Inc.
and __________________ ("Agreement"), hereunto subscribe my name in evidence
that I have read the foregoing Agreement and that I know its contents. Further,
I am aware that by its provisions my husband agrees, or in the case of my death
or my husband's death, the personal representative of our respective estate
agrees, to sell all Shares of the Company acquired pursuant to the Agreement,
including my community property interest in them, if any, on the occurrence of
certain events. Further, I am aware that by its provisions I am required to
sell any of such Shares, and any interest therein, acquired by me pursuant to
any law, court order, bequest, settlement agreement, or otherwise. Now,
therefore, I hereby consent to the sale, approve of the provisions of the
foregoing Agreement, and agree that all Shares acquired by me or my husband
pursuant to the Agreement and all my interest in them, if any, are subject to
the provisions of the Agreement and that I will take no action at any time to
hinder the operation of the Agreement on the Shares or my interest, if any, in
them.
DATED as of the 28th day of March, 1996.
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
BUY-SELL AGREEMENT PAGE 9
<PAGE>
SUBSCRIPTION AGREEMENT
CENTRAL BANCORPORATION, INC.
THE SECURITIES OF THE COMPANY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND THEREFORE ARE SUBJECT TO
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY AND RESALE.
- --------------------------------------------------------------------------------
To: Central Bancorporation, Inc.
777 West Rosedale
Fort Worth, Texas 76104
Attention: Mr. J. Andy Thompson
Chairman of the Board and
Chief Executive Officer
TERMS OF SUBSCRIPTION
The undersigned understands that Central Bancorporation, Inc. (the
"Company") is offering for sale 6,654 shares of common stock, $2.50 par value
(the "Shares") to certain key employees of the Company. The Shares must be
purchased for cash and the purchase price is $26.00 per Share.
1. SUBSCRIPTION FOR THE SHARES. Subject to the terms and conditions
hereof, the undersigned hereby irrevocably subscribes for ______ Shares, for an
aggregate purchase price (the "Purchase Price") of $________ (the Purchase Price
must equal the number of Shares subscribed times $26.00).
The undersigned hereby tenders along with this Subscription Agreement a
check payable to "Central Bancorporation, Inc." in the amount of the Purchase
Price.
It is understood that the Shares will be subject to certain restrictions on
transfer, all as more fully set forth in that certain Buy-Sell Agreement between
the undersigned and the Company date as of the date hereof (the"Buy-Sell
Agreement").
It is further understood that the undersigned's subscription is subject to
acceptance by the Company. In the event the undersigned's subscription is not
accepted, the check of the undersigned shall be returned promptly to the
undersigned and this Subscription Agreement shall be terminated.
2. REPRESENTATIONS AND WARRANTIES OF THE UNDERSIGNED. The undersigned
represents and warrants that:
(a) The undersigned has been advised that the Shares have not been
registered under the Securities Act of 1933, as
SUBSCRIPTION AGREEMENT PAGE 1
<PAGE>
amended (the "Act"), or any state securities law in reliance on applicable
exemptions, and that the undersigned is purchasing the Shares without regard to
any offering literature or prospectus other than the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (the "Annual Report") and
the Buy-Sell Agreement.
(b) The undersigned serves as the _____________ of the Company.
(c) The principal residence of the undersigned is the address
indicated on the signature page.
(d) The statements and representations contained in this Subscription
Agreement are true and correct on the date hereof and, to the best of the
undersigned's knowledge and belief, will remain true until acceptance or
rejection of this subscription by the Company. The undersigned will immediately
notify the Company if any information contained herein should become inaccurate.
(e) The undersigned can bear the economic risk of losing the
undersigned's entire investment in the Shares.
(f) The undersigned's financial capacity is such that the total cost
of his investment in the Shares is not material when compared to his total
financial capacity, and the total cost is less than twenty percent (20%) of the
undersigned's net worth (or joint net worth with his spouse, if any).
(g) The undersigned has adequate means of providing for the
undersigned's current needs and personal contingencies and has no need for
liquidity in the undersigned's investment in the Shares.
(h) The undersigned has substantial experience in making investment
decisions of this type.
(i) The undersigned has such knowledge and experience in financial,
securities and investment matters (both generally and based on actual
participation) as to enable the undersigned to use the information made
available to the undersigned in connection with the offering of the Shares to
evaluate the relative merits and risks of an investment in the Shares.
(j) The undersigned has received and read and is familiar with the
Annual Report, the Buy-Sell Agreement and this Subscription Agreement, and the
undersigned confirms that all documents, records and books pertaining to the
investment in the Company and requested by the undersigned have been made
available or delivered to the undersigned.
(k) The undersigned has had an opportunity to ask questions of and
receive answers from the Company, or a person or
SUBSCRIPTION AGREEMENT PAGE 2
<PAGE>
persons acting on its behalf, concerning the terms and conditions of this
investment.
(l) The Shares shall not be sold, pledged, hypothecated or otherwise
transferred except in accordance with the Buy-Sell Agreement and unless they are
registered under the Act and applicable state securities laws, or an exemption
from such registration is available.
(m) The Shares for which the undersigned hereby subscribes are being
acquired solely for the undersigned's own account for investment, and are not
being purchased with a view to or for the resale, distribution, subdivision or
fractionalization thereof; the undersigned has no present plans to enter into
any contract, undertaking, agreement or arrangement for resale, distribution,
subdivision or fractionalization of the Shares; and the Company will have no
obligation to recognize the ownership, beneficial or otherwise, of such Shares
by anyone other than the undersigned.
(n) The undersigned is aware of the following:
(i) The Shares are speculative investments which involve a high
degree of risk of loss by the undersigned of the undersigned's entire investment
in the Company.
(ii) Due to the high degree of risk of loss of the undersigned's
entire investment in the Company, the Shares may only be sold to persons who
understand the nature of the Company and for whom the investment is suitable.
Suitability is to be determined by taking into account all facts and
circumstances, including the purchaser's net worth and income, education,
sophistication, experience in investments, and investment objectives.
(iii) No federal or state agency has made any finding or
determination as to the fairness of an investment in, or any recommendation or
endorsement of, the Shares.
(iv) There are substantial restrictions on the transferability
of the Shares.
(v) Legends to the following effect will be placed on the
Shares:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
state. Without such registration, the securities represented by this
certificate may not be sold, pledged, hypothecated or otherwise
transferred, except upon delivery to the Company of an opinion of counsel
satisfactory to the Company that registration is not required for such
transfer or the submission to the Company of such other evidence as may be
satisfactory to the Company to the effect that any such transfer shall not
be in violation
SUBSCRIPTION AGREEMENT PAGE 3
<PAGE>
of applicable securities laws or any rules or regulations promulgated
thereunder."
"The shares of stock represented by this certificate and the transfer
thereof are subject to the terms of an Agreement dated March 28, 1996,
between the holder of this certificate and the issuer, a copy of which is
available for inspection at the principal place of business and the
registered office of the issuer."
The foregoing representations and warranties are true and accurate as of
the date hereof and shall be true and accurate as of the date of acceptance of
this subscription and shall survive such delivery. If in any respect such
representations and warranties shall not be true and accurate prior to the
acceptance of the undersigned's subscription, the undersigned shall give written
notice of such fact to the Company, specifying which representations and
warranties are not true and accurate and the reasons therefor.
3. TRANSFERABILITY AND RESALE OF THE SHARES. The undersigned
acknowledges that the Shares are not registered under the Act. The undersigned
also understands that the Company has not agreed to comply with any exemption
under the Act for the resale of all or any part of the Shares, or to register
any Shares. Therefore, the Shares purchased pursuant hereto may have to be held
indefinitely, unless and until subsequently registered under the Act and/or
applicable state securities law, or unless an exemption from such registration
is available, in which case a limitation as to the amount of said securities
that could be sold may still exist. The undersigned further acknowledges that
the Shares are subject to certain additional restrictions as more fully set
forth in the Buy-Sell Agreement.
4. SURVIVAL; FURTHER ASSURANCES. All representations, warranties,
covenants and indemnities contained in this Subscription Agreement shall survive
(i) the acceptance or rejection of the subscription by the Company, (ii) changes
in the Buy-Sell Agreement, and (iii) the death, incapacity or disability of the
undersigned. The undersigned agrees to provide such further assurances and to
execute or reexecute such documents that may be required for the Company to
sustain the exemption from registration of its securities offered hereby under
applicable federal and state laws and to effect the subscription hereby made.
5. INDEMNIFICATION. The undersigned acknowledges that the undersigned
understands the meaning and legal consequences of the representations and
warranties hereof, and the undersigned hereby agrees to indemnify and hold
harmless the Company and its directors, officers, controlling persons, agents,
employees and attorneys, and their respective heirs, successors and assigns,
from and against any and all claims, losses, damages and liabilities related to,
in connection with, or arising out of any inaccuracy, misrepresentation or a
breach of any warranties or agreements contained in
SUBSCRIPTION AGREEMENT PAGE 4
<PAGE>
this Subscription Agreement. THIS INDEMNIFICATION MAY LIMIT THE RIGHT OF THE
UNDERSIGNED TO RECOVER IN AN ACTION ARISING OUT OF THIS INVESTMENT.
6. LEGAL COST REIMBURSEMENT. In order to discourage meritless or
frivolous claims the parties agree that should any party to this Agreement bring
a claim or action against any person (whether or not a party to this Agreement),
arising out of, related to or in connection with this Agreement, then unless the
claimant in such proceeding succeeds in establishing such claim in substantial
part and obtaining a judgment or other monetary recovery against such person
(regardless of whether the claimant succeeds against one or more of the other
persons or parties to the action), then the person defending the claim or action
shall be entitled to recover all of such person's legal costs and expenses
relating to such proceeding and/or incurred in preparation therefor against the
party bringing the action. This section shall benefit such persons as third
party beneficiaries and is in addition to all other rights of parties under this
Agreement.
7. ARBITRATION. ANY AND ALL CONTROVERSIES, DISPUTES OR CLAIMS OF THE
COMPANY AGAINST THE UNDERSIGNED OR THE UNDERSIGNED AGAINST THE COMPANY AND/OR
ANY OF THE COMPANY'S DIRECTORS, OFFICERS, CONTROLLING PERSONS, EMPLOYEES OR
OTHER AGENTS, OR ANY OF THEM, OR THEIR RESPECTIVE HEIRS, SUCCESSORS OR ASSIGNS,
ARISING IN CONNECTION WITH, FROM OR WITH RESPECT TO (a) ANY PROVISION OF THIS
SUBSCRIPTION AGREEMENT OR ANY OTHER RELATED AGREEMENT; (b) AN INVESTMENT IN THE
COMPANY BY THE UNDERSIGNED; (c) THE RELATIONSHIP OF THE PARTIES HERETO; OR (d)
THE VALIDITY OF THIS SUBSCRIPTION AGREEMENT OR ANY OTHER RELATED AGREEMENT, OR
ANY PROVISIONS THEREOF, SHALL BE SUBMITTED FOR ARBITRATION TO AN OFFICE OF THE
AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION PROCEEDINGS SHALL BE
CONDUCTED IN FORT WORTH, TEXAS, AND SHALL BE CONDUCTED IN ACCORDANCE WITH THE
THEN CURRENT COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION. THE ARBITRATOR(S) SHALL HAVE THE RIGHT TO AWARD ANY RELIEF WHICH
THE ARBITRATOR(S) DEEM PROPER, INCLUDING MONETARY DAMAGES, SPECIFIC PERFORMANCE
AND INJUNCTIVE RELIEF, BUT NOT PUNITIVE OR EXEMPLARY DAMAGES. THE DECISION AND
AWARD OF THE ARBITRATOR(S) SHALL BE CONCLUSIVE AND BINDING UPON ALL PARTIES
HERETO, AND JUDGMENT UPON AWARD MAY BE ENTERED IN ANY COURT OF COMPETENT
JURISDICTION. THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY ARBITRATION AWARD MAY
BE ENFORCED AGAINST ANY OF THEM IN A COURT OF COMPETENT JURISDICTION, AND EACH
PARTY WAIVES ANY RIGHT TO CONTEST THE VALIDITY OR ENFORCEABILITY OF SUCH AWARD.
THE PARTIES FURTHER AGREE TO BE BOUND BY THE PROVISIONS OF ANY STATUTE OF
LIMITATIONS WHICH WOULD BE OTHERWISE APPLICABLE TO THE CONTROVERSY, DISPUTE OR
CLAIM WHICH IS THE SUBJECT OF ANY ARBITRATION PROCEEDING INITIATED HEREUNDER.
8. SEVERABILITY. To the extent that any provision herein is inconsistent
with or in violation of any applicable law, rule or regulation, such provision
shall be deemed modified so as to comply with such applicable law, rule or
regulation, and shall not otherwise affect any other provisions of this
Agreement. Any provision
SUBSCRIPTION AGREEMENT PAGE 5
<PAGE>
of this Agreement that is invalid or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
provisions of this Agreement or affecting the validity or enforceability of that
provision or of any other provisions of this Agreement in any other
jurisdiction.
9. ENTIRE AGREEMENT. This Subscription Agreement constitutes the whole
agreement of the parties and supersedes any commitment, agreement, memorandum or
understanding previously made by the parties, or any of them, with respect to
the subject matter of this Subscription Agreement.
BY SIGNING BELOW, THE SUBSCRIBER AGREES TO ARBITRATION OF CLAIMS.
, 1996
- --------------- -----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
ACCEPTED this day of , 1996.
------ -----------------
CENTRAL BANCORPORATION, INC.
By:
--------------------------------------------
J. Andy Thompson, Chairman of
the Board and Chief Executive
Officer
SUBSCRIPTION AGREEMENT PAGE 6
<PAGE>
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
The details of the computation of earnings per common share are disclosed in the
Consolidated Statements of Earnings for the Three Months Ended March 31, 1996
and 1995 (unaudited) contained in the Quarterly Report on Form 10-Q of the
Registrant for the quarter ended March 31, 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
___________________________________________________________________________
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 46,731,240
<INT-BEARING-DEPOSITS> 1,293,747
<FED-FUNDS-SOLD> 6,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 163,059,809
<INVESTMENTS-CARRYING> 346,344,303
<INVESTMENTS-MARKET> 345,555,000
<LOANS> 465,529,805
<ALLOWANCE> 5,461,009
<TOTAL-ASSETS> 1,077,122,584
<DEPOSITS> 947,474,848
<SHORT-TERM> 34,015,337
<LIABILITIES-OTHER> 10,467,437
<LONG-TERM> 0
0
0
<COMMON> 6,541,808
<OTHER-SE> 62,824,949
<TOTAL-LIABILITIES-AND-EQUITY> 1,077,122,584
<INTEREST-LOAN> 8,554,452
<INTEREST-INVEST> 7,634,330
<INTEREST-OTHER> 85,330
<INTEREST-TOTAL> 16,274,112
<INTEREST-DEPOSIT> 6,975,717
<INTEREST-EXPENSE> 7,512,440
<INTEREST-INCOME-NET> 8,761,672
<LOAN-LOSSES> 225,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,045,371
<INCOME-PRETAX> 3,386,601
<INCOME-PRE-EXTRAORDINARY> 2,645,811
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,645,811
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
<YIELD-ACTUAL> 4.36
<LOANS-NON> 3,740,000
<LOANS-PAST> 1,464,000
<LOANS-TROUBLED> 225,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,672,000
<CHARGE-OFFS> 234,000
<RECOVERIES> 113,000
<ALLOWANCE-CLOSE> 5,461,000
<ALLOWANCE-DOMESTIC> 1,758,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,703,000
</TABLE>
