<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 29, 1996
CENTRAL BANCORPORATION, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
TEXAS 0-15732 75-1653291
- --------------------------------------------------------------------------------
(state or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
777 WEST ROSEDALE, FORT WORTH, TEXAS 76104
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (817) 347-8800
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
1
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
- ----------------------------------------------
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1995 (UNAUDITED) AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
Assets 1995 1994
- ------ ------------ -----------
<S> <C> <C>
Cash and cash equivalents $ 7,545,571 8,833,695
Held-to-maturity investment securities 7,551,678 8,066,623
Federal Home Loan Bank Stock 1,088,200 1,020,600
Loans receivable, net 127,229,134 123,831,582
Premises and equipment, net 4,333,067 4,549,869
Accrued interest receivable 1,150,918 901,719
Real estate owned, net 1,140,498 956,301
Federal income taxes receivable 74,332 77,132
Other assets 469,477 391,637
------------ -----------
$150,582,875 148,629,158
============ ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits 135,984,688 130,214,615
Advances from Federal Home Loan Bank 1,125,000 7,500,000
Advances from borrowers for taxes and
and insurance 314,298 126,815
Deferred Federal income taxes 267,464 38,264
Other liabilities 1,335,569 938,236
------------ -----------
Total liabilities 139,027,019 138,817,930
------------ -----------
Stockholders' equity:
Common stock, $8.00 par value,
343,680 shares issued and
outstanding 2,749,440 2,749,440
Additional paid-in capital 850,345 850,345
Retained earnings 7,956,071 6,211,443
------------ -----------
Total stockholders' equity 11,555,856 9,811,228
------------ -----------
$150,582,875 148,629,158
============ ===========
</TABLE>
2
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Interest income:
Loans $10,952,713 8,853,800
Loan fees 1,063,772 1,369,338
Investment securities 544,022 431,244
Other 323,934 285,736
----------- ----------
Total interest income 12,884,441 10,940,118
----------- ----------
Interest expense:
Deposits 6,331,056 4,815,586
Borrowings 252,843 228,841
----------- ----------
Total interest expense 6,583,899 5,044,427
----------- ----------
Net interest income 6,300,542 5,895,691
Provision for loan losses 142,610 133,525
----------- ----------
Net interest income after provision
for loan losses 6,157,932 5,762,166
----------- ----------
Noninterest income:
Gain on sales of real estate 175,645 146,450
Gain on sales of loans 70,310 48,879
Rent 322,399 255,289
Service charges and other 924,928 773,389
----------- ----------
Total noninterest income 1,493,282 1,224,007
----------- ----------
Noninterest expenses:
Salaries 2,214,009 2,343,403
Insurance 489,189 503,863
Data processing services 202,754 193,680
Check processing charges 239,090 200,384
Depreciation and amortization 307,003 299,557
Payroll and other taxes 183,086 199,958
Advertising and public relations 112,670 219,035
Legal 56,789 135,749
Occupancy 403,483 400,661
Audit and examination fees 79,731 80,078
Provision for losses and expenses on
real estate owned 81,993 76,967
Other operating expenses 520,789 465,765
----------- ----------
Total noninterest expenses 4,890,586 5,119,100
----------- ----------
Income before Federal income taxes 2,760,628 1,867,073
Provision for income taxes 1,016,000 663,250
----------- ----------
Net income $ 1,744,628 1,203,823
=========== ==========
</TABLE>
3
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1994
<TABLE>
<CAPTION>
Additional
Capital Stock Paid-in Retained
-------------------
Shares Amount Capital Earnings Total
------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1993 343,680 $2,749,440 $850,345 $5,007,620 $ 8,607,405
Net income 1,203,823 1,203,823
------- --------- -------- ---------- -----------
December 31, 1994 343,680 $2,749,440 $850,345 $6,211,443 $ 9,811,228
Net income 1,744,628 1,744,628
------- ---------- -------- ---------- -----------
December 31, 1995 343,680 $2,749,440 $850,345 $7,956,071 $11,555,856
======= ========== ======== ========== ===========
</TABLE>
4
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1994
<TABLE>
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,744,628 1,203,823
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for losses 178,701 154,759
Gain on sale of loans (70,310) (48,879)
Stock dividends received on Federal Home
Loan Bank stock (67,600) (46,100)
Gain on sales of real estate (175,645) (146,450)
Depreciation and amortization 307,003 299,557
Deferred federal income taxes 229,200 154,585
Changes in operating assets and liabilities:
Increase in accrued interest receivable (249,199) (260,708)
Increase in other assets (87,659) (115,116)
Increase in other liabilities 397,333 271,282
Decrease/(increase) in Federal income
taxes receivable 2,800 (77,132)
------------ -----------
Net cash provided by
operating activities 2,209,252 1,389,621
------------ -----------
Cash flows from investing activities:
Purchases of held-to-maturity investment
securities (3,500,000) (1,747,274)
Proceeds from maturities and principal reductions
of held-to-maturity investment securities 4,014,945 3,820,957
Net increase in loans receivable (15,136,572) (31,457,143)
Proceeds from sales of loans receivable 10,674,142 9,900,634
Purchases of Federal Home Loan Bank stock - (109,500)
Additions to real estate owned (276,847) (13,652)
Proceeds from sales of real estate owned 1,224,782 1,048,892
Proceeds from sales of investments in
real estate - 467,311
Purchases of premises and equipment (80,382) (196,013)
------------ -----------
Net cash used in investing activities (3,079,932) (18,285,788)
------------ -----------
</TABLE>
(Continued)
5
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits 5,770,073 13,623,596
Net increase in advances from Federal
Home Loan Bank with original maturity
of less than three months (7,500,000) 7,500,000
Advances from Federal Home Loan Bank 1,125,000 -
Payoff of advances from Federal Home Loan Bank - (5,000,000)
Net decrease in advances from borrowers for
taxes and insurance 187,483 (93,054)
----------- ----------
Net cash provided by (used in)
financing activities (417,444) 16,030,542
----------- ----------
Net decrease in cash and cash equivalents (1,288,124) (865,625)
Cash and cash equivalents at beginning of year 8,833,695 9,699,320
----------- ----------
Cash and cash equivalents at end of year $ 7,545,571 8,833,695
=========== ==========
</TABLE>
Supplemental Cash Flow Information:
- ----------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Cash paid for interest $ 6,587,025 5,025,360
Cash paid for Federal income taxes $ 668,600 540,000
Loans transferred to real estate owned $ 992,578 1,249,342
</TABLE>
6
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) Principles of Reporting and Consolidation
-----------------------------------------
The accounting and reporting policies of First American Savings Bank,
S.S.B. and subsidiary conform to generally accepted accounting principles
and to general practices in the banking industry. The subsidiary is
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.
7
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
BEDFORD, TEXAS
________
REPORT ON AUDITS OF CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1994 and 1993
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
The Board of Directors and Stockholders
First American Savings Bank, S.S.B.
Bedford, Texas
We have audited the accompanying consolidated statements of financial condition
of First American Savings Bank, S.S.B. and Subsidiary (the "Bank") as of
December 31, 1994 and 1993, and the related consolidated statements of income,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of First American
Savings Bank, S.S.B. and Subsidiary as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
The Bank changed its method of accounting for certain investments in debt and
equity securities on January 1, 1994, and its method of accounting for income
taxes on January 1, 1993.
/s/ Coopers & Lybrand LLP
Fort Worth, Texas
March 3, 1995
9
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1994 and 1993
________
ASSETS
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 8,833,695 $ 9,699,320
Held-to-maturity investment securities 8,066,623
Investment securities 10,140,306
Loans receivable, net 123,831,582 103,609,061
Accrued interest receivable 901,719 641,011
Federal Home Loan Bank stock, at cost 1,020,600 865,000
Real estate owned, net 956,301 722,035
Investment in real estate 362,259
Office properties and equipment, net 4,549,869 4,628,272
Current federal income tax receivable 77,132
Deferred federal income taxes 116,321
Prepaid expenses and other assets 391,637 301,662
------------ ------------
Total assets $148,629,158 $131,085,247
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $130,214,615 $116,591,019
Advances from Federal Home Loan Bank 7,500,000 5,000,000
Advances from borrowers for taxes
and insurance 126,815 219,869
Deferred federal income taxes 38,264
Accounts payable and accrued expenses 938,236 666,954
------------ ------------
Total liabilities 138,817,930 122,477,842
------------ ------------
Commitments (Notes 9 and 14)
Stockholders' equity:
Capital stock - $8 par; 1,000,000
shares authorized, 343,680
shares issued and outstanding 2,749,440 2,749,440
Additional paid-in capital 850,345 850,345
Retained earnings 6,211,443 5,007,620
------------ ------------
Total stockholders' equity 9,811,228 8,607,405
------------ ------------
Total liabilities and
stockholders' equity $148,629,158 $131,085,247
============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
10
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Interest income:
Loans $ 8,853,800 $ 7,716,151
Loan fees 1,369,338 1,738,126
Investment securities 431,244 739,599
Other 285,736 255,291
----------- -----------
Total interest income 10,940,118 10,449,167
----------- -----------
Interest expense:
Deposits 4,815,586 4,334,799
Borrowings 228,841 280,937
----------- -----------
Total interest expense 5,044,427 4,615,736
----------- -----------
Net interest income before provision
for loan losses 5,895,691 5,833,431
Provision for loan losses 133,525 73,373
----------- -----------
Net interest income after provision
for loan losses 5,762,166 5,760,058
----------- -----------
Noninterest income:
Gain on sales of real estate 146,450 313,465
Gain on sales of loans 48,879 285,588
Rent 255,289 300,624
Service charges and other 773,389 514,489
----------- -----------
Total noninterest income 1,224,007 1,414,166
----------- -----------
Noninterest expenses:
Salaries 2,343,403 2,323,299
Insurance 503,863 524,464
Data processing services 193,680 181,761
Check processing charges 200,384 169,426
Depreciation and amortization 299,557 207,777
Payroll and other taxes 199,958 192,897
Advertising and public relations 219,035 269,412
Legal 135,749 94,315
Occupancy 400,661 382,017
Audit and examination fees 80,078 83,960
Provision for losses and expenses
on real estate owned 76,967 130,310
Other 465,765 508,255
----------- -----------
Total noninterest expenses 5,119,100 5,067,893
----------- -----------
Income before income taxes 1,867,073 2,106,331
----------- -----------
Income tax expense (benefit):
Current 508,665 732,629
Deferred 154,585 (10,467)
----------- -----------
663,250 722,162
----------- -----------
Net income $ 1,203,823 $ 1,384,169
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
11
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1994 and 1993
________
<TABLE>
<CAPTION>
Capital Stock Additional
------------------- Paid-in Retained
Shares Amount Capital Earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
December 31, 1992 343,680 $2,749,440 $850,345 $3,623,451 $7,223,236
Net income 1,384,169 1,384,169
------- ---------- -------- ---------- ----------
December 31, 1993 343,680 2,749,440 850,345 5,007,620 8,607,405
Net income 1,203,823 1,203,823
------- ---------- -------- ---------- ----------
December 31, 1994 343,680 $2,749,440 $850,345 $6,211,443 $9,811,228
======= ========== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
12
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994 and 1993
________
<TABLE>
<CAPTION>
1994 1993
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,203,823 $ 1,384,169
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for losses 154,759 123,785
Gain on sale of loans (48,879) (285,588)
Stock dividends received on Federal Home
Loan Bank stock (46,100) (30,000)
Gain on sales of real estate (146,450) (313,465)
Provision for depreciation and amortization 299,557 207,777
Deferred federal income taxes 154,585 (10,467)
Net increase in accrued interest receivable (260,708) (79,265)
Net decrease in federal income taxes payable (74,585)
Net (increase) decrease in prepaid expenses
and other assets (115,116) 77,144
Net increase in accounts payable and accrued
expenses 271,282 390,344
Net increase in federal income taxes
receivable (77,132)
------------ ------------
Net cash provided by operating activities 1,389,621 1,389,849
------------ ------------
Cash flows from investing activities:
Purchases of held-to-maturity investment
securities (1,747,274)
Purchases of investment securities (6,445,987)
Proceeds from sale of investment securities 5,000,000
Principal payments collected on
held-to-maturity investment securities 3,820,957
Principal payments collected on investment
securities 9,446,664
Net increase in loans receivable (31,457,143) (57,864,844)
Proceeds from sale of loans receivable 9,900,634 39,275,257
Purchases of Federal Home Loan Bank stock (109,500) (34,200)
Additions to real estate owned (13,652) (71,948)
Proceeds from sale of real estate owned 1,048,892 2,057,069
Proceeds from sale of investments in
real estate 467,311 629,642
Purchases of office properties
and equipment (196,013) (1,245,638)
Proceeds from sale of office properties
and equipment 5,100
------------ ------------
Net cash used by investing activities (18,285,788) (9,248,885)
------------ ------------
</TABLE>
Continued
13
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
for the years ended December 31, 1994 and 1993
________
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits $13,623,596 $11,973,938
Net increase (decrease) in advances from
Federal Home Loan Bank with original
maturities of less than three months 7,500,000 (1,768,858)
Payoff of advances from Federal Home Loan Bank (5,000,000)
Advances from Federal Home Loan Bank 5,000,000
Net decrease in advances from borrowers for
taxes and insurance (93,054) (130,965)
----------- -----------
Net cash provided by financing activities 16,030,542 15,074,115
----------- -----------
(Decrease) increase in cash and cash equivalents (865,625) 7,215,079
Cash and cash equivalents at beginning of year 9,699,320 2,484,241
----------- -----------
Cash and cash equivalents at end of year $ 8,833,695 $ 9,699,320
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during year for:
Interest $ 5,025,360 $ 4,628,230
Federal income taxes $ 540,000 $ 745,000
Supplemental schedule of noncash investing and
financing activities:
Additions to real estate owned from foreclosure
of loans receivable $ 1,249,342 $ 2,027,035
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
14
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________
1. Form of Organization:
--------------------
Effective April 1, 1994, First American Savings Banc, a Savings Association,
converted from a State Savings Association to a State Savings Bank, and as a
result changed its name to First American Savings Bank, S.S.B.
2. Summary of Significant Accounting Policies:
------------------------------------------
Principles of Consolidation
---------------------------
The financial statements include the accounts of First American Savings
Bank, S.S.B. (the Bank) and its wholly-owned subsidiary, First American
Family Financial Services, Inc. (the Subsidiary). The Subsidiary was
incorporated in February 1994 and is primarily engaged in the sale of
uninsured investments (e.g., mutual funds and annuities). All significant
intercompany balances and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash on hand, due from banks and money
market accounts.
Investment Securities
---------------------
Effective January 1, 1994, the Bank adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in
Debt and Equity Securities, which requires that investments in debt
securities and marketable equity securities be designated as either trading,
held-to-maturity or available-for-sale. Management determines the
appropriate classification of its investments in debt and equity securities
at the time of purchase and re-evaluates such determination at each balance
sheet date. Under SFAS No. 115, trading securities are reported at fair
value, with changes in fair value included in earnings. Available-for-sale
securities are reported at fair value, with net unrealized gains and losses
net of deferred taxes included in stockholders' equity. At December 31,
1994, the Bank had no investments classified as trading or available-for-
sale securities. Held-to-maturity investment securities are reported at
amortized cost. For each category of investment securities, unrealized
losses that are other than temporary are recognized in earnings.
The amortized cost of investment securities classified as held-to-maturity
is adjusted for amortization of premiums and accretion of discounts to
maturity or, in the case of mortgage-backed securities, over the estimated
life of the security using a method which approximates the interest method.
Such amortization and interest are included in interest income. Realized
gains and losses are included in other income or expense in the accompanying
statements of income. The cost of securities sold is based on the specific
identification method.
At December 31 1993, investment securities were stated at amortized cost.
15
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
2. Summary of Significant Accounting Policies, continued:
------------------------------------------
Loans Receivable
----------------
Loans receivable are stated at unpaid principal balances, less the allowance
for loan losses and net deferred loan-origination fees.
Interest on loans receivable is accrued as earned. The accrual of interest
income on specific loans is discontinued when it is anticipated that
interest may not be collected. It is the general policy of the Bank to
discontinue the accrual of interest when principal or interest payments are
delinquent 90 days or more, and to reverse from income any unpaid amounts
previously accrued on these loans. Interest received on such loans is
recorded as income when collected.
Loans Held for Sale
-------------------
Mortgage loans originated or purchased and intended for sale in the
secondary market are carried at the lower of cost or estimated market value
in the aggregate. Net unrealized losses are recognized in a valuation
allowance by charges to income. At December 31, 1994 and 1993, the market
value of loans held for sale exceed their carrying value.
Allowance for Losses
--------------------
The allowance for loan losses is increased by charges to income and
decreased by charge-offs of loan balances judged to be uncollectible (net of
recoveries). Management's periodic evaluation of the adequacy of the
allowance is based on the Bank's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions.
Loan Origination Fees, Commitment Fees, and Related Costs
---------------------------------------------------------
Loan origination fees and certain direct loan origination costs are
deferred, and the net fee or cost is recognized as an adjustment to interest
income using a method which approximates the interest method over the
contractual life of the loans, adjusted for estimated prepayments based on
the Bank's historical prepayment experience. Commitment fees and costs
relating to commitments, the likelihood of exercise of which is remote, are
recognized over the commitment period on a straight-line basis. If the
commitment is exercised during the commitment period, the remaining
unamortized commitment fee at the time of exercise is recognized over the
life of the loan as an adjustment of yield.
Loan Servicing
--------------
Fees received for servicing loans owned by others are based on a percentage
of the outstanding principal balance of the loans serviced and are collected
out of payments received from mortgagors. Late charges and other fees
collected from mortgagors are credited to income when collected while loan
servicing costs are charged to expense as incurred.
16
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
2. Summary of Significant Accounting Policies, continued:
------------------------------------------
Real Estate Owned
-----------------
Real estate acquired in settlement of loans is recorded at the balance of
the loan or at estimated fair value, whichever is less, at the date
acquired. Adjustments are made by a charge to operations to reflect
declines, if any, in fair values less estimated selling costs below the
recorded amounts (including the cost of capital improvements made to
facilitate sale). Valuations are periodically performed by management, and
an allowance for losses is established by a charge to operations if the
carrying value of a property exceeds its fair value. Costs of holding real
estate acquired in settlement of loans are reflected in income currently.
Gains on sales of such real estate are taken into income based on the
buyer's initial and continuing investment in the property.
Investment in Real Estate
-------------------------
Real estate held for investment is carried at the lower of cost or estimated
net realizable value.
Office Properties and Equipment
-------------------------------
Office properties and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the various classes of assets:
Buildings 25 - 31.5 years
Building improvements 5 - 10 years
Furniture and equipment 3 - 10 years
Expenditures for repairs and maintenance are expensed as incurred, and
renewals and betterments that extend the lives of assets are capitalized.
Costs of assets sold or abandoned and the related accumulated depreciation
are eliminated from the accounts and the net amount, less proceeds from
disposal, is charged or credited to income.
Income Tax
----------
The Bank records its provision for income taxes based on pretax income as
reported for financial statement purposes. Deferred income taxes are
recognized for temporary differences between financial statement and income
tax bases of assets and liabilities. The Bank uses the liability method for
computing deferred income taxes as required by SFAS 109.
Reclassifications
-----------------
Certain prior year amounts have been reclassified for consistency in
reporting. These reclassifications have no effect on net income or retained
earnings as previously stated.
17
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
3. Investment Securities:
---------------------
As discussed in Note 2, on January 1, 1994, the Bank adopted the provisions
of SFAS No. 115. There was no effect on net income or stockholders' equity
as of January 1, 1994 from adopting SFAS No. 115 as all securities were
classified as held-to-maturity.
The carrying value and estimated fair value of investment securities at
December 31, 1994 by type and contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
December 31, 1994
------------------------------------------------------------------
Real Estate
Mortgage
U.S. Mortgage- Investment
Government Backed Conduits Other
Securities Securities (REMICs) Securities Total
------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
HELD-TO-MATURITY
Principal balance $2,000,000 $3,760,643 $1,640,223 $500,000 $7,900,866
Unamortized premiums
(discounts) (5,290) 177,980 (6,933) 165,757
---------- ---------- ----------- -------- ----------
Carrying value 1,994,710 3,938,623 1,633,290 500,000 8,066,623
Gross unrealized gains 677
Gross unrealized losses (90,022) (170,239) (72,343) (33,750) (365,677)
---------- ---------- ----------- ---------- ----------
Estimated fair value $1,904,688 $3,769,061 $1,560,947 $466,250 $7,700,946
========== ========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Estimated
Amortized Fair
Cost Value
----------- ----------
Contractual Maturities:
Due after one year through five years $3,080,892 $2,950,891
Due after five years through ten years 3,352,442 3,189,110
Due after ten years 1,633,289 1,560,945
---------- ----------
$8,066,623 $7,700,946
========== ==========
</TABLE>
18
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
3. Investment Securities, continued:
---------------------
The carrying value and estimated fair value of investment securities at
December 31, 1993 are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1993
----------------------------------------------------
Real Estate
Mortgage
Mortgage- Investment
Backed Conduits Other
Securities (REMICs) Securities Total
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Principal balance $5,191,414 $3,158,829 $1,500,000 $ 9,850,243
Unamortized premiums
(discounts) 293,996 1,664 (5,597) 290,063
---------- ---------- ---------- -----------
Carrying value 5,485,410 3,160,493 1,494,403 10,140,306
Gross unrealized gains 6,690 5,517 2,477 14,684
Gross unrealized losses (93,743) (7,613) (101,356)
---------- ---------- ---------- -----------
Estimated fair value $5,398,357 $3,158,397 $1,496,880 $10,053,634
========== ========== ========== ===========
</TABLE>
4. Loans Receivable:
----------------
Loans receivable consist of the following at December 31:
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
---- ----
Single family mortgage loans held for sale $ 595,466 $ 5,118,676
Single family mortgage loans held for investment 80,283,122 65,843,368
Construction loans 55,406,762 49,292,024
Nonresidential real estate loans 2,227,667 3,245,724
Loans collateralized by savings accounts 492,679 741,884
Installment loans 1,894,425 804,421
------------ ------------
140,900,121 125,046,097
Less: Allowance for loan losses 548,548 415,023
Deferred loan fees 298,467 310,025
Loans in process 16,221,524 20,711,988
------------ ------------
$123,831,582 $103,609,061
============ ============
</TABLE>
19
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
4. Loans Receivable, continued:
----------------
Loans on which the accrual of interest had been discontinued amounted to
approximately $434,000 and $1,495,000 at December 31, 1994 and 1993,
respectively.
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
<S> <C>
Balance at December 31, 1992 $341,650
Provisions charged to income 73,373
--------
Balance at December 31, 1993 415,023
Provisions charged to income 133,525
--------
Balance at December 31, 1994 $548,548
========
</TABLE>
5. Real Estate Owned:
-----------------
Real estate owned consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Residential real estate owned $981,634 $827,063
Less valuation allowance 25,333 105,028
-------- --------
$956,301 $722,035
======== ========
</TABLE>
Changes in the valuation allowance on real estate owned are as follows:
<TABLE>
<CAPTION>
<S> <C>
Balance at December 31, 1992 $ 61,838
Provisions charged to income 50,412
Charge-offs, net of recoveries (7,222)
---------
Balance at December 31, 1993 105,028
Provisions charged to income 21,234
Charge-offs, net of recoveries (100,929)
---------
Balance at December 31, 1994 $ 25,333
=========
</TABLE>
20
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
6. Loan Servicing:
--------------
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal
balances of mortgage loans serviced for others were approximately
$56,660,000 and $59,400,000 at December 31, 1994 and 1993, respectively.
7. Office Properties and Equipment:
-------------------------------
A summary of office properties and equipment at December 31 is as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Land $1,697,120 $1,697,120
Buildings 2,333,279 2,326,061
Building and leasehold improvements 454,959 367,706
Furniture and equipment 979,951 879,043
---------- ----------
5,465,309 5,269,930
Less accumulated depreciation 915,440 641,658
---------- ----------
$4,549,869 $4,628,272
========== ==========
8. Deposits:
----------
</TABLE>
The weighted average nominal interest rate payable on deposits at December
31, 1994 and 1993 was 4.42% and 3.83%, respectively. A summary of deposits
by type and rate at December 31 is as follows:
<TABLE>
<CAPTION>
Rate 1994 1993
--------------- ------------ ------------
<S> <C> <C> <C>
Noninterest-bearing accounts $ 7,764,960 $ 6,785,144
Savings accounts 2.50% 5,241,133 5,417,724
NOW accounts 0.84% - 4.00% 29,262,400 26,714,368
------------ ------------
Total transaction accounts 42,268,493 38,917,236
------------ ------------
Certificate accounts: 2.50% - 3.49% 3,793,897 16,958,398
3.50% - 4.49% 12,677,974 27,258,891
4.50% - 5.49% 34,511,409 8,984,222
5.50% - 6.49% 24,260,190 11,515,913
6.50% - 7.49% 11,447,813 10,930,584
7.50% - 8.49% 1,254,839 1,257,525
8.50% and over 768,250
------------ ------------
Total certificate accounts 87,946,122 77,673,783
------------ ------------
Total deposits $130,214,615 $116,591,019
</TABLE>
21
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
8. Deposits, continued:
--------
The aggregate amount of deposit accounts with a minimum denomination of
$100,000 was approximately $37,889,000 and $30,560,000 at December 31, 1994
and 1993, respectively.
At December 31, 1994, contractual maturities of certificate accounts are as
follows:
<TABLE>
<CAPTION>
Year Ending 7.50% and
December 31, 3.0%-4.49% 4.50%-5.99% 6.00%-7.49% Over Total
------------ ------------ ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1995 $15,182,980 $30,371,673 $ 2,590,000 $ 398,404 $48,543,057
1996 1,107,741 6,511,699 6,095,569 856,435 14,571,445
1997 107,662 4,916,610 10,248,006 15,272,278
1998 73,488 5,435,052 2,031,770 7,540,309
Thereafter 1,001,924 1,017,109 2,019,033
----------- ----------- ----------- ---------- -----------
$16,471,871 $48,236,958 $21,982,454 $1,254,839 $87,946,122
=========== =========== =========== ========== ===========
</TABLE>
Interest expense on deposits for the years ended December 31
is summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
---- ----
Savings $ 135,095 $ 115,464
NOW 792,721 637,870
Certificates 3,887,770 3,581,465
---------- -----------
$4,815,586 $ 4,334,799
=========== ===========
</TABLE>
9. Advances from Federal Home Loan Bank:
------------------------------------
At December 31, 1994 and 1993, the Bank had advances outstanding from the
Federal Home Loan Bank. The following schedule is a summary of the advances
as of December 31, 1994 and 1993:
<TABLE>
<CAPTION>
Interest Rate Maturity 1994 1993
- ------------- -------- ---- ----
<S> <C> <C> <C>
6.85% January 3, 1995 $7,500,000
3.72% April 22, 1994 $1,500,000
3.83% May 2, 1994 1,500,000
4.11% June 1, 1994 2,000,000
---------- ----------
$7,500,000 $5,000,000
========== ==========
</TABLE>
The advances are collateralized by single family permanent mortgage loans.
The Bank had $15,000,000 of undisbursed advance commitments from Federal
Home Loan Bank at December 31, 1993.
22
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
10. Income Tax:
----------
Income tax expense (benefit) for the years ended December 31 is summarized as
follows:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Federal:
Current $466,665 $666,489
Deferred 154,585 (10,467)
-------- --------
621,250 656,022
State:
Current 42,000 66,140
-------- --------
Total income tax expense $663,250 $722,162
======== ========
</TABLE>
The provision for federal income tax differs from that computed using the
statutory tax rate of 34%. The reasons for those differences and the related
tax effects are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Tax at statutory rate $634,805 $716,153
Increase (decrease) in taxes resulting from:
State franchise taxes 27,720 43,652
Other 725 (37,643)
-------- --------
$663,250 $722,162
======== ========
</TABLE>
23
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
10. Income Tax, continued:
----------
The components of the Bank's deferred tax assets and liabilities as of
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
December December
<S> <C> <C>
31, 1994 31, 1993
--------- ---------
Deferred tax assets:
State taxes $ 59,256 $ 50,773
Loan fees 105,409
Book allowance for loan losses 186,410 156,303
Other 36,317 33,401
--------- ---------
Total deferred tax assets 281,983 345,886
--------- ---------
Deferred tax liabilities:
Accrual to cash method change 29,281
Tax allowance for loan losses 235,361 193,217
Loan fees 84,886
Other 7,067
--------- ---------
Total deferred tax liabilities 320,247 229,565
--------- ---------
Net deferred tax (liabilities) assets $ (38,264) $ 116,321
========= =========
</TABLE>
Retained earnings at December 31, 1994 include approximately $42,045 for
which no deferred federal income tax liability has been recognized. This
amount represents an allocation of income to bad-debt deductions for tax
purposes only. Reduction of amounts so allocated for purposes other than tax
bad-debt losses or adjustments arising from carryback of net operating
losses would create income for tax purposes only, which would be subject to
the then-current corporate income-tax rate. The unrecorded deferred income-
tax liability on the above amount was approximately $14,000 at December 31,
1994.
24
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
11. Regulatory Capital Considerations:
---------------------------------
The following table presents current regulatory capital requirements and the
Bank's compliance therewith:
<TABLE>
<CAPTION>
Current Bank Actual at
Requirement December 31, 1994
------------ ------------------
<S> <C> <C>
Tier 1 capital to risk-weighted
assets ratio 4% 10.19%
Total capital to risk-weighted
assets ratio 8% 10.76%
Leverage capital ratio 4% 6.67%
</TABLE>
12. Leasing Agreements as Lessor:
----------------------------
The Bank leases a portion of its facilities to both affiliated and
unaffiliated third parties for periods not exceeding five years.
Future minimum lease payments receivable are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1995 $250,302
1996 170,916
1997 102,302
1998 17,077
--------
Total $540,597
========
</TABLE>
13. Related Party Transactions:
--------------------------
The Bank leases office space in its Bedford facility to a major stockholder
for $3,035 per month under a 36 month lease, which will expire on December
31, 1996.
14. Financial Instruments With Off-Balance Sheet Risk and Concentration of
----------------------------------------------------------------------
Credit Risk:
-----------
The Bank is a party to financial instruments with off-balance-sheet risk
entered into in the normal course of business to meet the financing needs of
its customers. These financial instruments include loan commitments. The
instruments involve, to varying degrees, elements of credit and interest-
rate risk in excess of the amount recognized in the financial statements.
25
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
14. Financial Instruments With Off-Balance Sheet Risk and Concentration of
----------------------------------------------------------------------
Credit Risk, continued:
-----------
The Bank's exposure to credit loss in the event of nonperformance by
counterparties to loan commitments is represented by the contractual amount
of those instruments. The Bank uses the same credit policies in making
commitments as it does for on-balance-sheet instruments. The total amounts
of financial instruments with off-balance-sheet risk are as follows at
December 31 :
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Unfunded mortgage loan commitments $14,858,788 $19,302,952
Construction loans in process 16,221,524 20,711,988
----------- -----------
Total loan commitments $31,080,312 $40,014,940
=========== ===========
Standby letters of credit $ 230,415 -0-
=========== ===========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the loan commitments
may expire without being drawn upon, the total commitment amount does not
necessarily represent future cash requirements.
Loans are made in accordance with formal written loan policies. The Bank
evaluates each customer's credit worthiness on a case-by-case basis. The
Bank's lending is generally concentrated in the Northeast Tarrant County
market. The amount of collateral obtained, if deemed necessary by the Bank
upon extension of credit, is based on management's credit evaluation.
The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers. The Bank
has a savings account and a deed of trust in the amount of $595,000 at
December 31, 1994 as collateral supporting those letter of credit
commitments for which collateral is deemed necessary.
The Bank maintains deposits with other financial institutions in amounts
which exceed FDIC insurance coverage. At December 31, 1994 and 1993,
approximately $8,061,000 and $8,976,000, respectively, of such balances were
uninsured.
The accounting loss that would be suffered in the event of complete
nonperformance of counterparties to investment securities is the full
carrying value of such securities; however, the risk of loss is mitigated by
the fact that loans underlying securities held by the Bank are guaranteed by
various agencies of the U.S. Government.
26
<PAGE>
FIRST AMERICAN SAVINGS BANK, S.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
________
15. Employee Benefit Plan:
---------------------
Effective July 1, 1993, the Bank adopted the Financial Institutions Thrift
Plan. Employees are eligible for membership in this 401(k) plan upon
completion of twelve months of continuous employment (during which at least
1,000 hours have been completed) and attainment of age 21. The Bank is not
required to match participant contributions. The Bank's contributions to the
plan were $21,695 and $10,665 during 1994 and 1993, respectively.
27
<PAGE>
(b) Pro Forma Financial Information
- ------------------------------------
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
PRO FORMA INFORMATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet and
pro forma condensed consolidated statement of operations as of and for the
year ended December 31, 1995 give effect to the acquisition by Central
Bancorporation, Inc. (the Company) of First American Savings Bank, S.S.B.
(First American).
The pro forma condensed consolidated balance sheet combines the historical
consolidated balance sheets of the Company and First American, as if the
acquisition had been effective December 31, 1995. The attached pro forma
condensed consolidated statement of operations combines the historical
consolidated statement of operations of the Company and First American as
if the acquisition had been effective January 1, 1995.
The pro forma information is based on the assumptions and adjustments
described in the accompanying notes to the pro forma condensed consolidated
financial statements. The pro forma information may not be indicative of
the results that actually would have occurred if the acquisition had been
effected on the dates indicated and should be read in conjunction with the
historical consolidated financial statements and related notes of the
Company. In addition, the pro forma information is not necessarily
indicative of results which may be obtained in the future.
28
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
PRO FORMA INFORMATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
ASSETS Historical
Historical First Pro Forma
Company American Entry Adjustments Pro Forma
---------- ---------- ----- ------------ ---------
<S> <C> <C> <C> <C> <C>
Cash and due from banks $ 51,855 7,546 - 59,401
Investment securities
available-for-sale 155,602 - - 155,602
Investment securities
held-to-maturity 355,448 8,640 A (71) 364,017
Loans, net 326,474 127,229 B (1,000) 452,703
Premises and equipment 22,282 4,333 - 26,615
Other assets 14,973 2,835 C,D 10,445 28,253
-------- ------- ------ ---------
$926,634 150,583 9,374 1,086,591
======== ======= ====== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $804,500 135,985 - 940,485
Short-term borrowings 44,420 - E 9,500 53,920
Other liabilities 10,385 3,042 F (126) 13,301
-------- ------- ------ ---------
Total liabilities 859,305 139,027 9,374 1,007,706
-------- ------- ------ ---------
Common stock 6,542 2,750 - 9,292
Additional paid-in
capital 16,578 850 - 17,428
Retained earnings 44,574 7,956 - 52,530
Unrealized loss on
available-for-sale
investment securities (365) - - (365)
-------- ------- ------ ---------
Total stockholders'
equity 67,329 11,556 - 78,885
-------- ------- ------ ---------
$926,634 150,583 9,374 1,086,591
======== ======= ====== =========
</TABLE>
See accompanying notes to unaudited condensed financial statements
29
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Historical
Historical First Pro Forma
Company American Entry Adjustment Pro Forma
---------- ---------- ----- ----------- ---------
<S> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $27,624 12,017 G 160 39,801
Interest on investment securities 30,981 544 H,I (1,047) 30,478
Other interest income 1,185 324 - 1,509
------- ------ ------ ---------
Total interest income 59,790 12,885 (887) 71,788
------- ------ ------ ---------
Interest expense
Interest on deposits 24,532 6,331 - 30,863
Interest on borrowings 3,257 253 J 130 3,640
------- ------ ------ ---------
Total interest expense 27,789 6,584 130 34,503
------- ------ ------ ---------
Net interest income 32,001 6,301 (1,017) 37,285
------- ------ ------ ---------
Provision for loan losses 900 143 - 1,043
------- ------ ------ ---------
Net interest income after
provision for loan losses 31,101 6,158 (1,017) 36,242
------- ------ ------ ---------
Other income
Service charges and fees 9,343 925 K (238) 10,030
Gain on sale of investment
securities 133 - - 133
Other income 928 568 - 1,496
------- ------ ------ ---------
Total other income 10,404 1,493 (238) 11,659
------- ------ ------ ---------
Other expenses
Salaries and employee benefits 16,377 2,397 L (828) 17,946
Net occupancy expense 2,826 403 M (170) 3,059
Equipment and data processing
expense 3,242 442 N (309) 3,375
Communications expense 1,358 91 - 1,449
Other operating expenses 5,462 1,557 O,P 593 7,612
------- ------ ------ ---------
Total other expenses 29,265 4,890 (714) 33,441
------- ------ ------ ---------
Income before income taxes 12,240 2,761 (541) 14,460
------- ------ ------ ---------
Provision for income taxes 2,723 1,016 Q (184) 3,555
------- ------ ------ ---------
Net income $ 9,517 1,745 (357) 10,905
======= ====== ====== =========
</TABLE>
See accompanying notes to unaudited condensed financial statements
30
<PAGE>
CENTRAL BANCORPORATION, INC. AND SUBSIDIARIES
PRO FORMA INFORMATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Acquisition
-----------
At the close of business on February 29, 1996, Central Bancorporation, Inc.
("CBI") acquired First American Savings Bank, S.S.B., a Texas savings bank
("First American"), pursuant to an Agreement and Plan of Reorganization between
CBI 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 CBI, formed a new bank subsidiary ("New Bank") which was merged
with and into First American ("the Merger"). Pursuant to the Merger, the
resulting bank acquird all 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 transaction has been accounted for as a purchase with, to the extent
possible, the assets and liabilities of First American recorded at fair market
value as of the date of the transaction.
Note 2 Pro Forma Adjustments (in thousands)
---------------------
A) Adjust investment securities to fair value $ (71)
B) Adjust loans receivable to fair value $(1,000)
C) Record mortgage serving rights acquired at
fair value $ 700
D) Record goodwill, which represents the difference
between the purchase price of $20,093,094 and the
fair value of net assets acquired $ 9,745
E) Borrowing on revolving line of credit on the date
of the acquisition $ 9,500
F) Record a deferred tax liability for the difference
between fair value and the tax basis of acquired
assets $ (126)
G) Record accretion of the discount on loans based on
the level yield method over the life of the loans
considering estimated prepayments $ 160
H) Record accretion of the discount on investments
based on the level yield method over the life of
the investments considering estimated prepayments $ 35
31
<PAGE>
I) Adjustment to reflect the reduction in earning
assets resulting from the cash payment for the
stock of First American $(1,082)
J) Record interest expense on the borrowing on the
revolving line of credit; the borrowing is
expected to be outstanding for 60 days $ 130
K) Record amortization of the recorded value of
the mortgage servicing rights based on the level
yield method over the life of such assets
considering estimated prepayments $ (238)
L) Represents anticipated reductions in staffing $ (828)
M) Represents reduction in net occupancy costs to
be achieved primarily by leasing excess space $ (170)
N) Represents savings from eliminating First
American's outsourced data processing and item
processing $ (309)
O) Represents savings from reduction in audit and tax
services and directors fees $ (87)
P) Adjustment to reflect amortization of estimated
cost over net assets acquired (15 year life) $ 680
Q) Adjustment to reflect income tax benefit from
net results of pro forma adjustments $ (184)
32
<PAGE>
(c) Exhibits
- -------------
The following exhibits are included with this Form 8-K/A in accordance with
the provisions of Item 601 of Regulation S-K:
Exhibits:
2.01 Agreement and Plan or 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)
2.02 Agreement and Plan or Merger between New Bedford Bank, S.S.B. and
First American Savings Bank, S.S.B. and joined in by CBI, dated
January 23, 1996(1)
___________________________________
(1) Filed with the Company's current report on Form 8-K for an event
dated February 29, 1996 and incorporated herein by reference.
33
<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.
Dated: March 29, 1996 /s/ Michael J. Tyler
--------------------
Michael J Tyler , Senior Vice President and
Chief Financial Officer
34
