<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 1934for the quarterly period ended June 30, 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 June
30, 1996 was 2,623,377 shares.
<PAGE>
CENTRAL BANCORPORATION, INC.
----------------------------
INDEX
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements
-------
Consolidated Balance Sheets at June 30, 1996 (unaudited)
and at December 31, 1995 (audited) 3
Consolidated Statements of Earnings for the Three Months and Six
Months Ended June 30, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 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 23
-------
Item 2. Change in Securities 23
-------
Item 3. Defaults Upon Senior Securities 23
-------
Item 4. Submission of Matters to a Vote of Security Holders 23
-------
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
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
Assets 1996 1995
- ------ -------------- -----------
<S> <C> <C>
Cash and due from banks $ 52,769,104 51,682,644
Interest-bearing deposits in other banks 313,662 172,617
Federal funds sold 1,000,000 -
-------------- -----------
Total cash and cash equivalents 54,082,766 51,855,261
-------------- -----------
Investment securities available-for-sale 160,359,338 155,601,882
Investment securities held-to-maturity 344,594,715 355,447,926
Loans:
Loans, net of unearned discount 472,265,082 331,146,028
Less allowance for loan losses 5,503,490 4,671,819
-------------- -----------
Net loans 466,761,592 326,474,209
-------------- -----------
Premises and equipment, net 27,255,221 22,281,915
Accrued interest receivable 10,458,802 9,443,032
Other real estate owned, net 864,238 129,160
Excess of cost over net assets acquired,
net of applicable amortization 10,711,112 741,068
Deferred income taxes 2,549,891 2,297,102
Other assets 3,215,088 2,362,212
-------------- -----------
$1,080,852,763 926,633,767
============== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits:
Noninterest-bearing demand $ 164,836,061 147,430,934
Interest-bearing demand 349,143,450 311,724,814
Savings 89,233,960 76,041,682
Time, $100,000 and over 78,658,419 56,675,896
Other time 279,648,818 212,626,503
-------------- -----------
Total deposits 961,520,708 804,499,829
-------------- -----------
Short-term borrowings 34,796,003 44,419,993
Note payable 4,000,000 2,500,000
Dividends payable 262,338 261,672
Accrued interest payable 2,747,133 2,502,361
Federal income taxes payable 90,293 39,476
Other liabilities 6,087,033 5,081,525
-------------- -----------
Total liabilities 1,009,503,508 859,304,856
-------------- -----------
Stockholders' equity:
Common stock, $2.50 par value,
5,000,000 shares authorized and 2,623,377
shares issued 6,558,443 6,541,808
Additional paid-in capital 16,734,379 16,578,010
Retained earnings 49,181,890 44,574,243
Unrealized loss on securities
available-for-sale (1,125,457) (365,150)
-------------- -----------
Total stockholders' equity 71,349,255 67,328,911
-------------- -----------
$1,080,852,763 926,633,767
============== ===========
</TABLE>
3
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1996 1995 1996 1995
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $10,389,756 6,735,294 18,902,041 12,938,914
Interest on investment securities:
Taxable securities 6,255,117 6,820,599 12,630,705 13,968,812
Tax-exempt securities 1,283,338 1,003,511 2,584,247 1,814,005
Interest on deposits in other banks 10,810 1,544 20,297 3,405
Interest on Federal funds sold 205,260 399,019 281,103 682,679
----------- ---------- ---------- ----------
Total interest income 18,144,281 14,959,967 34,418,393 29,407,815
----------- ---------- ---------- ----------
Interest expense:
Interest on interest-bearing demand deposits 2,529,112 2,165,892 4,878,801 4,085,829
Interest on savings deposits 586,247 355,694 1,130,141 712,740
Interest on time deposits 4,899,715 3,564,926 8,981,849 6,720,640
Interest on short-term borrowings 400,222 1,050,981 810,309 2,281,187
Interest on note payable 137,924 30,750 264,560 49,146
----------- ---------- ---------- ----------
Total interest expense 8,553,220 7,168,243 16,065,660 13,849,542
----------- ---------- ---------- ----------
Net interest income 9,591,061 7,791,724 18,352,733 15,558,273
Provision for loan losses 261,000 225,000 486,000 450,000
----------- ---------- ---------- ----------
Net interest income after provision
for loan losses 9,330,061 7,566,724 17,866,733 15,108,273
----------- ---------- ---------- ----------
Noninterest income:
Service charges and fees 2,967,896 2,310,853 5,581,297 4,510,205
Gains on sales of investment securities - 133,176 - 133,176
Other income 295,355 271,893 577,254 420,092
----------- ---------- ---------- ----------
Total noninterest income 3,263,251 2,715,922 6,158,551 5,063,473
----------- ---------- ---------- ----------
Noninterest expenses:
Salaries and employee benefits 5,067,279 4,070,495 9,752,035 8,042,326
Net occupancy expense 803,237 739,013 1,504,653 1,396,221
Equipment and data processing expense 1,090,133 826,585 1,986,072 1,587,804
Communication expense 433,121 338,308 827,285 677,461
Other real estate owned expense, (income) net 39,383 (4,913) 44,070 (51,661)
Federal deposit insurance fees 77,516 398,100 104,597 796,200
Legal and professional 342,788 241,230 669,175 474,493
Stationery and supplies 364,460 242,224 576,776 459,340
Marketing expense 347,126 224,434 574,507 432,538
Other operating expense 846,423 425,991 1,417,667 836,798
----------- ---------- ---------- ----------
Total noninterest expenses 9,411,466 7,501,467 17,456,837 14,651,520
----------- ---------- ---------- ----------
Income before Federal income taxes 3,181,846 2,781,179 6,568,447 5,520,226
Provision for Federal income taxes 696,000 601,000 1,436,790 1,257,000
----------- ---------- ---------- ----------
Net income $ 2,485,846 2,180,179 5,131,657 4,263,226
=========== ========== ========== ==========
Net income per share $ .95 .83 1.96 1.63
=========== ========== ========== ==========
Weighted average number of shares outstanding 2,621,159 2,616,723 2,618,941 2,616,723
=========== ========== ========== ==========
</TABLE>
4
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,131,657 4,263,226
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses and losses
on other real estate owned, net 523,286 480,390
Depreciation 1,653,550 1,332,943
Amortization of intangibles 257,649 98,736
Premium amortization and discount accretion, net 291,450 305,720
Net gain on sales of other real estate owned (33,447) (97,011)
Net loss (gain) on sales of premises and equipment 2,745 (1,948)
Gains on sales of investment securities - (133,176)
Deferred Federal income taxes, net 340,000 -
Changes in operating assets and liabilities:
Net increase in loans held for sale (254,243) (831,639)
Decrease (increase) in accrued interest receivable 58,042 (620,789)
Decrease in Federal income taxes receivable - 258,760
Decrease in other assets 160,191 366,797
Increase (decrease) in accrued interest payable (353,322) 354,785
Decrease in Federal income taxes payable (127,313) -
Decrease in other liabilities (1,161,805) (1,194,637)
------------ -----------
Net cash provided by
operating activities 6,488,440 4,582,157
------------ -----------
Cash flows from investing activities:
Cash and cash equivalents paid in acquisitions (8,929,262) -
Proceeds from sales of investment securities
available-for-sale - 30,228,601
Proceeds from maturities and principal reductions
of investment securities held-to-maturity 32,792,956 22,058,156
Proceeds from maturities and principal reductions
of investment securities available-for-sale 21,508,932 8,855,318
Purchases of investment securities held-to-maturity (22,058,187) (39,445,387)
Purchases of investment securities available-for-sale (20,315,506) (14,194,800)
Net increase in loans (16,428,932) (34,691,547)
Proceeds from sales of premises and equipment 5,025 3,342
Purchases of premises and equipment (2,781,885) (1,883,265)
Proceeds from sales of other real estate owned 818,326 400,884
Cost of capital improvements for other real estate owned (17,336) -
------------ -----------
Net cash used in
investing activities (15,405,869) (28,668,698)
------------ -----------
</TABLE>
(Continued)
5
<PAGE>
CENTRAL BANCORPORATION, 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 $ 20,742,660 52,475,975
Proceeds from note payable 11,000,000 1,000,000
Proceeds from issuance of common stock 173,004 -
Net decrease in other borrowings (10,747,386) (43,719,156)
Principal payment on note payable (9,500,000) -
Dividends paid (523,344) (523,344)
------------ -----------
Net cash provided by
financing activities 11,144,934 9,233,475
------------ -----------
Net increase (decrease) in cash and cash equivalents 2,227,505 (14,853,066)
Cash and cash equivalents at beginning of period 51,855,261 74,716,332
------------ -----------
Cash and cash equivalents at end of period $ 54,082,766 59,863,266
============ ===========
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash paid for interest $ 15,820,888 13,494,757
Cash paid for Federal income taxes $ 1,150,000 1,000,000
Supplemental Disclosures of Non Cash Investing and Financing Activities:
- -----------------------------------------------------------------------
Loans transferred to other real estate owned $ 432,064 921,038
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 $160,583,649
Cash paid for the common stock (20,238,497)
------------
Liabilities assumed $140,345,152
============
</TABLE>
6
<PAGE>
CENTRAL BANCORPORATION, 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") 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, the Corporation 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. Subsequently, as
of the close of business on April 18, 1996, the resulting First American was
merged with and into Central Bank & Trust, another wholly-owned subsidiary of
Central Bancorporation of Delaware, Inc.
The acquisition of First American was accounted for as a purchase with,
to the extent possible, the assets and liabilities recorded at their fair market
values as of the purchase date. Accordingly, the accompanying consolidated
financial statements include the acquired assets and liabilities assumed from
First American as of June 30, 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
on 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>
Six Months
Ended June 30,
1996 1995
------- -------
<S> <C> <C>
Net interest income $19,171 $18,034
Net income 5,392 5,343
Earnings per share 2.06 2.04
</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 closing. 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 operations.
ANALYSIS OF EARNINGS
Net income for the second quarter of 1996 was $2,485,846 or $0.95 per share
compared to $2,180,179 or $0.83 per share for the second quarter of 1995. For
the six months ended June 30, 1996, net income was $5,131,657 or $1.96 per
share, compared with net income of $4,263,226 or $1.63 per share for the same
period in 1995. Per share amounts are based on average shares outstanding of
2,621,159 for the second quarter of 1996, 2,618,941 for the six months ended
June 30, 1996 and 2,616,723 for the second quarter of 1995 and the six months
ended June 30, 1995.
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 second quarter of
1996 increased $2,013,000 or 23.9%, compared to the same period in 1995. For
the six months ended June 30, 1996, net interest income on a taxable equivalent
basis increased $3,331,000 or 19.9% 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 21 basis points and 15 basis points, respectively, from the second
quarter of 1995. Yields on earning assets for the second quarter of 1996
increased from the same period last year due to the increase in loans
outstanding resulting from the acquisition of First American. Rates on
interest-bearing liabilities for the second quarter of 1996 declined by 7 basis
points from the level for the same period a year ago. The net interest spread
on a taxable equivalent basis increased to 3.67% for the second quarter of 1996
from 3.46% for the comparable period in 1995 and the net interest margin on a
taxable equivalent basis increased to 4.27% for the second quarter of 1996 from
4.12% for the same period in 1995.
8
<PAGE>
The following table summarizes the effects of changes in interest rates and
average volume of earning assets on net interest income for the quarters and six
months ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN NET INTEREST MARGIN
(Dollars in Thousands - Taxable Equivalent Basis)
2nd Qtr 1996 vs. 2nd 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 $3,397 $3,058 $ 283 $ 56
Interest-bearing
liabilities 1,384 1,537 (126) (27)
------ ------ ----- -----
Net interest margin before
allocation of
rates/volume 2,013 1,521 409 83
Allocation of
rates/volume - 65 18 (83)
------ ------ ----- -----
Net interest margin $2,013 $1,586 $ 427 $ -
====== ====== ===== =====
YTD 1996 vs. YTD 1995
- ---------------------
Due to Due to Changes
Net Changes Changes in Rates/
Increase In Volume In Rates Volume
--------- --------- --------- ---------
Earning assets $5,547 $4,629 $ 797 $ 121
Interest-bearing
liabilities 2,216 2,117 86 13
------ ------ ----- -----
Net interest margin before
allocation of
rates/volume 3,331 2,512 711 108
Allocation of
rates/volume - 84 24 (108)
------ ------ ----- -----
Net interest margin $3,331 $2,596 $ 735 $ -
====== ====== ===== =====
</TABLE>
9
<PAGE>
Noninterest Income
Noninterest income increased $547,329 or 20.2% for the second quarter of
1996 from the same period last year. For the six months ended June 30, 1996,
non-interest income increased $1,095,078 or 21.6%. 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 bank's investment services department. The following table
summarizes the major categories of noninterest income for the six months ended
June 30, 1996 and 1995 (dollars in thousands).
<TABLE>
<CAPTION>
Six Months
Ended June 30, $ %
--------------
1996 1995 Change Change
------ ------ ------- -------
<S> <C> <C> <C> <C>
Service charges and fees $4,414 $3,829 $ 585 15.3%
Investment services income 707 208 499 239.9
Trust fees 547 419 128 30.5
Mortgage services income 453 316 137 43.4
Gains on sales of investment securities - 133 (133) (100.0)
Other income 38 158 (120) (75.9)
------ ------ ------ ------
Total noninterest income $6,159 $5,063 $1,096 21.6%
====== ====== ====== ======
</TABLE>
Noninterest Expenses
Noninterest expenses were $9,411,466 for the second quarter of 1996
compared to $7,501,467 for the second quarter of 1995, an increase of $1,909,999
or 25.5%. For the six months ended June 30, 1996 and 1995, noninterest expenses
were $17,456,837 and $14,651,520, respectively, an increase of 19.1%. The
following table summarizes the major categories of noninterest expense for the
six months ended June 30, 1996 and 1995 (dollars in thousands).
<TABLE>
<CAPTION>
Six Months
Ended June 30, $ %
-----------------
1996 1995 Change Change
------- -------- -------- -------
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 9,752 $ 8,042 $1,710 21.3%
Net occupancy expense 1,505 1,396 109 7.8
Equipment and data processing expense 1,986 1,588 398 25.1
Communication expense 827 678 149 22.0
Other real estate owned expense (income), net 44 (52) 96 -
Federal deposit insurance fees 105 796 (691) (86.8)
Legal and professional 669 475 194 40.8
Stationery and supplies 577 459 118 25.7
Marketing expense 574 433 141 32.6
Other operating expenses 1,418 837 581 69.4
------- ------- ------ -----
Total noninterest expenses $17,457 $14,652 $2,805 19.1%
======= ======= ====== =====
</TABLE>
Salaries and employee benefits for the first half of 1996 increased
$1,709,709 or 21.3% over the same period in 1995 due primarily to the
acquisition of First American, but also to normal compensation increases and
expanded banking operations.
Equipment and data processing expense increased $398,268 or 25.1% compared
to the same period in 1995. The increase is attributable to system conversion
activities associated with the acquisition of First American as well as
depreciation expense on new equipment and new furniture for new and remodeled
banking centers.
Federal deposit insurance fees decreased $691,603 or 86.8% over the same
period in 1995. The decrease is attributable to a reduction in the Federal
deposit insurance premium.
10
<PAGE>
Legal and professional fees for the six months ended June 30, 1996
increased $194,682 or 40.8% over the same period in 1995 due to increased use of
outside legal counsel, professional trust services, loan review services and
real estate management services.
Other operating expenses increased $580,869 or 69.4% from June 30, 1995 to
June 30, 1996 due to increases in employee education, operational losses and
expenses resulting from the acquisition of First American, primarily
amortization of goodwill.
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 June 30, 1996 the Corporation has a deferred tax asset in the amount
of $2,549,891. 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 $6,600,000.
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 June 30, 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 4.2%, well below the national rate.
In 1996 and 1995, the real estate market, as a whole, continues to be
active. 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.
11
<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 Six Months Year Ended
Ended June 30, Ended June 30, December 31,
-------------------- -------------------- -------------
1996 1995 1996 1995 1995
--------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 5,461 $ 3,866 $ 4,672 $ 3,872 $ 3,872
-------- -------- -------- -------- --------
Allowance acquired from First American - - 685 - -
Charge-offs:
Commercial and financial loans 19 13 85 106 284
Real estate loans 111 49 187 361 414
Installment loans 179 53 271 95 268
-------- -------- -------- -------- --------
Total 309 115 543 562 966
-------- -------- -------- -------- --------
Recoveries:
Commercial and financial loans 44 158 96 269 493
Real estate loans 22 43 44 117 226
Installment loans 24 41 63 72 147
-------- -------- -------- -------- --------
Total 90 242 203 458 866
-------- -------- -------- -------- --------
Net Charge-offs:
Commercial and financial loans (25) (145) (11) (163) (209)
Real estate loans 89 6 143 244 188
Installment loans 155 12 208 23 121
-------- -------- -------- -------- --------
Total 219 (127) 340 104 100
-------- -------- -------- -------- --------
Provision charged to earnings 261 225 486 450 900
-------- -------- -------- -------- --------
Balance at end of period $ 5,503 $ 4,218 $ 5,503 $ 4,218 $ 4,672
======== ======== ======== ======== ========
Amount of outstanding loans at
end of period $472,265 $307,548 $472,265 $307,548 $331,146
======== ======== ======== ======== ========
Average amount of loans outstanding
Commercial and financial loans 141,822 104,032 $137,098 $ 99,694 $109,606
Real estate loans 308,921 171,854 269,654 169,275 175,334
Installment loans 16,960 17,349 18,226 16,711 17,063
-------- -------- -------- -------- --------
Total $467,703 $293,235 $424,978 $285,680 $302,003
======== ======== ======== ======== ========
Ratios:
Annualized net charge-offs (recoveries) to
average loans:
Commercial and financial loans (0.02)% (0.33)% (0.19)%
Real estate loans 0.11 0.29 0.11
Installment loans 2.28 0.28 0.71
-------- -------- --------
Total 0.16 0.07% 0.03%
======== ======== ========
Balance in allowance at end of
period to outstanding loans
at end of period 1.17% 1.37% 1.41%
======== ======== ========
</TABLE>
At June 30, 1996, the allowance for loan losses was $5.503 million, or 1.17%
of period end loans, compared to $4.672 million and 1.41% at December 31, 1995
and $4.218 million or 1.37% at June 30, 1995.
12
<PAGE>
The following schedule presents the allowance for loan losses by loan
category at the dates indicated (dollars in thousands).
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Specific reserves by category:
Commercial and financial loans $ 337 $ 288
Real estate loans 1,343 1,270
Installment loans 22 26
Unallocated reserves 3,801 3,088
------ ------
Total allowance for loan losses $5,503 $4,672
====== ======
</TABLE>
Net charge-offs for the quarter ended June 30, 1996 were $219,000 compared
to net recoveries of $127,000 in the second quarter of 1995. For the six months
ended June 30, 1996, net charge-offs were $340,000 compared to $104,000 for the
same period in 1995.
A provision for loan losses of $261,000 and $225,000 was charged to
earnings for the quarters ended June 30, 1996 and 1995, respectively.
Nonperforming assets (loans accounted for on a nonaccrual basis,
restructured loans and foreclosed real estate) at June 30, 1996 totaled $3.637
million, a 98.1% increase from the $1.836 million reported at December 31, 1995
and an increase of $482,000 or 15.3% compared to June 30, 1995 totals. The
increase in nonperforming assets from June 30, 1995 to June 30, 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>
June 30, March 31, December 31, September 30, June 30,
1996 1996 1995 1995 1995
-------- --------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $2,552 $3,740 $1,480 $1,642 $1,985
Other real estate
owned, net 864 1,046 129 614 939
Restructured loans 221 225 227 228 231
------ ------ ------ ------ ------
Total nonperforming
assets $3,637 $5,011 $1,836 $2,484 $3,155
====== ====== ====== ====== ======
Loans over 90 days
past due but not
on nonaccrual $3,067 $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. Based on evaluations performed subsequent to June
30, 1996, approximately $1.2 million of the $3.067 million 90 days past due but
still accruing interest have been changed to nonaccrual status.
13
<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>
June 30, 1996 December 31, 1995
-------------- ------------------
<S> <C> <C>
Commercial and financial $139,509 $124,364
Purchased receivables 2,278 2,158
Real Estate:
Construction 47,353 9,324
Mortgage 266,419 180,266
Installment 18,826 17,764
Overdrafts 179 126
-------- --------
Total loans 474,564 334,002
Less unearned discount (2,299) (2,856)
-------- --------
Total loans, net
of unearned discount $472,265 $331,146
======== ========
</TABLE>
Net loans increased by $141.119 million or 42.6% 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 in the first
quarter of 1996. 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>
Six Months Ended Twelve Months Ended
June 30, 1996 December 31, 1995
---------------- -------------------
<S> <C> <C>
Noninterest-bearing demand $154,298 $141,975
Interest-bearing demand 331,002 286,634
Savings 83,427 66,740
Time, $100,000 and over 72,625 55,261
Other time 260,470 217,636
-------- --------
Total deposits $901,822 $768,246
======== ========
</TABLE>
Total average deposits increased $133.575 million or 17.39% from the
average for the year ended December 31, 1995. Approximately $88 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.
14
<PAGE>
Investment Portfolio
Management of the investment portfolio remains very important as investment
securities comprise over 50% of the Corporation's earning assets 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 June 30,
1996.
The following schedule presents the amortized cost and fair value of the
available-for-sale and held-to-maturity investment securities as of June 30,
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 $119,559 247 (827) 118,979
U. S. Government agencies 22,448 92 (47) 22,493
FHLB stock 4,039 - - 4,039
Mortgage-backed securities 2,471 - (34) 2,437
Collateralized mortgage obligations 12,450 13 (52) 12,411
-------- ----- ------ -------
$160,967 352 (960) 160,359
======== ===== ====== =======
Held-to-maturity
- ----------------
U.S. Treasury $ 5,009 13 - 5,022
State and political subdivisions 94,938 547 (692) 95,793
Mortgage-backed securities 63,555 80 (1,587) 62,048
Collateralized mortgage obligations 181,093 280 (4,350) 177,023
-------- ----- ------ -------
$344,595 1,920 (6,629) 339,886
======== ===== ====== =======
</TABLE>
15
<PAGE>
The following schedule presents the total book value 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
The Corporation offers repurchase agreements to certain customers with
large investable balances. As of June 30, 1996, through this funding source, the
Corporation has $31,273,069 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 June 30, 1996 was 4.32%.
These agreements were collateralized by U.S. Government securities with a market
value of $43,308,020 as of June 30, 1996.
16
<PAGE>
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 requirement 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 an increased emphasis on interest rate sensitivity management.
Interest-sensitive 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 period 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.
The following table quantifies the interest rate sensitivity of both
earning assets and interest-bearing liabilities as of June 30, 1996.
INTEREST RATE SENSITIVITY ANALYSIS AT JUNE 30, 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 $ 128,077 $ 25,736 $ 59,379 $ 213,192 $259,073 $472,265
Interest-bearing deposits
in other banks 314 - - 314 - 314
Federal funds sold 1,000 - - 1,000 - 1,000
Investment securities:
Taxable 57,268 23,943 91,393 172,604 237,412 410,016
Tax-exempt - 466 - 466 94,472 94,938
--------- --------- --------- --------- -------- --------
Total investment securities 57,268 24,409 91,393 173,070 331,884 504,954
--------- --------- --------- --------- -------- --------
Total earning assets 186,659 50,145 150,772 387,576 590,957 978,533
--------- --------- --------- --------- -------- --------
Interest-bearing liabilities:
Interest-bearing demand 349,143 - - 349,143 - 349,143
Savings 71,531 1,517 4,046 77, 094 12,140 89,234
Time deposits less than $100,000 36,665 53,243 118,081 207,989 71,660 279,649
Time deposits greater than $100,000 9,185 13,434 39,550 62,169 16,489 78,658
Other borrowings 37,681 - - 37,681 1,115 38,796
--------- --------- --------- --------- -------- --------
Total interest-bearing
liabilities 504,205 68,194 161,677 734,076 101,404 835,480
--------- --------- --------- --------- -------- --------
Interest sensitivity gap $(317,546) $ (18,049) $ (10,905) $(346,500) $489,553 $143,053
========= ========= ========= ========= ======== ========
Cumulative gap $(317,546) $(335,595) $(346,500)
========= ========= =========
Relationship of gap to
total earning assets (32.45)% (34.30)% (35.41)%
========= ========= =========
</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.
17
<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>
June 30, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Tier 1 (Core Capital)
Stockholders' equity $ 71,349 $ 67,329
Plus: Unrealized loss on securities
available-for-sale 1,125 365
Less: Excess cost over
net assets acquired (10,711) (741)
-------- --------
Total Tier 1 Capital 61,763 66,953
-------- --------
Tier 2 (Supplementary Capital)
Eligible portion of allowance
for loan losses 5,503 4,672
-------- --------
Total risk-based capital $ 67,266 $ 71,625
======== ========
Total risk-weighted assets $527,745 $417,727
======== ========
Tier 1 capital ratio 11.70% 16.03%
Total risk-based capital ratio 12.75% 17.15%
======== ========
Leverage capital ratio 6.09% 7.23%
======== ========
</TABLE>
The above capital ratios, under all regulatory measurements, are in excess
of required minimum levels. The Texas Banking Department issued a 6% minimum
leverage capital ratio standard for all state banks during 1991.
18
<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 totaling $20,250,000 have been received from the
Corporation's subsidiaries in 1996 to provide operating capital and to pay
principal on the revolving line.
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 June 30, 1996, Central
Bank & Trust could declare dividends up to approximately $1,000,000 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.
19
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
<S> <C> <C> <C> <C>
Assets 1996 1995 1996 1995
- ------ ---------- -------- ---------- --------
Earning assets:
Loans $ 467,703 $293,235 $ 421,864 $285,680
Interest-bearing deposits in banks 843 223 699 240
Federal funds sold 16,248 26,204 11,153 22,776
Investment securities:
Taxable 400,726 429,513 403,454 439,204
Tax-exempt 94,978 70,605 95,341 61,970
---------- -------- ---------- --------
Total investment securities 495,704 500,118 498,795 501,174
---------- -------- ---------- --------
Total earning assets 980,498 819,780 932,511 809,870
Cash and due from banks 44,254 40,502 43,264 41,330
Other real estate 739 493 600 391
Other assets 57,638 36,178 50,832 36,592
Less allowance for possible loan losses (5,485) (4,009) (5,213) (3,948)
---------- -------- ---------- --------
Total assets $1,077,644 $892,944 $1,021,994 $884,235
========== ======== ========== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Interest-bearing liabilities:
Deposits $ 795,294 $614,694 $ 747,524 $603,826
Other borrowings 41,719 74,566 42,230 81,203
---------- -------- ---------- --------
Total interest-bearing liabilities 837,013 689,260 789,754 685,029
---------- -------- ---------- --------
Noninterest-bearing demand deposits 160,718 136,195 154,298 134,307
Other liabilities 9,410 6,750 8,325 6,074
Stockholders' equity 70,503 60,739 69,617 58,825
---------- -------- ---------- --------
Total liabilities and stockholders' equity $1,077,644 $892,944 $1,021,994 $884,235
========== ======== ========== ========
</TABLE>
20
<PAGE>
CENTRAL BANCORPORATION, INC AND SUBSIDIARIES
CONSOLIDATED TAXABLE EQUIVALENT STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans (1) $10,581 $ 6,856 $19,267 $13,164
Interest on investment securities:
Taxable securities 6,255 6,821 12,631 13,969
Tax-exempt (1) 1,944 1,521 3,916 2,749
Interest on deposits in other banks 11 2 20 3
Interest on federal funds sold 205 399 281 683
------- ------- ------- -------
Total interest income 18,996 15,599 36,115 30,568
------- ------- ------- -------
Interest expense:
Interest on interest-bearing demand deposits 2,529 2,166 4,879 4,086
Interest on savings deposits 586 356 1,130 713
Interest on time deposits 4,900 3,565 8,982 6,721
Interest on other borrowings 538 1,082 1,075 2,330
------- ------- ------- -------
Total interest expense 8,553 7,169 16,066 13,850
------- ------- ------- -------
Net interest income 10,443 8,430 20,049 16,718
Provision for possible loan losses 261 225 486 450
------- ------- ------- -------
Net interest income after provision
for possible loan losses 10,182 8,205 19,563 16,268
------- ------- ------- -------
Other income:
Service charges and fees 2,968 2,311 5,582 4,510
Gains on sales of investment securities - 133 - 133
Other income 295 272 577 420
------- ------- ------- -------
Total other income 3,263 2,716 6,159 5,063
------- ------- ------- -------
Other expenses:
Salaries and employee benefits 5,067 4,071 9,752 8,042
Net occupancy expense 803 739 1,505 1,396
Equipment and data processing expense 1,090 827 1,986 1,588
Communications expense 433 338 827 678
Other real estate owned expense, net 39 (5) 44 (52)
Federal deposit insurance fees 78 398 105 796
Legal and professional 343 241 669 475
Stationery and supplies 364 242 577 459
Marketing expense 347 224 574 433
Other operating expenses 847 426 1,418 837
------- ------- ------- -------
Total other expenses 9,411 7,501 17,457 14,652
------- ------- ------- -------
Income before Federal income taxes 4,034 3,420 8,265 6,679
------- ------- ------- -------
Tax equivalent adjustment 852 639 1,696 1,159
------- ------- ------- -------
Income before Federal income taxes 3,182 2,781 6,569 5,520
------- ------- ------- -------
Provision for Federal income taxes 696 601 1,437 1,257
------- ------- ------- -------
Net income $ 2,486 $ 2,180 $ 5,132 $ 4,263
======= ======= ======= =======
</TABLE>
(1) Presented on a taxable equivalent basis using a 34% Federal income tax
rate for 1996 and 1995.
21
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
AVERAGE INTEREST RATES AND SELECTED RATIOS
(TAX EQUIVALENT BASIS)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Yields on earning assets:
Loans (1) 9.07% 9.38% 9.16% 9.29%
Interest-bearing deposits
in other banks 5.23 3.60 5.74 2.52
Federal funds sold 5.06 6.11 5.05 6.05
Investment securities:
Taxable 6.26 6.37 6.28 6.41
Tax-exempt (1) 8.21 8.64 8.24 8.95
----- ----- ----- -----
Total investment securities 6.63 6.69 6.65 6.73
----- ----- ----- -----
Total earning assets 7.77% 7.63% 7.77% 7.61%
----- ----- ----- -----
Rates on interest-bearing liabilities:
Deposits 4.04% 3.97% 4.02% 3.85%
Other borrowings 5.17 5.82 5.11 5.79
----- ----- ----- -----
Total interest-bearing liabilities 4.10% 4.17% 4.08% 4.08%
----- ----- ----- -----
Net interest spread 3.67% 3.46% 3.69% 3.53%
===== ===== ===== =====
Net interest margin 4.27% 4.12% 4.31% 4.16%
===== ===== ===== =====
Selected ratios:
Net income as a percent of:
Average total assets .93% .98% 1.01% .97%
===== ===== ===== =====
Average stockholders' equity 14.14% 14.40% 14.82% 14.62%
===== ===== ===== =====
</TABLE>
(1) Presented on a taxable equivalent basis using a 34% Federal income tax
rate for 1996 and 1995.
22
<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.
------------------------------------------------------------
Not applicable.
Item 5. Other Information
--------------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
--------
(11) Computation of Earnings Per Common Share*
(27) Financial Data Schedule*
_____
*Filed herewith.
(b) Reports on Form 8-K
-------------------
No report of Form 8-K was filed by the registrant during the quarter
ended June 30, 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: August 14, 1996 By: /s/ J. Andy Thompson
---------------------------------------
J. Andy Thompson, Chairman of the Board
and Chief Executive Officer
DATE: August 14, 1996 By: /s/ Michael J. Tyler
----------------------------------------
Michael J. Tyler, Senior Vice President
and Chief Financial Officer
24
<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 and Six Months
Ended June 30, 1996 and 1995 (unaudited) contained in the Quarterly Report on
Form 10-Q of the registrant for the quarter ended June 30, 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES AS
OF JUNE 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995, AND THE RELATED CONSOLIDATED
STATEMENTS OF EARNINGS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996
AND 1995 (UNAUDITED) AND CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 52,769,104
<INT-BEARING-DEPOSITS> 313,662
<FED-FUNDS-SOLD> 1,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 160,359,338
<INVESTMENTS-CARRYING> 344,594,715
<INVESTMENTS-MARKET> 339,886,000
<LOANS> 472,265,082
<ALLOWANCE> 5,503,490
<TOTAL-ASSETS> 1,080,852,763
<DEPOSITS> 961,520,708
<SHORT-TERM> 34,796,003
<LIABILITIES-OTHER> 9,186,797
<LONG-TERM> 4,000,000
0
0
<COMMON> 6,558,443
<OTHER-SE> 64,790,812
<TOTAL-LIABILITIES-AND-EQUITY> 1,080,852,763
<INTEREST-LOAN> 18,902,041
<INTEREST-INVEST> 15,214,952
<INTEREST-OTHER> 301,400
<INTEREST-TOTAL> 34,418,393
<INTEREST-DEPOSIT> 14,990,791
<INTEREST-EXPENSE> 16,065,660
<INTEREST-INCOME-NET> 18,352,733
<LOAN-LOSSES> 486,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 17,456,837
<INCOME-PRETAX> 6,568,447
<INCOME-PRE-EXTRAORDINARY> 5,131,657
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,131,657
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.96
<YIELD-ACTUAL> 4.31
<LOANS-NON> 2,552,000
<LOANS-PAST> 3,067,000
<LOANS-TROUBLED> 221,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,672,000
<CHARGE-OFFS> 543,000
<RECOVERIES> 203,000
<ALLOWANCE-CLOSE> 5,503,000
<ALLOWANCE-DOMESTIC> 1,702,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,801,000
</TABLE>
