<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________TO________.
COMMISSION FILE NO. 0-17416
CENTURY FINANCIAL CORPORATION
-----------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COMMONWEALTH OF PENNSYLVANIA 25-1553790
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE CENTURY PLACE, ROCHESTER, PENNSYLVANIA 15074
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(412) 774-1872
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES___X____ NO________
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK AS OF
OCTOBER 18, 1995 WAS:
COMMON STOCK, $0.835 PAR VALUE - 3,376,450 SHARES OUTSTANDING
<PAGE>
CENTURY FINANCIAL CORPORATION
FORM 10-Q
INDEX
PAGE
NUMBER
------
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED) 3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) 4
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 - 7
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATING
RESULTS AND FINANCIAL CONDITION 8 - 19
PART II OTHER INFORMATION
ITEMS 1 - 6 20
SIGNATURES 21
-2-
<PAGE>
CENTURY FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1995 1994
------------ ------------
<S> <C> <C>
ASSETS (IN THOUSANDS)
CASH AND DUE FROM BANKS $ 10,466 $ 9,418
INTEREST BEARING DEPOSITS IN OTHER BANKS 13 58
SECURITIES AVAILABLE FOR SALE 60,903 38,672
INVESTMENT SECURITIES (APPROXIMATE MARKET VALUE
OF $42,294 AT SEPTEMBER 30, 1995 AND $37,544 AS
OF DECEMBER 31, 1994) 41,664 38,155
LOANS (NET OF UNEARNED INCOME OF $8,776 AT SEPTEMBER
30, 1995 AND $7,859 AT DECEMBER 31, 1994) 251,036 235,266
LESS ALLOWANCE FOR LOAN LOSSES 3,053 3,206
-------- --------
LOANS - NET 247,983 232,060
BANK PREMISES AND EQUIPMENT 8,673 8,549
ACCRUED INTEREST AND OTHER ASSETS 5,419 4,868
-------- --------
TOTAL ASSETS $375,121 $331,780
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
NON INTEREST-BEARING DEPOSITS $ 39,420 $ 39,206
INTEREST-BEARING DEPOSITS 292,873 258,833
-------- --------
TOTAL DEPOSITS 332,293 298,039
FEDERAL FUNDS PURCHASED 4,400 470
BORROWINGS FROM FEDERAL HOME LOAN BANK 1,700 1,700
SUBORDINATED CAPITAL NOTES 1,500 1,500
ACCRUED INTEREST AND OTHER LIABILITIES 4,607 2,415
-------- --------
TOTAL LIABILITIES 344,500 304,124
-------- --------
STOCKHOLDERS' EQUITY
COMMON STOCK, PAR VALUE $.835; 8,000,000 SHARES
AUTHORIZED; 3,376,450 ISSUED AND OUTSTANDING AT
SEPTEMBER 30, 1995; 3,365,116 ISSUED AND
OUTSTANDING AT DECEMBER 31, 1994 2,819 2,810
SURPLUS 2,750 2,638
RETAINED EARNINGS 24,893 22,911
TREASURY STOCK (3,000 SHARES AT COST) (37) -
UNREALIZED GAIN/(LOSS) ON SECURITIES
AVAILABLE FOR SALE 196 (703)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 30,621 27,656
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $375,121 $331,780
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-3-
<PAGE>
CENTURY FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR TO DATE
SEPT 30 SEPT 30
1995 1994 1995 1994
(IN THOUSANDS) (IN THOUSANDS)
------------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME
INTEREST AND FEES ON LOANS:
TAXABLE $5,241 $4,718 $15,405 $13,344
TAX-EXEMPT 381 250 892 910
INTEREST ON DEPOSITS IN OTHER BANKS 1 1 2 7
INTEREST ON INVESTMENT SECURITIES:
TAXABLE 1,425 870 3,613 2,374
TAX-EXEMPT 174 126 447 414
INTEREST ON FEDERAL FUNDS SOLD 32 16 215 195
------ ------ ------- ------
TOTAL INTEREST INCOME 7,254 5,981 20,574 17,244
------ ------ ------- ------
INTEREST EXPENSE
INTEREST ON DEPOSITS:
CERTIFICATES OF DEP. OF $100,000 OR MORE 544 306 1,276 1,016
OTHER DEPOSITS 2,737 2,000 7,728 5,670
INTEREST ON BORROWINGS 88 65 209 202
------ ------ ------- ------
TOTAL INTEREST EXPENSE 3,369 2,371 9,213 6,888
------ ------ ------- ------
NET INTEREST INCOME 3,885 3,610 11,361 10,356
PROVISION FOR LOAN LOSSES 60 68 180 203
------ ------ ------- ------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 3,825 3,542 11,181 10,153
------ ------ ------- ------
NONINTEREST INCOME
TRUST DEPARTMENT INCOME 180 131 489 392
SERVICE CHARGES ON DEPOSIT ACCOUNTS 370 371 1,125 1,048
OTHER NONINTEREST INCOME 99 84 287 680
NET SECURITIES GAINS/(LOSSES) (30) - (14) 7
------ ------ ------- ------
TOTAL NONINTEREST INCOME 619 586 1,887 2,127
------ ------ ------- ------
NONINTEREST EXPENSE
SALARIES AND EMPLOYEE BENEFITS 1,553 1,509 4,591 4,447
NET OCCUPANCY AND EQUIPMENT EXPENSE 489 464 1,462 1,435
OTHER NONINTEREST EXPENSE 882 892 2,904 2,865
------ ------ ------- ------
TOTAL NONINTEREST EXPENSE 2,924 2,865 8,957 8,747
------ ------ ------- ------
INCOME BEFORE INCOME TAXES 1,519 1,263 4,111 3,533
INCOME TAXES 342 323 1,014 796
------ ------ ------- ------
NET INCOME $1,177 $ 940 $ 3,097 $2,737
====== ====== ======= ======
EARNINGS PER SHARE $0.35 $0.28 $0.92 $0.81
DIVIDENDS PER SHARE $0.11 $0.12 $0.31 $0.28
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 3,374,163 3,364,993 3,371,812 3,364,506
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-4-
<PAGE>
CENTURY FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES (IN THOUSANDS)
NET INCOME $ 3,097 $ 2,737
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
PROVISION FOR LOAN LOSSES 180 203
DEPRECIATION, AMORTIZATION AND ACCRETION 378 1,256
(INCREASE) DECREASE IN ACCRUED INTEREST
RECEIVABLE (504) 28
(DECREASE) INCREASE IN ACCRUED INTEREST
PAYABLE 1,166 (495)
OTHER, NET (253) (297)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 4,064 $ 3,432
-------- --------
INVESTING ACTIVITIES
DECREASE IN INTEREST-BEARING DEPOSITS
IN OTHER BANKS $ 45 $ 299
INVESTMENT SECURITIES AVAILABLE FOR SALE:
PROCEEDS FROM MATURITIES AND REPAYMENTS
OF SECURITIES 13,133 13,628
PROCEEDS FROM SALE OF SECURITIES 5,062 -
PURCHASES OF SECURITIES (38,611) (13,934)
INVESTMENT SECURITIES HELD TO MATURITY:
PROCEEDS FROM MATURITIES AND REPAYMENTS
OF SECURITIES 9,837 24,285
PURCHASES OF SECURITIES (14,273) (15,857)
PROCEEDS FROM SALE OF SECURITIES 758 -
NET INCREASE IN LOANS (15,770) (29,581)
PURCHASE OF PREMISES AND EQUIPMENT (1,176) (793)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES ($40,237) ($20,367)
-------- --------
FINANCING ACTIVITIES
NET INCREASE IN DEPOSITS $ 34,254 $ 5,033
DECREASE IN U S TREASURY DEMAND NOTES - (3,000)
INCREASE IN FEDERAL FUNDS PURCHASED 3,930 -
NET INCREASE IN FHLB BORROWINGS - 1,700
CASH DIVIDENDS (1,011) (953)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 121 -
TREASURY STOCK PURCHASED (73) -
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 37,221 $ 2,780
-------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 1,048 ($14,155)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,418 22,941
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,466 $ 8,786
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-5-
<PAGE>
CENTURY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
1. SUMMARY OF ACCOUNTING POLICIES
BASIS OF PRESENTATION
---------------------
THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THE ACCOUNTS OF THE CENTURY
FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY, CENTURY NATIONAL BANK
AND TRUST COMPANY. ALL INTERCOMPANY BALANCES AND TRANSACTIONS HAVE BEEN
ELIMINATED IN THE CONSOLIDATION.
THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS HAVE BEEN
PREPARED IN ACCORDANCE WITH THE INSTRUCTIONS TO FORM 10-Q AND, THEREFORE, DO
NOT NECESSARILY INCLUDE ALL INFORMATION WHICH WOULD BE INCLUDED IN AUDITED
FINANCIAL STATEMENTS. THE INFORMATION FURNISHED REFLECTS ALL ADJUSTMENTS
WHICH ARE RE-OCCURRING IN NATURE AND CONSIDERED NECESSARY, IN THE OPINION OF
MANAGEMENT, FOR THE FAIR PRESENTATION OF RESULTS OF OPERATIONS FOR THE
INTERIM PERIOD. THE RESULTS OF OPERATIONS FOR THE INTERIM PERIOD ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR. FOR
FURTHER INFORMATION REFER TO THE CONSOLIDATED FINANCIAL STATEMENTS AND
FOOTNOTES THERETO INCLUDED IN THE CORPORATION'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1994.
ACCOUNTING FOR IMPAIRED LOANS
-----------------------------
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 114, "ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN", AS AMENDED BY STATEMENT NO. 118, WAS
ADOPTED BY THE CORPORATION EFFECTIVE JANUARY 1, 1995. AT SEPTEMBER 30, 1995,
THE CORPORATION DID NOT HAVE ANY IMPAIRED LOANS WHICH MET THE CRITERIA OF
STATEMENT NO. 114.
INDEPENDENT BANKERS COMPUTER SERVICE, INCORPORATED
--------------------------------------------------
EFFECTIVE APRIL 1, 1995, INDEPENDENT BANKERS COMPUTER SERVICE, INCORPORATED
WAS DISSOLVED AND ITS OPERATIONS INTEGRATED WITH CENTURY NATIONAL BANK AND
TRUST COMPANY. INDEPENDENT BANKERS COMPUTER SERVICE, INCORPORATED WAS NOT A
SIGNIFICANT SEGMENT OF THE CORPORATION'S BUSINESS.
INVESTMENT SECURITIES
---------------------
ON APRIL 17, 1995 THE BANK SOLD TWO MUNICIPAL SECURITIES OUT OF THE HELD-TO-
MATURITY PORTFOLIO. THESE ISSUES WERE PURCHASED ON MARCH 20, 1995. AT A
SUBSEQUENT DATE IT WAS DETERMINED THAT THESE SECURITIES DID NOT MEET THE
CRITERIA OF CENTURY'S INVESTMENT POLICY AND WERE SOLD. MANAGEMENT DOES NOT
BELIEVE THAT THIS TRANSACTION TAINTS THE REMAINDER OF THE HELD-TO-MATURITY
PORTFOLIO. THE GAIN RECOGNIZED ON THE SALE OF THE TWO MUNICIPAL SECURITIES
WAS $16,000.
-6-
<PAGE>
DIVIDEND REINVESTMENT PLAN
- - --------------------------
ON MAY 18, 1995 THE BOARD OF DIRECTORS OF THE CORPORATION ESTABLISHED A DIVIDEND
REINVESTMENT PLAN. 300,000 AUTHORIZED BUT UNISSUED SHARES WERE ALLOCATED FOR
THIS PLAN OR THE CORPORATION CAN PURCHASE SHARES IN THE OPEN MARKET TO FULFILL
DEMAND FOR THIS PROGRAM. PARTICIPATION IS AVAILABLE TO ALL COMMON STOCKHOLDERS.
THE PLAN PROVIDES EACH PARTICIPANT WITH A SIMPLE AND CONVENIENT METHOD OF
PURCHASING ADDITIONAL COMMON SHARES WITHOUT PAYMENT OF ANY BROKERAGE COMMISSION
OR OTHER SERVICE FEES. A PARTICIPANT IN THE PLAN MAY ELECT TO REINVEST
DIVIDENDS ON ALL OR PART OF THEIR SHARES TO ACQUIRE ADDITIONAL COMMON STOCK. A
PARTICIPANT MAY WITHDRAW FROM THE PLAN AT ANY TIME.
ON JULY 31, 1995 AND OCTOBER 31, 1995, APPROXIMATELY 3,000 TREASURY SHARES, ON
EACH DATE, WERE ISSUED UNDER THE DIVIDEND REINVESTMENT PLAN. THIS REPRESENTS
10% OF DIVIDENDS ELECTING TO PARTICIPATE IN THE PLAN.
-7-
<PAGE>
CENTURY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
SUMMARY OF EARNINGS
NET INCOME FOR THE FIRST NINE MONTHS OF 1995 WAS $3,097,000, OR $.92 PER SHARE,
COMPARED WITH $2,737,000, OR $.81 PER SHARE, IN THE FIRST NINE MONTHS OF 1994.
THIS WAS AN INCREASE IN NET INCOME OF $360,000, OR 13.2%, IN THE FIRST THREE
QUARTERS OF 1995 COMPARED TO THE SAME TIME PERIOD IN 1994.
NET INCOME FOR THE THIRD QUARTER OF 1995 WAS $1,177,000, OR $.35 PER SHARE,
COMPARED WITH $940,000, OR $.28 PER SHARE, IN THE THIRD QUARTER OF 1994. THIS
WAS AN INCREASE OF $237,000, OR 25.2%.
RATES OF RETURN ON AVERAGE ASSETS (ROA) AND AVERAGE EQUITY (ROE) ARE KEY
MEASURES OF PROFITABILITY. ANNUALIZED ROA FOR THE FIRST NINE MONTHS OF 1995
WAS 1.16%, SLIGHTLY ABOVE THE 1.14% ROA EARNED IN THE FIRST THREE QUARTERS OF
1994. ANNUALIZED ROE FOR THE FIRST THREE QUARTERS OF 1995 WAS 14.39%,
SIGNIFICANTLY HIGHER THAN THE 13.68% ACHIEVED IN THE FIRST NINE MONTHS OF 1994.
NINE MONTHS ENDING SEPTEMBER 30, 1995 AND 1994
INTEREST INCOME AND EXPENSE
CENTURY FINANCIAL CORPORATION'S NET INTEREST INCOME WAS $11,361,000 FOR THE
FIRST NINE MONTHS OF 1995 ENDED SEPTEMBER 30, 1995. THIS WAS AN INCREASE OF
$1,005,000, OR 9.7%, OVER THE FIRST NINE MONTHS OF 1994. THIS INCREASE IN NET
INTEREST INCOME WAS THE RESULT OF A GROWTH IN AVERAGE EARNING ASSETS OF
$38,561,000, OR 12.9%, IN THE FIRST THREE QUARTERS OF 1995 COMPARED TO THE FIRST
THREE QUARTERS OF 1994. HOWEVER, THIS GROWTH IN AVERAGE EARNING ASSETS WAS
PARTIALLY OFFSET BY A DECLINE IN THE NET INTEREST MARGIN FROM 4.87% IN THE FIRST
NINE MONTHS OF 1994 TO 4.71% IN THE FIRST NINE MONTHS OF 1995.
THE INCREASE IN AVERAGE EARNING ASSETS OCCURRED PRIMARILY IN THE LOAN PORTFOLIO
WHICH ACCOUNTED FOR 60.7% OF THE GROWTH. LOAN GROWTH PRIMARILY OCCURRED IN
COMMERCIAL LOANS WHICH INCREASED $12,789,000, OR 18.1%, AND INDIRECT INSTALLMENT
LOANS WHICH GREW $11,202,000, OR 93.6%. TOTAL INVESTMENTS INCREASED $18,109,000,
OR 24.9%, IN THE FIRST NINE MONTHS OF 1995. THIS GROWTH WAS CENTERED IN U.S.
GOVERNMENT AGENCY SECURITIES WHICH INCREASED $12,256,000.
TOTAL AVERAGE DEPOSITS GREW $34,745,000, OR 12.1%, IN THE FIRST THREE QUARTERS
OF 1995 COMPARED TO THE SAME TIME PERIOD IN 1994. TOTAL DEMAND DEPOSITS
INCREASED $1,662,000, OR 2.4%, WHILE TOTAL SAVINGS DEPOSITS DECLINED
$4,145,000, OR 4.6%. SIGNIFICANT GROWTH OCCURRED IN TIME DEPOSITS WHICH
INCREASED $37,228,000, OR 29.4%, IN
-8-
<PAGE>
THE FIRST THREE QUARTERS OF 1995. TIME DEPOSITS GREW AS A RESULT OF GENERALLY
INCREASING RATES PAID ON SUCH DEPOSITS AS WELL AS AGGRESSIVE PRICING
IMPLEMENTED BY THE BANK IN JANUARY 1995 FOR ADVANTAGE 50 CUSTOMERS AS WELL AS
AN AGGRESSIVE PRICING CAMPAIGN CONDUCTED BY THE BANK DURING THE SECOND QUARTER
OF 1995.
CENTURY FINANCIAL CORPORATION'S NET INTEREST MARGIN, OR NET INTEREST INCOME AS A
FULLY-TAXABLE EQUIVALENT BASIS EXPRESSED AS A PERCENTAGE OF AVERAGE EARNING
ASSETS, WAS 4.71% FOR THE FIRST NINE MONTHS OF 1995 COMPARED TO 4.87% IN THE
FIRST NINE MONTHS OF 1994. CENTURY'S MARGIN DECLINED AS THE RATE ON AVERAGE
EARNING ASSETS INCREASED 45 BASIS POINTS IN THE FIRST THREE QUARTERS OF 1995.
THIS CONSISTED OF A 96 BASIS POINT INCREASE IN TOTAL INVESTMENTS, FEDERAL FUNDS
SOLD AND INTEREST-BEARING DEPOSITS WITH OTHER BANKS, BUT ONLY A 29 BASIS POINT
INCREASE IN LOANS. WHILE THE YIELD ON AVERAGE EARNING ASSETS INCREASED
45 BASIS POINTS, THE RATE PAID ON INTEREST-BEARING LIABILITIES INCREASED
67 BASIS POINTS. THIS WAS DUE TO A DECREASE IN LOWER-PAYING CORE DEPOSITS
AND THE VERY SIGNIFICANT GROWTH IN HIGHER-RATE TIME DEPOSITS.
PROVISION FOR POSSIBLE LOAN LOSS
IN ESTABLISHING THE CHARGE TO THE PROVISION FOR LOAN LOSSES, MANAGEMENT
CONSIDERS A VARIETY OF FACTORS INCLUDING ACTUAL LOSSES INCURRED, THE LEVEL OF
THE ALLOWANCE FOR LOAN LOSSES, LOAN GROWTH, THE EXISTING ECONOMIC CLIMATE AND
MANAGEMENT'S ASSESSMENT OF POTENTIAL FUTURE LOSSES ON OUTSTANDING LOANS.
CENTURY FINANCIAL CORPORATION'S PROVISION FOR POSSIBLE LOAN LOSSES CHARGED TO
OPERATIONS WAS $180,000 IN THE FIRST NINE MONTHS OF 1995 COMPARED TO $203,000
IN THE FIRST NINE MONTHS OF 1994. NET CHARGE-OFFS FOR THE FIRST THREE QUARTERS
OF 1995 EQUALLED $333,000 COMPARED TO $46,000 IN THE FIRST THREE QUARTERS OF
1994. WHILE THE AMOUNT OF NET CHARGE-OFFS WAS SIGNIFICANTLY GREATER IN 1995, IT
REPRESENTED 10.4% OF THE BALANCE OF THE ALLOWANCE FOR LOAN LOSS AT THE
BEGINNING OF 1995. THE INCREASE IN CHARGE-OFFS HAS OCCURRED PRIMARILY IN
INSTALLMENT LENDING AS A RESULT OF GROWTH IN THE INDIRECT LENDING PROGRAM.
LOAN UNDERWRITING STANDARDS HAVE BEEN REVIEWED IN THIS PROGRAM, COLLECTION
PROCEDURES MODIFIED AND INCREASED MONITORING HAS BEEN INSTITUTED TO REDUCE
CHARGE-OFFS TO WHAT MANAGEMENT CONSIDERS A MORE ACCEPTABLE LEVEL.
NONINTEREST INCOME AND EXPENSE
TOTAL NONINTEREST INCOME DECREASED $240,000, OR 11.3%, IN THE FIRST THREE
QUARTERS OF 1995 COMPARED TO THE SAME PERIOD IN 1994. TRUST DEPARTMENT
INCOME INCREASED $97,000, OR 24.7%, DUE TO A SIGNIFICANTLY HIGHER LEVEL OF
TRUST ASSETS. SERVICE CHARGES ON DEPOSIT ACCOUNTS INCREASED $77,000, OR 7.3%,
DUE TO HIGHER CHARGES
-9-
<PAGE>
INSTITUTED ON NONINTEREST-BEARING DEMAND DEPOSITS IN THE LAST HALF OF 1994.
HOWEVER, OFFSETTING THESE GAINS WAS A DECREASE OF $393,000 IN OTHER INCOME IN
THE FIRST NINE MONTHS OF 1995 COMPARED TO THE FIRST NINE MONTHS OF 1994. IN
1994, THE CORPORATION SOLD THE DEPOSITS AND CERTAIN ASSETS OF THE BANK'S MOON
TOWNSHIP OFFICE AND RECORDED A NET GAIN OF $309,000. IN ADDITION, IN MARCH OF
1994 ONE PROPERTY HELD BY THE BANK IN OTHER REAL ESTATE OWNED WAS SOLD AND
PROVIDED A GAIN OF $93,000.
TOTAL NONINTEREST EXPENSE INCREASED $209,000, OR 2.4%, IN THE FIRST NINE MONTHS
OF 1995 COMPARED TO THE FIRST NINE MONTHS OF 1994. SALARIES AND EMPLOYEE
BENEFITS INCREASED $27,000, OR .8%, WHILE PENSION AND PROFIT-SHARING EXPENSE
INCREASED $64,000, OR 17.7%, IN THE FIRST NINE MONTHS OF 1995. NET OCCUPANCY AND
EQUIPMENT EXPENSE INCREASED ONLY $27,000, OR 1.9% AS A RESULT OF INCREASED COSTS
OF MAINTENANCE CONTRACTS ON EQUIPMENT AND EQUIPMENT PURCHASED.
OTHER NONINTEREST EXPENSE INCREASED $39,000, OR 1.4%, IN THE FIRST THREE
QUARTERS OF 1995 COMPARED TO THE FIRST THREE QUARTERS OF 1994. WITH THE REBATE
RECEIVED IN SEPTEMBER 1995, THE FDIC PREMIUM EXPENSE DECLINED $157,000 IN THE
FIRST NINE MONTHS OF 1995. OFFSETTING THIS DECREASE WERE INCREASES IN TRAINING
EXPENSES ($21,000), STATIONERY AND SUPPLIES ($23,000), POSTAGE ($24,000),
PROFESSIONAL FEES ($54,000), DIRECTORS' FEES ($23,000) AND REPOSSESSION EXPENSES
($21,000). THE BANK IS PROVIDING PERSONAL COMPUTER TRAINING FOR EMPLOYEES AND IS
MAKING A CONSCIOUS EFFORT TO UPGRADE THE TECHNICAL SKILLS OF ITS STAFF. THIS IS
RESPONSIBLE FOR THE INCREASED TRAINING EXPENSES. WITH THE INCREASED EFFORT ON
CUSTOMER SALES AND SERVICE, MARKETING AND THE INTRODUCTION OF CENTURY'S NEW
DEBIT CARD, MASTER MONEY, BOTH STATIONERY AND SUPPLIES AND POSTAGE HAVE
INCREASED IN THE FIRST NINE MONTHS OF 1995. HIGHER PROFESSIONAL FEES REFLECT
CONSULTANTS' STUDIES AND ASSISTANCE WITH STRATEGIC PLANNING. INCREASED
DIRECTORS' FEES ARE A FUNCTION OF THE THREE NEW DIRECTORS ADDED TO THE BOARD IN
JANUARY 1995. THE SIGNIFICANT GROWTH IN REPOSSESSION EXPENSE REFLECT THE GROWTH
IN INDIRECT INSTALLMENT LENDING AND THE SUBSEQUENT HIGHER CHARGE-OFFS
EXPERIENCED TO-DATE IN 1995.
FEDERAL INCOME TAXES
THE PROVISION FOR FEDERAL INCOME TAXES INCREASED $218,000, OR 27.4%, FROM
$796,000 IN THE FIRST THREE QUARTERS OF 1994 TO $1,014,000 IN THE FIRST THREE
QUARTERS OF 1995. THIS WAS ATTRIBUTABLE TO INCREASED PRE-TAX EARNINGS IN TOTAL
OF $578,000, WHILE TAX-EXEMPT INTEREST INCOME INCREASED ONLY $15,000 IN THE
FIRST NINE MONTHS OF 1995 COMPARED TO THE SAME PERIOD IN 1994.
-10-
<PAGE>
FINANCIAL CONDITION
THE CORPORATION'S TOTAL ASSETS WERE $375,121,000 AT SEPTEMBER 30, 1995, COMPARED
TO $331,780,000 AT DECEMBER 31, 1994. THIS WAS AN INCREASE OF $43,341,000, OR
13.1%, IN THE FIRST NINE MONTHS OF 1995. THE MAJORITY OF THIS INCREASE AT
PERIOD-END OCCURRED IN SECURITIES AVAILABLE-FOR-SALE. SECURITIES AVAILABLE FOR
SALE INCREASED $22,231,000, OR 36.5%,IN THE FIRST NINE MONTHS OF 1995. LOANS,
NET OF UNEARNED INCOME, GREW $15,770,000, OR 6.7%, IN THE FIRST NINE MONTHS OF
1995. THIS LOWER GROWTH IN THE LOAN PORTFOLIO IS REFLECTED IN THE FACT THAT AT
SEPTEMBER 30, 1995, LOANS REPRESENTED 71.0% OF EARNING ASSETS VERSUS 75.4% AT
DECEMBER 31, 1994. THE CORPORATION DOES EXPECT LOANS AS A PERCENT OF EARNING
ASSETS TO INCREASE IN THE FOURTH QUARTER OF 1995. DEPOSITS GREW $34,254,000, OR
11.5%, FROM DECEMBER 31, 1994 TO SEPTEMBER 30, 1995. THIS WAS A RESULT OF AN
AGGRESSIVE PRICING PROGRAM FOR TIME DEPOSITS.
-11-
<PAGE>
LOAN PORTFOLIO
NET LOANS INCREASED $15,923,000, OR 6.9%, IN THE FIRST NINE MONTHS OF 1995.
INCREASES OCCURRED IN COMMERCIAL LOANS, REAL ESTATE
CONSTRUCTION AND TAX-EXEMPT LOANS.
THE FOLLOWING TABLE SHOWS THE COMPOSITION OF CENTURY FINANCIAL'S LOAN PORTFOLIO
AT SEPTEMBER 30, 1995, AND DECEMBER 31, 1994:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
COMMERCIAL, FINANCIAL & AGRICULTURAL $ 53,931 $ 44,514
REAL ESTATE - CONSTRUCTION 12,218 7,957
REAL ESTATE - MORTGAGE 98,693 103,089
INSTALLMENT LOANS TO INDIVIDUALS 78,285 77,109
TAX EXEMPT LOANS 16,003 9,881
OTHER 682 575
-------- --------
259,812 243,125
LESS UNEARNED INCOME 8,776 7,859
-------- --------
251,036 235,266
LESS ALLOWANCE FOR LOAN LOSSES 3,053 3,206
-------- --------
$247,983 $232,060
======== ========
</TABLE>
THE CORPORATION'S ALLOWANCE FOR POSSIBLE LOAN LOSSES WAS $3,053,000 AT
SEPTEMBER 30, 1995 COMPARED TO $3,206,000 AT DECEMBER 31, 1994. THE RATIO OF
THE ALLOWANCE FOR LOAN LOSSES TO LOANS, NET OF UNEARNED INCOME, WAS 1.22% AT
SEPTEMBER 30, 1995, COMPARED TO 1.36% AT DECEMBER 31, 1994.
IN ORDER TO DETERMINE THE ADEQUACY OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES,
MANAGEMENT CONSIDERS THE RISK CLASSIFICATION OF LOANS, DELINQUENCY TRENDS,
CHARGE-OFF EXPERIENCE, CREDIT CONCENTRATIONS, ECONOMIC CONDITIONS AND OTHER
FACTORS. SPECIFIC RESERVES ARE ESTABLISHED FOR EACH CLASSIFIED CREDIT TAKING
INTO CONSIDERATION THE CREDIT'S DELINQUENCY STATUS, CURRENT OPERATING STATUS,
PLEDGED COLLATERAL AND PLAN OF ACTION FOR RESOLVING ANY DEFICIENCIES. FOR
NONCLASSIFIED LOANS AND SMALLER LOANS NOT INDIVIDUALLY REVIEWED, MANAGEMENT
CONSIDERS HISTORICAL CHARGE-OFF EXPERIENCE IN DETERMINING THE AMOUNT TO BE
ALLOCATED TO THE ALLOWANCE. AN UNALLOCATED OR GENERAL RESERVE IS ALSO
ESTABLISHED WHICH TAKES INTO CONSIDERATION AMONG OTHER THINGS, UNFUNDED
COMMITMENTS, CONCENTRATIONS OF CREDIT, ECONOMIC CONDITIONS, DELINQUENCY AND
NONACCRUAL TRENDS, MANAGEMENT EXPERIENCE AND TRENDS IN VOLUME AND TERMS OF
LOANS. THE ALLOWANCE IS MAINTAINED AT A LEVEL DETERMINED ACCORDING TO THIS
METHODOLOGY BY CHARGING A PROVISION TO OPERATIONS.
-12-
<PAGE>
THE CORPORATION BELIEVES THAT THE ALLOWANCE FOR POSSIBLE LOAN LOSSES AT
SEPTEMBER 30, 1995 IS ADEQUATE TO COVER LOSSES INHERENT IN THE PORTFOLIO AS OF
SUCH DATE. HOWEVER, THERE CAN BE NO ASSURANCE THAT THE CORPORATION WILL NOT
SUSTAIN LOSSES IN FUTURE PERIODS, WHICH COULD BE SUBSTANTIAL IN RELATION TO THE
SIZE OF THE ALLOWANCE AT SEPTEMBER 30, 1995.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE
INVESTMENT SECURITIES INCREASED $3,509,000 TO $41,664,000 AT SEPTEMBER 30, 1995.
THE MARKET VALUE OF INVESTMENT SECURITIES WAS $630,000, OR 1.6%, ABOVE THE
AMORTIZED COST AT SEPTEMBER 30, 1995. AT DECEMBER 31,1994, THE MARKET VALUE WAS
$611,000, OR 1.6%, BELOW AMORTIZED COST.
SECURITIES AVAILABLE FOR SALE INCREASED $22,231,000, OR 36.5%, FROM DECEMBER 31,
1994 TO JUNE 30, 1995. THIS WAS THE RESULT OF SIGNIFICANT DEPOSIT GROWTH OF
$34,254,000 WHILE THE LOAN PORTFOLIO INCREASED $15,923,000. THE CORPORATION'S
NET UNREALIZED DEPRECIATION ON SECURITIES AVAILABLE-FOR-SALE DECREASED FROM A
NET UNREALIZED DEPRECIATION OF $1,065,000 AT DECEMBER 31, 1994 TO A NET
UNREALIZED APPRECIATION OF $297,000 AT SEPTEMBER 30, 1995, PRIMARILY AS A RESULT
OF A DECLINE IN INTERMEDIATE AND LONG-TERM INTEREST RATES DURING THE FIRST NINE
MONTHS OF 1995.
DEPOSITS
TOTAL DEPOSITS INCREASED $34,254,000, OR 11.5%, FROM DECEMBER 31, 1994 TO
SEPTEMBER 30, 1995. NONINTEREST BEARING DEPOSITS INCREASED ONLY $214,000, OR
.5%, IN THE FIRST NINE MONTHS OF 1995. THE CORPORATION'S GROWTH OCCURRED IN
TIME DEPOSITS AS A RESULT OF THE IMPLEMENTATION OF AN AGGRESSIVE PRICING
STRATEGY IN ORDER TO INCREASE TIME DEPOSITS. THE CORPORATION CONTINUES TO
EXPERIENCE A SHIFTING OF DEPOSITS AWAY FROM LOWER COST CORE DEPOSITS TO HIGHER
RATE TIME DEPOSITS DUE TO THE HIGHER RATES PAID ON TIME DEPOSITS RESULTING FROM
RECENT MARKET INTEREST RATE INCREASES.
THREE MONTHS ENDING SEPTEMBER 30, 1995 AND 1994
NET INTEREST INCOME
CENTURY FINANCIAL CORPORATION'S NET INTEREST INCOME WAS $3,885,000 FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1995. THIS WAS AN INCREASE OF $275,000, OR
7.6%, OVER THE SAME PERIOD IN 1994. THIS INCREASE WAS THE RESULT OF GROWTH IN
AVERAGE EARNING ASSETS OF $49,783,000, OR 16.3%, FROM THE THIRD QUARTER OF 1994
TO THE
-13-
<PAGE>
THIRD QUARTER OF 1995. OFFSETTING THIS GROWTH IN AVERAGE EARNING ASSETS WAS A
DECLINE IN THE NET INTEREST MARGIN FROM 4.91% IN THE THIRD QUARTER OF 1994 TO
4.62% IN THE THIRD QUARTER OF 1995. AVERAGE LOANS OUTSTANDING INCREASED
$19,242,000, OR 8.4%, THE YIELD ON THE LOAN PORTFOLIO INCREASED TO 8.89% IN THE
THIRD QUARTER OF 1995 FROM 8.54% IN THE THIRD QUARTER OF 1994. WHILE TOTAL
INVESTMENTS GREW $8,886,000, OR 8.7%, THE YIELD ON THE TOTAL INVESTMENT
PORTFOLIO IS SUBSTANTIALLY LESS THAN THE YIELD ON THE LOAN PORTFOLIO. A MAJOR
CONTRIBUTOR TO THE INCREASING COMPRESSION OF THE NET INTEREST MARGIN WAS AN
INCREASE IN AVERAGE TIME DEPOSITS FROM $130,342,000 IN THE THIRD QUARTER OF 1994
TO $174,042,000 IN THE THIRD QUARTER OF 1995. AT THIS SAME TIME, THE RATE PAID
ON TIME DEPOSITS INCREASED TO 6.19% IN THE THIRD QUARTER OF 1995 FROM 5.24% IN
THE SAME PERIOD LAST YEAR.
PROVISION FOR LOAN LOSS
THE PROVISION CHARGED TO OPERATIONS IN THE THIRD QUARTER OF 1995 WAS $60,000
COMPARED TO $68,000 IN THE THIRD QUARTER OF 1994. NET CHARGE-OFFS EQUALLED
$177,000 IN THE THIRD QUARTER OF 1995, COMPARED TO $10,000 IN THE THIRD QUARTER
OF 1994. THE INCREASED AMOUNT OF NET CHARGE-OFFS IS ATTRIBUTABLE TO THE
GROWTH IN INDIRECT INSTALLMENT LOANS.
NONINTEREST INCOME AND EXPENSE
TOTAL NONINTEREST INCOME INCREASED $33,000, OR 5.6%, IN THE THIRD QUARTER OF
1995 COMPARED TO THE SAME PERIOD IN 1994. TRUST DEPARTMENT INCOME WAS UP
SIGNIFICANTLY $49,000, OR 37.4%, IN THE THIRD QUARTER OF 1995 COMPARED TO THE
THIRD QUARTER OF 1994. THIS WAS DUE TO BOTH A NUMBER OF NEW TRUST ACCOUNTS
ALONG WITH A GENERAL RISE IN ASSET VALUES. SERVICE CHARGES ON DEPOSIT ACCOUNTS
DECLINED $1,000. OTHER NONINTEREST INCOME WAS $15,000, OR 17.9%, HIGHER IN
1995'S THIRD QUARTER DUE TO INCREASED MAC FEES PLUS THOSE FEES BEING CHARGED
MONTHLY INSTEAD OF ANNUALLY. IN THE THIRD QUARTER OF 1995, THE CORPORATION
TOOK $30,000 IN NET SECURITIES LOSSES. THIS WAS DONE TO LENGTHEN THE PORTFOLIO
SOMEWHAT AND INCREASE THE YIELD AVAILABLE TO THE CORPORATION.
TOTAL NONINTEREST EXPENSES INCREASED $59,000, OR 2.1%, IN THE THIRD QUARTER OF
1995 COMPARED TO THE SAME PERIOD IN 1994. SALARIES AND EMPLOYEE BENEFITS
INCREASED $44,000, OR 2.9%, IN THE THIRD QUARTER OF 1995. PROFIT SHARING
EXPENSE WAS $20,000, OR 25.5% HIGHER AS THIS IS PAID OUT BASED ON A FORMULA
TIED TO RETURN ON EQUITY. BONUS EXPENSE WAS $7,000, OR 16.7%, HIGHER DUE TO
HIGHER LEVEL OF NET INCOME EARNED BY THE CORPORATION. NET OCCUPANCY AND
EQUIPMENT EXPENSE WAS $25,000, OR 5.4%, HIGHER IN THE THIRD QUARTER OF 1995
THAN IN THE THIRD QUARTER OF 1994.
-14-
<PAGE>
THE COST OF MAINTENANCE AGREEMENTS ON EQUIPMENT INCREASED $38,000 IN THE THIRD
QUARTER OF 1995 COMPARED TO THE THIRD QUARTER OF 1994 BUT THIS WAS PARTIALLY
OFFSET BY A DECLINE IN DEPRECIATION EXPENSE OF $10,000 IN THE THIRD QUARTER OF
1995.
OTHER NONINTEREST EXPENSE DECREASED $10,000, OR 1.1%, IN THE THIRD QUARTER OF
1995 COMPARED TO THE THIRD QUARTER OF 1994. FDIC PREMIUM EXPENSE DECLINED
$174,000 IN THE THIRD QUARTER OF 1995 DUE TO THE FDIC REBATE AND REDUCTION IN
PREMIUM. MARKETING EXPENSES INCREASED $17,000 AS A RESULT OF PROMOTING THE
INTRODUCTION OF A DEBIT CARD. PROFESSIONAL FEES INCREASED $20,000 IN THE THIRD
QUARTER FOR THE COST OF TECHNOLOGY AND STRATEGIC PLANNING. LEGAL FEES INCREASED
$21,000 AS TWO UNSECURED LOAN COLLECTION EFFORTS WERE WRAPPED UP IN THE THIRD
QUARTER OF 1995. OREO EXPENSE INCREASED $20,000 AS SUBSTANTIAL EXPENSES WERE
INCURRED TO PREPARE ONE PROPERTY FOR DISPOSITION. DURING THE THIRD QUARTER OF
1995, REPOSSESSION EXPENSE INCREASED $6,000 AS A RESULT OF INCREASED
CHARGE-OFFS IN THE INDIRECT INSTALLMENT LENDING PROGRAM.
FEDERAL INCOME TAXES
THE PROVISION FOR FEDERAL INCOME TAX WAS $19,000, OR 5.6%, HIGHER IN THE THIRD
QUARTER OF 1995 VERSUS THE THIRD QUARTER OF 1994. THE RELATIVELY SLIGHT
INCREASE WAS DUE TO THE SUBSTANTIALLY HIGHER LEVEL OF TAX-EXEMPT LOAN AND
INVESTMENT INCOME EARNED IN THE THIRD QUARTER OF 1995 COMPARED TO THE THIRD
QUARTER OF 1994. THERE WAS $179,000 GREATER TAX-EXEMPT INTEREST INCOME EARNED
IN THE THIRD QUARTER OF 1995 WHEN COMPARED TO THE THIRD QUARTER OF 1994.
LIQUIDITY AND INTEREST RATE SENSITIVITY
THE LIQUIDITY OF A BANKING INSTITUTION REFLECTS ITS ABILITY TO PROVIDE FUNDS TO
MEET LOAN REQUESTS, TO ACCOMMODATE POSSIBLE OUTFLOWS IN DEPOSITS, AND TO TAKE
ADVANTAGE OF INTEREST RATE MARKET OPPORTUNITIES. FUNDING OF LOAN REQUESTS,
PROVIDING FOR LIABILITY OUTFLOWS, AND MANAGEMENT OF INTEREST RATE FLUCTUATIONS
REQUIRE CONTINUOUS ANALYSIS IN ORDER TO MATCH THE MATURITIES OF SPECIFIC
CATEGORIES OF SHORT-TERM LOANS AND INVESTMENTS WITH SPECIFIC TYPES OF DEPOSITS
AND BORROWINGS. BANK LIQUIDITY IS THUS NORMALLY CONSIDERED IN TERMS OF THE
NATURE AND MIX OF THE BANKING INSTITUTION'S SOURCES AND USES OF FUNDS.
ASSET LIQUIDITY IS PROVIDED THROUGH LOAN REPAYMENTS AND THE MANAGEMENT OF
MATURITY DISTRIBUTIONS FOR LOANS AND SECURITIES. AN IMPORTANT ASPECT OF
LIQUIDITY LIES IN MAINTAINING ADEQUATE LEVELS OF INTEREST-EARNING ASSETS THAT
MATURE WITHIN ONE YEAR.
-15-
<PAGE>
INTEREST-BEARING DEPOSITS IN BANKS, FEDERAL FUNDS SOLD AND SHORT-TERM
INVESTMENT SECURITIES ARE USED FOR THIS PURPOSE AND TOTALLED $35,236,000 AT
SEPTEMBER 30, 1995.
CLOSELY RELATED TO THE CONCEPT OF LIQUIDITY IS THE MANAGEMENT OF INTEREST-
EARNING ASSETS AND INTEREST-BEARING LIABILITIES. THE CORPORATION MANAGES ITS
RATE SENSITIVITY POSITION TO MINIMIZE FLUCTUATION IN THE NET INTEREST MARGIN AND
TO MINIMIZE THE RISK DUE TO CHANGES IN INTEREST RATES, THEREBY ATTEMPTING TO
ACHIEVE CONSISTENT GROWTH OF NET INTEREST INCOME.
THE DIFFERENCE BETWEEN A FINANCIAL INSTITUTION'S INTEREST-SENSITIVE ASSETS
(I.E., ASSETS WHICH WILL MATURE OR REPRICE WITHIN THE SAME TIME PERIOD) AND
INTEREST-SENSITIVE LIABILITIES (I.E., LIABILITIES WHICH WILL MATURE OR REPRICE
WITHIN THE SAME PERIOD) IS COMMONLY REFERRED TO AS ITS "GAP" OR "INTEREST RATE
GAP". AN INSTITUTION HAVING MORE INTEREST RATE SENSITIVE ASSETS THAN INTEREST
SENSITIVE LIABILITIES WITHIN A GIVEN TIME PERIOD IS SAID TO HAVE A "POSITIVE
GAP"; AN INSTITUTION HAVING MORE INTEREST RATE SENSITIVE LIABILITIES THAN
INTEREST RATE SENSITIVE ASSETS WITHIN A GIVEN TIME PERIOD IS SAID TO HAVE A
"NEGATIVE GAP".
-16-
<PAGE>
THE FOLLOWING TABLE IS PRESENTED IN CONFORMITY WITH INDUSTRY PRACTICE AND
REFLECTS CONTRACTUAL REPRICING SCHEDULES AS OF SEPTEMBER 30, 1995 -- (IN
THOUSANDS):
<TABLE>
<CAPTION>
3 3-12 1-5 OVER
MONTHS MONTHS YEARS 5 YEARS TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
TAXABLE INVESTMENT SECURITIES $13,639 $19,125 $ 52,253 $ 3,289 $ 88,306
NON-TAXABLE INVESTMENT SECURITIES 250 2,209 2,825 8,680 13,964
INTEREST-BEARING DEPOSITS 13 - - - 13
LOANS 68,747 48,507 88,024 45,758 251,036
FEDERAL FUNDS SOLD 0 - - - 0
------- -------- -------- -------- --------
TOTAL EARNING ASSETS 82,649 69,841 143,102 57,727 353,319
------- -------- -------- -------- --------
INTEREST-BEARING DEMAND DEPOSITS - - 30,995 - 30,995
SAVINGS DEPOSITS - 22,199 14,799 - 36,998
MONEY MARKET DEPOSITS 30,440 - 20,293 - 50,733
TIME DEPOSITS 51,009 70,908 44,273 7,957 174,147
SUBORDINATED CAPITAL NOTES - - 1,500 - 1,500
OTHER BORROWINGS 4,400 - - 1,700 6,100
------- -------- -------- -------- --------
TOTAL INTEREST-BEARING LIABILITIES 85,849 93,107 111,860 9,657 300,473
------- -------- -------- -------- --------
INTEREST RATE SENSITIVITY GAP ($3,200) ($23,266) $31,242 $48,070 $52,846
======== ======== ======== ======== ========
CUMULATIVE INTEREST RATE SENSITIVITY GAP ($3,200) ($26,466) $4,776 $52,846
======== ======== ======== ========
CUMULATIVE INTEREST RATE SENSITIVITY GAP
AS A PERCENTAGE OF TOTAL EARNING ASSETS -0.9% -7.5% 1.4% 15.0%
======== ======== ======== ========
</TABLE>
THE TABLE ABOVE IS A STATIC VIEW OF THE BALANCE SHEET WITH ASSETS AND
LIABILITIES GROUPED INTO CERTAIN DEFINED TIME PERIODS. BEING MEASURED AT A
SPECIFIC POINT IN TIME, THIS ANALYSIS MAY NOT FULLY DESCRIBE THE COMPLEXITY OF
RELATIONSHIPS BETWEEN PRODUCT FEATURES AND PRICING, MARKET RATES, AND FUTURE
MANAGEMENT OF THE BALANCE SHEET MIX. THE PRIMARY METHOD OF MEASURING THE
SENSITIVITY OF EARNINGS TO CHANGING MARKET INTEREST RATES IS TO SIMULATE
EXPECTED EARNINGS STREAMS UNDER VARIOUS RATE SCENARIOS WHILE AT THE SAME TIME
ADJUSTING FOR THE ANTICIPATED BEHAVIOR OF NON-CONTRACTUAL DEPOSIT ACCOUNTS. FOR
THIS REASON, INTEREST-BEARING DEMAND DEPOSITS ARE PLACED IN THE 1-TO-5 YEAR
CATEGORY. THAT PORTION OF SAVINGS DEPOSITS CONSIDERED MOST VOLATILE IS PLACED
IN THE 3-TO-12 MONTHS REPRICING CATEGORY WITH THE REMAINDER IN THE 1-TO-5 YEAR
TIME FRAME; AND THAT PORTION OF MONEY MARKET DEPOSITS CONSIDERED MOST VOLATILE
IS PLACED IN THE 3-MONTH TIME FRAME WITH THE REMAINDER IN THE 1-TO-5 YEAR TIME
FRAME. SUBJECT TO THESE QUALIFICATIONS, THE TABLE ABOVE REFLECTS A CUMULATIVE
NEGATIVE GAP FOR ASSETS AND LIABILITIES MATURING OR REPRICING IN THE NEXT TWELVE
MONTHS. THIS CUMULATIVE NEGATIVE GAP OF $26,466,000 REPRESENTS 7.5% OF EARNING
ASSETS AT SEPTEMBER 30, 1995.
MANAGEMENT'S ASSET/LIABILITY MANAGEMENT COMMITTEE MONITORS THE CORPORATION'S
INTEREST RATE SENSITIVITY POSITION TO ULTIMATELY ACHIEVE CONSISTENT GROWTH OF
NET INTEREST INCOME.
AT THIS TIME, MANAGEMENT IS NOT AWARE OF ANY KNOWN TRENDS, EVENTS, OR
UNCERTAINTIES THAT WOULD HAVE A MATERIAL EFFECT ON EITHER THE LIQUIDITY, CAPITAL
RESOURCES, OR OPERATIONS OF THE CORPORATION. NOR IS MANAGEMENT AWARE OF ANY
CURRENT RECOMMENDATIONS BY THE REGULATORY AUTHORITIES WHICH, IF IMPLEMENTED,
WOULD HAVE A MATERIAL EFFECT ON THE LIQUIDITY, CAPITAL RESOURCES, OR OPERATIONS
OF THE CORPORATION.
-17-
<PAGE>
CAPITAL RESOURCES
SHAREHOLDERS' EQUITY INCREASED $2,966,000 DURING THE FIRST NINE MONTHS OF 1995.
THIS WAS PRIMARILY THE RESULT OF A RETENTION OF EARNINGS OF $1,983,000, NET OF
CASH DIVIDENDS PAID TO SHAREHOLDERS. ALSO SUBSTANTIALLY INCREASING
SHAREHOLDERS' EQUITY WAS THE FACT THAT THE UNREALIZED GAIN/LOSS ON SECURITIES
AVAILABLE-FOR-SALE, NET OF INCOME TAX EFFECT, WENT FROM AN UNREALIZED
DEPRECIATION OF $703,000 AT DECEMBER 31, 1994 TO AN UNREALIZED APPRECIATION OF
$196,000 AT SEPTEMBER 30, 1995.
TOTAL DIVIDENDS OF $.31 PER SHARE WERE PAID TO SHAREHOLDERS IN THE FIRST NINE
MONTHS OF 1995 COMPARED TO $.28 PER SHARE IN THE SAME PERIOD IN 1994.
AT SEPTEMBER 30, 1995, THE CORPORATION'S EQUITY CAPITAL WAS 8.16% OF TOTAL
ASSETS, COMPARED TO 8.34% AT YEAR-END 1994. THIS WAS WELL ABOVE MINIMUM
REGULATORY REQUIREMENTS.
CENTURY FINANCIAL CORPORATION, AS A BANK HOLDING COMPANY, IS REQUIRED TO MEET
CERTAIN RISK BASED CAPITAL AND LEVERAGE REQUIREMENTS. THESE REQUIRE MINIMUM
RATIOS OF CAPITAL TO RISK-WEIGHTED ASSETS (INCLUDING CERTAIN OFF-BALANCE SHEET
ITEMS). THE GUIDELINES DISTINGUISH BETWEEN "TIER I", OR "CORE", CAPITAL AND
"TIER II", OR "SUPPLEMENTARY", CAPITAL. SUBJECT TO CERTAIN ADJUSTMENTS, TIER I
CAPITAL CONSISTS OF TANGIBLE EQUITY CAPITAL (I.E., COMMON STOCK, AND PERPETUAL
NON-CUMULATIVE PREFERRED STOCK), INCLUDING PAID IN SURPLUS AND RETAINED
EARNINGS, MINUS CERTAIN INTANGIBLE ASSETS. TIER II CAPITAL INCLUDES
SUBORDINATED DEBT TO A MAXIMUM OF 50% OF TIER I CAPITAL, CERTAIN HYBRID CAPITAL
INSTRUMENTS, INCLUDING CUMULATIVE PREFERRED STOCK, LONG-TERM MANDATORY
CONVERTIBLE DEBT INSTRUMENTS, AND A PREFERRED SHARES AND LIMITED AMOUNT OF
GENERAL LOAN LOSS RESERVES. THE TOTAL TIER II CAPITAL WILL BE LIMITED TO 100%
OF TIER I CAPITAL. EFFECTIVE AT THE END OF 1992, THE REQUIRED RATIO OF CAPITAL
TO RISK-WEIGHTED ASSETS WAS 8%, OF WHICH AT LEAST HALF MUST BE TIER I CAPITAL.
ON THIS BASIS, THE CORPORATION'S RISK BASED CAPITAL AT SEPTEMBER 30, 1995 WAS
12.7%, WHICH FAR EXCEEDED REGULATORY REQUIREMENTS. THE EXCESS OF REGULATORY
CAPITAL RELATES TO THE FACT THAT (1) THE CORPORATION'S TIER I CAPITAL ALONE
(11.4%) EXCEEDS THE GUIDELINES AND (2) THE CORPORATION DOES NOT HAVE A
SIGNIFICANT AMOUNT OF OFF-BALANCE SHEET CREDIT ITEMS.
THE CORPORATION IS ALSO SUBJECT TO A MINIMUM TIER I LEVERAGE RATIO. THIS
LEVERAGE RATIO IS EQUAL TO THE CORPORATION'S EQUITY MINUS INTANGIBLE ASSETS
DIVIDED BY TOTAL ASSETS MINUS INTANGIBLE ASSETS.
-18-
<PAGE>
THE REQUIRED RATIO FOR EACH FINANCIAL INSTITUTION IS DETERMINED BASED ON THE
FINANCIAL INSTITUTION'S SOUNDNESS. A MINIMUM RATIO OF TIER I CAPITAL TO TOTAL
ASSETS OF 3% HAS BEEN ESTABLISHED FOR TOP RATED FINANCIAL INSTITUTIONS, WITH
LESS HIGHLY RATED INSTITUTIONS, OR THOSE WITH HIGHER LEVELS OF RISK, REQUIRED TO
MAINTAIN RATIOS 100 TO 200 BASIS POINTS ABOVE THE MINIMUM LEVEL. THE
CORPORATION'S TIER I LEVERAGE RATIO WAS 8.1% AT SEPTEMBER 30, 1995.
-19-
<PAGE>
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
NONE
ITEM 2 - CHANGES IN THE RIGHTS OF THE COMPANY'S
SECURITY HOLDERS.
NONE
ITEM 3 - DEFAULTS BY THE CORPORATION ON ITS
SENIOR SECURITIES.
NONE
ITEM 4 - RESULTS OF VOTES OF SECURITY HOLDERS.
NONE
ITEM 5 - OTHER INFORMATION.
NONE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
NONE
-20-
<PAGE>
SIGNATURES OF PRESIDENT AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS QUARTERLY REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
CENTURY FINANCIAL CORPORATION
DATE____________________ BY______________________________________
JOSEPH N. TOSH, II
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DATE____________________ BY______________________________________
DONALD A. BENZIGER
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
-21-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,466
<INT-BEARING-DEPOSITS> 13
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 60,903
<INVESTMENTS-CARRYING> 41,664
<INVESTMENTS-MARKET> 42,294
<LOANS> 251,036
<ALLOWANCE> (3,053)
<TOTAL-ASSETS> 375,121
<DEPOSITS> 332,293
<SHORT-TERM> 4,400
<LIABILITIES-OTHER> 4,607
<LONG-TERM> 3,200
<COMMON> 2,819
0
0
<OTHER-SE> 27,802
<TOTAL-LIABILITIES-AND-EQUITY> 375,121
<INTEREST-LOAN> 16,297
<INTEREST-INVEST> 4,060
<INTEREST-OTHER> 217
<INTEREST-TOTAL> 20,574
<INTEREST-DEPOSIT> 9,004
<INTEREST-EXPENSE> 9,213
<INTEREST-INCOME-NET> 11,361
<LOAN-LOSSES> (180)
<SECURITIES-GAINS> (14)
<EXPENSE-OTHER> 8,957
<INCOME-PRETAX> 4,111
<INCOME-PRE-EXTRAORDINARY> 3,097
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,097
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92
<YIELD-ACTUAL> 4.71
<LOANS-NON> 985
<LOANS-PAST> 295
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,943
<ALLOWANCE-OPEN> 3,206
<CHARGE-OFFS> 352
<RECOVERIES> 19
<ALLOWANCE-CLOSE> 3,053
<ALLOWANCE-DOMESTIC> 180
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
