<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 0-17416
CENTURY FINANCIAL CORPORATION
-----------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1553790
- - ------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Century Place
Rochester, Pennsylvania 15074
------------------------------------
(Address of principal executive offices)(Zip code)
(412) 774-1872
-----------------
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $0.835 per share
---------------------------------------------
(Title of each class)
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ____
The aggregate market value of Common Stock held by nonaffiliates (based upon
the closing sale price on the NASDAQ National Market System on March 20,
1997), was approximately $58,146,000.
Number of shares of Registrant's common stock outstanding at March 20, 1997:
3,370,806.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
1996 are incorporated by reference into parts I and II, and portions of the
Proxy Statement for the annual shareholders meeting to be held April 28, 1997
are incorporated by reference into part III.
Page 1
<PAGE>
CENTURY FINANCIAL CORPORATION
FORM 10-K
TABLE OF CONTENTS
PAGE
NUMBER
--------
PART I
ITEM 1. Business 1-12
ITEM 2. Properties 13
ITEM 3. Legal Proceedings 13
ITEM 4. Submission of Matters to a Vote of
Security Holders 13
PART II
ITEM 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 13
ITEM 6. Selected Financial Data 13
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
ITEM 8. Financial Statements and Supplementary Data 13
ITEM 9. Disagreements on Accounting and
Financial Disclosure 13
PART III
ITEM 10. Directors and Executive Officers of the
Registrant 14
ITEM 11. Executive Compensation 14
ITEM 12. Security Ownership of Certain Beneficial
Owners and Management 14
ITEM 13. Certain Relationships and Related Transactions 14
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 15
Exhibit Index 15
Signatures 16-17
Page 2
<PAGE>
PART I
ITEM 1. BUSINESS
- - ----------------
General
- - -------
Century Financial Corporation (Corporation) is a Pennsylvania corporation and
is registered under the Holding Company Act. The Corporation was organized to
be the holding company of Century National Bank and Trust Company (Century).
The Corporation and its subsidiary derive substantially all their income from
banking and bank-related services which includes interest earnings on
commercial, commercial mortgage, residential real estate, and consumer loan
financing as well as interest earnings on investment securities and deposit
services to its customers. Century provides banking services to Southwestern
Pennsylvania. In 1989, the Corporation acquired the Independent Bankers
Computer Services (IBCS), a data processing center. Effective April 1, 1995,
Independent Bankers Computer Services was dissolved and its operations
integrated with Century National Bank and Trust Company. IBCS was not a
significant segment of the Corporation's business. The Corporation is
supervised by the Federal Reserve Board while Century is subject to regulation
and supervision by the Office of the Comptroller of the Currency.
Century National Bank and Trust Company was formed in 1973 as a result of the
consolidation of the Union National Bank of New Brighton, New Brighton,
Pennsylvania, and the Freedom National Bank, Freedom, Pennsylvania. In 1985,
The National Bank of Beaver County, Monaca, Pennsylvania, and The First
National Bank of Midland, Midland, Pennsylvania, were merged into Century.
Each of these business combinations were accounted for as a pooling of
interests.
Century engages in full service commercial and consumer banking and trust
services. Century provides services to its customers through its network of
thirteen full service community branches which includes drive-in facilities.
Century's services include accepting time, demand and savings deposits
including NOW accounts, regular savings accounts, Money Market accounts,
fixed rate certificates of deposit, and club accounts. Its services also
include commercial transactions either directly or through regional industrial
development corporations, making construction and mortgage loans, and the
renting of safe deposit facilities. Additional services include making
residential mortgage loans, revolving credit loans with overdraft protection,
small business loans, etc. Century's business loans include seasonal credit
collateral loans, and term loans. During the five year period beginning in 1992
and ending in 1996, the Corporation's combined total assets have grown from
approximately $306 million in 1992 to approximately $413 in 1996. Net income
for each of the years in this period has increased also.
Trust services provided by Century include services as executor and trustee
under will and deeds, as guardian and custodian and as trustee and agent for
pension, profit sharing and employee benefit trusts as well as various
investment, pension and estate planning services. Trust services also include
service as transfer agent and registrar of stock and bond issues and escrow
agent.
As of December 31, 1996, Century had a total of 164 full-time employees and 45
who were part-time.
Supervision and Regulation
- - --------------------------
The Corporation is subject to regulation under the Bank Holding Company Act of
1956, as amended (the Act),and the Securities and Exchange Commission.
Century is subject to regulation and periodic examination by the Office of the
Comptroller of the Currency. It is also subject to the rules and regulations
of the Board of Governors of the Federal Reserve System and the Federal
Deposit Insurance Corporation.
Page 3
<PAGE>
Supervision and Regulation (Continued)
- - --------------------------------------
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") was enacted on August 9, 1989. FIRREA has significantly affected
the financial industry in several ways, including higher deposit insurance
premiums, more stringent capital requirements and new investment limitations
and restrictions. The Federal Deposit Insurance Corporation Act of 1991 ("The
FDIC Improvement Act") covers a wide area of Banking regulatory issues.
The FDIC Improvement Act deals with the capitalization of the Bank Insurance
Fund (BIF), with deposit insurance reform, including requiring the FDIC to
establish a risk-based premium assessment system, and with a number of other
regulatory and supervisory matters. The FDIC refunded $193,000 to the
Corporation in September, 1995 as a result of the FDIC lowering the insurance
premium for bank institutions meeting certain capital requirements. In
addition, the FDIC eliminated the premium for 1996, and for 1997, the
Corporation expects the premium assessment to be approximately 1.29 cents per
$100 of insured deposits.
The monetary policies of regulatory authorities, including the Federal Reserve
Board, have a significant effect on the operating results of banks and bank
holding companies. The nature of future monetary policies and the effect of
such policies on the future business and earnings of the Corporation cannot be
predicted.
Management is not aware of any current recommendations by regulatory
authorities which, if they were to be implemented, would have a material
effect on the liquidity, capital resources or operations of the Corporation.
Competition
- - -----------
All phases of Century's business are considered to be highly competitive.
Century competes with other commercial banks and financial institutions,
including savings and loan associations, savings banks, finance companies,
credit unions and other providers of financial services, such as money market
mutual funds, brokerage firms, credit companies and insurance companies.
Century also competes with non-financial institutions such as retail stores
that maintain their own credit programs and government agencies that make
available low cost guaranteed loans to certain borrowers. Century competes in
its market areas with a number of much larger financial institutions with
greater resources and larger lending limits. Century's market area includes
all of Beaver County, Pennsylvania, in addition to various communities in
neighboring Butler County (Cranberry Township area). Century competes with
local financial institutions with branches in the immediate area. Century
considers its major competition to be Mellon Bank, N.A. and National City Bank
of Pennsylvania, both headquartered in Pittsburgh, Pennsylvania along with
First Western Bank, N.A., headquartered in New Castle, Pennsylvania.
Century is generally competitive with all financial institutions in its
service areas with respect to interest rates paid on time and savings
deposits, service charges on deposit accounts and interest rates and fees
charged on loans.
Century has a relatively stable deposit base and no material amount of
deposits is obtained from a single depositor or group of depositors (including
federal, state and local governments). Century has not experienced any
significant seasonal fluctuations in the amount of its deposits. None of
Century's deposits are from outside of the United States.
Market Area
- - -----------
Century has twelve community branches in Beaver County, Pennsylvania and one
branch in Butler County, bordering Beaver County. The Corporation is
headquartered in Rochester, Pennsylvania. Beaver County is approximately 25
miles northwest of Pittsburgh.
Page 4
<PAGE>
Market Area (Continued)
- - -----------------------
The Beaver County area was once largely dependent on heavy industry
manufacturing, primarily steel. Due to the nationwide recession in the early
1980's and competition from imported steel, the county experienced reduced
employment which caused a severe recession. Beaver County has now moved to a
more diversified economic base consisting of light industrial, high
technology, educational and health related industries.
Beaver County's largest employer is US Airways which operates its hub from the
Pittsburgh International Airport. Other major employers include The Medical
Center, Beaver County government, state government and Duquesne Light Company.
Statistical Disclosures by Bank Holding Companies
- - -------------------------------------------------
I. Distribution of Assets, Liabilities and Shareholders' Equity; Interest
Rates and Interest Differential
Information required by this section is presented on pages XXI through XXII of
the 1996 Annual report and is incorporated herein by reference.
II. Investment Portfolio
A. Book Value of Investment Portfolio
The following table sets forth the carrying value of investments as of the
dates indicated.
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Available For Sale
U.S. Treasury securities $ 7,231 $ 9,217 $ 7,231
U.S. Government agency securities 18,224 25,271 21,773
Obligations of states and political subdivisions 14,829 20,847 -
Mortgage-backed securities and collateralized
mortgage obligations 21,029 28,224 10,733
Other securities 8,540 12,925 -
Equity securities 1,299 1,207 -
-------- --------- ---------
Total $ 71,152 $ 97,691 $ 39,737
======== ========= =========
December 31,
-----------------------------------
1996 1995 1994
------- ------ ------
Held to Maturity
U.S. Government agency securities $ - $ - $ 2,043
Obligations of states and political subdivisions - - 18,830
Mortgage-backed securities - - 2,583
Other securities - - 13,578
Equity securities - - 1,121
-------- --------- ---------
Total $ - $ - $ 38,155
======== ========= =========
</TABLE>
Page 5
<PAGE>
II. Investment Portfolio (Continued)
- - ------------------------------------
B. Maturity and Yield Information
The following table sets forth the maturity of investments at December 31,
1996, and the weighted average yields of such investments. The yields
reflected are calculated on the basis of the cost and effective yields
weighted for the scheduled maturity of each investment.
<TABLE>
<CAPTION>
1 Year 5 Years
Within 1 Through Through Over
Amount Year 5 Years 10 Years 10 Years Total
- - ------------------------- --------- -------- --------- --------- ---------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities $ 4,271 $ 3,006 $ - $ - $ 7,277
U.S. Government agency
securities 4,535 13,783 - - 18,318
Obligations of states and
political subdivisions 1,139 3,621 4,205 6,334 15,299
Mortgage-backed securities
and collateralized
mortgage obligations 1,495 7,611 1,759 10,202 21,067
Other securities 4,201 4,412 - - 8,613
Equity securities - - - 1,299 1,299
--------- --------- --------- --------- ---------
Total $ 15,641 $ 32,433 $ 5,964 $ 17,835 $ 71,873
========= ========= ========= ========= =========
<CAPTION>
Weighted Average
Yield
- - ------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities 6.50% 5.96% - -
U.S. Government agency
securities 6.85% 6.38% - -
Obligations of states and
political subdivisions 6.68% 6.55% 6.56% 6.06%
Mortgage-backed securities
and collateralized
mortgage obligations 5.82% 6.72% 5.47% 7.39%
Other securities 6.33% 7.31% - -
Equity securities - - - 6.33%
--------- --------- --------- ---------
Total 6.50% 6.57% 6.24% 6.84%
========= ========= ========= =========
Weighted average yields are computed on a tax equivalent basis using a federal
tax rate of 34% based on cost, adjusted for amortization of premium or
accretion discounted.
C. Aggregate Book Value of Securities Exceeding 10% of Stockholders' Equity
Excluding those holdings of the investment portfolio in U.S. Treasury
securities and other agencies and corporations of the U.S. Government, there
are no investments of any one issuer which exceeds 10% of the Corporation's
shareholders' equity at December 31, 1996.
Page 6
<PAGE>
III. Loan Portfolio
- - -------------------
A. Types of Loans
The following table presents the Corporation's loan classifications at the end
of each of the last five years.
<CAPTION>
</TABLE>
<TABLE>
December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $ 78,666 $ 62,945 $ 44,514 $ 40,523 $ 25,857
Real estate -
construction 11,042 12,918 7,957 6,556 6,018
Real estate - mortgage 124,957 99,484 103,089 96,247 111,317
Installment loans to
individuals 83,637 75,295 77,109 51,157 44,458
Term federal funds - - - - 2,000
Tax exempt loans 20,385 15,509 10,456 13,963 13,832
--------- --------- --------- --------- ---------
318,687 266,151 243,125 208,446 203,482
Less unearned income 10,677 8,539 7,859 5,389 5,580
--------- --------- --------- --------- ---------
Total $ 308,010 $ 257,612 $ 235,266 $ 203,057 $ 197,902
========= ========= ========= ========= =========
</TABLE>
Century maintains a written lending policy requiring certain underwriting
standards be met prior to funding any loan, including requirements for credit
analysis, collateral value coverage, documentation and terms. The principal
factor used to determine potential borrower's creditworthiness is business
cash flows or consumer income available to service debt payments. Secondary
sources of repayment, including collateral or guarantees, are frequently
obtained. The Bank generally lends within the market areas served by the
Bank's branches.
Commercial loans are granted generally to small and middle market customers
for operating, expansion or asset acquisition purposes. Operating cash flows
of the business enterprise are identified as the principal source of
repayment, with business assets held as collateral. Collateral margins and
loan terms are based upon the purpose and structure of the transaction as set
forth in the loan policy.
Commercial real estate loans are granted for the acquisition or improvement of
real property. Generally, commercial real estate loans do not exceed 80% of
the appraised value of the property pledged to secure the transaction.
Repayment of such loans are expected from the operations of the subject real
estate and are carefully analyzed prior to approval.
Real estate construction loans are granted for the purpose of construction
improvements to real property, both commercial and residential. Real estate
loans secured by 1-4 family residential housing properties are granted subject
to statutory limits regarding the maximum percentage of appraised value of the
mortgaged property. Residential loan terms are normally established in
compliance with regulatory requirements. Residential mortgage portfolio
interest rates are established based upon factors such as interest rates in
general, the supply of money available to the bank and the demand for such
loans.
Page 7
<PAGE>
III. Loan Portfolio (Continued)
- - -------------------------------
A. Types of Loans (Continued)
Loans to individuals represent financing extended to customers for personal or
household purposes, including automobile financing, education, home
improvement and personal expenditures. These loans are granted in the form of
installment, indirect automobile loans, credit cards or revolving
transactions. Consumer credit-worthiness is evaluated on the basis of ability
to repay, stability of income sources and past credit history.
B. Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table shows the maturity of commercial and real
estate-construction loans outstanding as of December 31, 1996 and the amounts
due after one year classified according to the sensitivity to changes in
interest rates.
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------
Maturing
----------------------------------------------
1 Year
Within Through After
1 Year 5 Years 5 Years Total
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 26,185 $ 30,513 $ 21,968 $ 78,666
Real estate-construction 8,713 731 1,598 11,042
--------- --------- --------- ---------
Total $ 34,898 $ 31,244 $ 23,566 $ 89,708
========= ========= ========= =========
Sensitivity of loans to interest rates
Predetermined interest rates $ 26,332 $ 20,420 $ 46,752
Floating interest rates 4,912 3,146 8,058
--------- --------- ---------
Total $ 31,244 $ 23,566 $ 54,810
========= ========= =========
C. Risk Elements
Non-performing assets include non-performing loans and other real estate
owned. Non-performing loans consists of non-accrual loans, loans 90 days or
more past due, and restructured loans. Non-accrual loans represent loans on
which interest accruals have been discontinued and any previously accrued
interest is reversed against current income. Restructured loans are loans
with respect to which a borrower has been granted a concession on the interest
rate or the original repayment terms because of financial difficulties.
The Corporation's total non-performing assets, including any loans classified
for regulatory purposes as loss, doubtful, substandard or special mention do
not represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity
or capital resources. Nor do they represent material credits about which
management is aware of any information which causes management to have serious
doubts as to the ability of borrowers to comply with loan repayment terms.
Page 8
<PAGE>
III. Loan Portfolio (Continued)
- - -------------------------------
C. Risk Elements (Continued)
The following table sets forth information regarding non-performing assets:
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual loans $ 872 $ 901 $ 1,317 $ 425 $ 969
Loans past due 90
days or more 223 266 539 167 313
Restructured loans - - - - -
--------- --------- --------- --------- ---------
Total non-performing
loans 1,095 1,167 1,856 592 1,282
--------- --------- --------- --------- ---------
Other real estate owned - - 18 402 195
--------- --------- --------- --------- ---------
Total non-performing
assets $ 1,095 $ 1,167 $ 1,874 $ 994 $ 1,477
========= ========= ========= ========= =========
Non-performing loans
to total loans 0.36% 0.38% 0.60% 0.19% 0.42%
Non-performing assets
to total assets 0.27% 0.28% 0.45% 0.24% 0.36%
Non-performing assets to
allowance for loan loss 35.05% 37.36% 59.99% 31.82% 47.28%<PAGE>
</TABLE>
The gross amount of interest which would have been recorded for 1996 for
nonaccrual loans outstanding as of December 31, 1996, as though the loans had
been current in accordance with their original terms was approximately $58.
There was no interest income actual recorded on these loans in 1996.
While it is impossible to predict what 1997 loan losses will be, there are no
potential problem loans outstanding at the end of any period presented for
which there was serious doubt as to the ability of the borrower to comply with
present loan repayment terms except as discussed above.
At December 31, 1996, the Corporation had no impaired loans in accordance with
Statement of Financial Accounting Standard Statement Nos. 114 and 118 that have
a material effect on the financial position or results of operations of the
Corporation.
At December 31, 1996, the Corporation did not have any concentrations of loans
to borrowers engaged in similar activities exceeding 10% of total loans, net
of unearned income.
Page 9
<PAGE>
IV. Summary of Loan Loss Experience
- - ------------------------------------
A. Analysis of Loan Loss Experience
The following table summarizes the Corporations loan loss experience for each
of the five years presented.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, $ 3,003 $ 3,206 $ 3,070 $ 2,472 $ 1,824
Charge-offs:
Commercial loans 68 - 1 26 21
Real estate mortgages - 49 - 3 23
Installment loans 399 426 175 129 148
--------- --------- --------- --------- ---------
Total charge-offs 467 475 176 158 192
--------- --------- --------- ---------- ---------
Recoveries:
Commercial loans 20 4 10 98 43
Real estate mortgages 2 7 - - -
Installment loans 51 21 32 33 50
--------- --------- --------- --------- ---------
Total recoveries 73 32 42 131 93
--------- --------- --------- --------- ---------
Net charge-offs 394 443 134 27 99
--------- --------- --------- --------- ---------
Provision charged to
operations 625 240 270 625 747
--------- --------- --------- --------- ---------
Balance at December 31, $ 3,234 $ 3,003 $ 3,206 $ 3,070 $ 2,472
========= ========= ========= ========== ==========
Net charge-offs as a
percent of average
loans, net of unearned 0.14% 0.18% 0.06% 0.01% 0.05%
========= ========= ========= ========== ==========
</TABLE>
The Corporation believes that the allowance for loan losses at December 31,
1996 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
additional losses in future periods, which could be substantial in relation to
the size of the allowance at December 31, 1996.
B. Allocation of the Allowance for Possible Loan Losses
The allocation of the allowance for possible loan losses is based upon
Management's periodic and systematic review and evaluation of individual
loans, overall risk characteristics of potential credit concentrations, past
experience with losses, the impact of economic conditions on borrowers, and
risk elements associated with particular loan categories. The allowance for
loan loss is available to absorb credit losses arising from individual or
portfolio segments. When losses on specific loans are identified, Management
charges off the portion deemed uncollectible.
Page 10
<PAGE>
IV. Summary of Loan Loss Experience (Continued)
- - ------------------------------------------------
B. Allocation of the Allowance for Possible Loan Losses
Century monitors its loan portfolio on a monthly basis and assesses a detailed
analysis of delinquencies, non-performing assets and potential problem loans.
The adequacy of the allowance for loan losses is determined by management
considering such factors as the risk classification of loans, delinquency
trends, charge-off experience, credit concentrations, economic conditions and
other relevant 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. All credit relationships in excess of $250,000 are reviewed by
management and the executive committee of Century's Board of Directors on an
annual basis. In addition, loan relationships in excess of $250,000, rated
substandard or lower are reviewed on a quarterly basis and evaluated for the
adequacy of payment histories, any changes in collateral and exposure, if any,
is specifically reserved for. All special mention loans are pooled and a
reserve is determined. All other homogeneous loan pools such as consumer
installment loans, cash reserve, 1-4 family mortgage loans and unfunded
commitments are pooled and the adequacy of the reserve is determined.
The following table shows the allocation of the allowance for possible loan
losses for each of the last five years:
December 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- -------- -------- -------- --------
(In thousands)
Commercial, financial
and agricultural $ 1,010 $ 720 $ 859 $ 813 $ 764
Real estate -
construction - - - - -
Real estate - mortgage 641 521 582 507 616
Installment loans to
individuals 815 733 751 502 487
Unallocated 768 1,029 1,014 1,248 605
------- -------- -------- -------- --------
Total $ 3,234 $ 3,003 $ 3,206 $ 3,070 $ 2,472
======= ======== ======== ======== ========
The following table shows the percentage of loans in each category to total
loans for each of the last five years:
December 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- -------- -------- -------- --------
Commercial, financial
and agricultural 31.1% 29.5% 22.6% 26.1% 20.5%
Real estate -
construction 3.5% 4.9% 3.3% 3.1% 3.0%
Real estate - mortgage 39.2% 37.4% 42.4% 46.2% 54.7%
Installment loans to
individuals 26.2% 28.2% 31.7% 24.6% 21.8%
-------- -------- -------- -------- --------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ========
Page 11
<PAGE>
V. Deposits
- - ------------
A. Average Deposits and Rates Paid by Type
The following tables summarize the daily average amount of deposits and rates
paid on such deposits for the periods indicated.
Year Ended December 31,
------------------------------------
1996 1995 1994
-------- --------- ---------
(Amounts in thousands)
Amount
- - ----------------------------------
Noninterest-bearing demand deposits $ 41,157 $ 40,079 $ 37,244
Interest-bearing demand deposits 34,567 31,518 31,747
Savings deposits 34,972 37,483 41,883
Money market 49,304 49,178 47,964
Time deposits 178,167 165,474 129,824
---------- ---------- ----------
Total $ 338,167 $ 323,732 $ 288,662
========== ========== ==========
Rate
- - ----------------------------------
Noninterest-bearing demand deposits - - -
Interest-bearing demand deposits 0.97% 0.96% 0.97%
Savings deposits 2.02% 2.05% 2.09%
Money market 2.28% 2.29% 2.30%
Time deposits 6.11% 6.06% 5.31%
B. Maturities of Time Deposits of $100,000 or More
The following table sets forth the remaining maturity of time certificates of
deposits of $100,000 or more at December 31, 1996.
December 31,
1996
------------
(In thousands)
3 months or less $ 2,484
Over 3 through 6 months 14,415
Over 6 through 12 months 4,795
Over 12 months 7,798
------------
Total $ 29,492
============
VI. Return on Equity and Assets
- - -------------------------------
The required information is incorporated by reference to page XVIII of the
1996 Annual Report.
VII. Short-Term Borrowings
- - ----------------------------
The required information is incorporated by reference to page IX of the 1996
Annual Report.
Page 12
<PAGE>
ITEM 2. Properties
- - -------------------
The Corporation's executive offices are located at One Century Place,
Rochester, Pennsylvania, in a building owned by Century and which also
contains Century's main office. In addition, Century owns eight other
properties in Beaver County, Pennsylvania, and two properties in Butler
County, Pennsylvania at the following locations: 2522 Darlington Road, Beaver
Falls; Third Avenue Freedom; Seventh Street and Midland Avenue, Midland; 1001
Pennsylvania Avenue, Monaca; Third Avenue, New Brighton; 800 Brodhead Road,
Aliquippa; 700 Merchant Street, Ambridge; 716 Fourteenth Street, Beaver Falls;
Rt 19 and Cranberry Square, Mars; and Freedom and Haines School Road, Mars.
Century leases three additional properties located at: 613 Beaver Valley
Mall, Monaca; Northern Lights Shoppers City, Baden; and Third Avenue and
Buffalo Street, Beaver.
All facilities and equipment are periodically appraised for insurance purposes
and Management asserts that all properties are adequately insured.
ITEM 3. Legal Proceedings
- - --------------------------
The required information is incorporated by reference to page XII of the 1996
Annual Report.
ITEM 4. Submission of Matters to a Vote of Security Holders
- - ------------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
PART II
- - --------
ITEM 5. Market for Registrant's Common Equity and Related Matters
- - ------------------------------------------------------------------
The required information is incorporated by reference to page XXVII of the
1996 Annual Report.
ITEM 6. Selected Financial Data
- - --------------------------------
The required information is incorporated by reference to page XVIII of the
1996 Annual Report.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- - ------------------------------------------------------------------------
The required information is incorporated by reference to page XIX through XXVI
of the 1996 Annual Report.
ITEM 8. Financial Statements and Supplementary Data
- - ----------------------------------------------------
The required information is incorporated by reference to page I through XVIII
of the 1996 Annual Report.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
- - -------------------------------------------------------------------------
None
Page 13
<PAGE>
PART III
- - --------
ITEM 10. Directors and Executive Officers of the Registrant
- - ------------------------------------------------------------
The required information with respect to the directors is incorporated by
reference to page 4 through 6 of the 1997 Annual Proxy Statement to
Shareholders (the 1997 Proxy Statement).
The required information with respect to Executive Officers of the Registrant
is as follows:
Principal Occupation, Business Experience
Executive Officers Age during the past 5 Years
- - ---------------------- ----- -----------------------------------------
Joseph N. Tosh, II 55 President/Chief Executive Officer of
Century Financial Corporation
since 1988, President and Chief
Executive Officer of Century National
Bank and Trust Company since 1985.
Donald A. Benziger 43 Senior Vice President, Chief Financial
Officer and Corporate Secretary of Century
Financial Corporation and Century National
Bank and Trust Company since 1995, Vice
President, Chief Financial Officer since
1990.
ITEM 11. Executive Compensation
- - --------------------------------
The required information is incorporated by reference to page 7 through 9 of
the 1997 Proxy Statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
- - -------------------------------------------------------------------------
The required information is incorporated by reference to page 2 through 3 of
the 1997 Proxy Statement.
ITEM 13. Certain Relationship and Related Transactions
- - --------------------------------------------------------
The required information is incorporated by reference to page 12 of the 1997
Proxy Statement.
Page 14
<PAGE>
PART IV
- - --------
ITEM 14. Exhibits, Financial Statements and Reports on Form 8-K
- - -----------------------------------------------------------------
(a) The following documents are filed as part of this report, except as may be
indicated:
(1) Financial Statements:
The following Consolidated Financial Statements of Century Financial
Corporation together with the Independent Auditor's Report dated February 7,
1997 are included in the 1996 Annual Report of the registrant which is
referenced in Part II, Item 8 - Financial Statements and Supplementary Data
and are incorporated herein:
Page Reference
----------------
Report of Independent Certified Public Accountants. XVII
Consolidated Balance Sheet, December 31, 1996 and 1995. I
Consolidated Statements of Income for the years
ended December 31, 1996, 1995 and 1994. II
Consolidated Statement of Changes in Stockholders'
Equity for the years ended December 31, 1996,
1995 and 1994. III
Consolidated Statement of Cash Flows for the years
ended December 31, 1996, 1995 and 1994. IV
Notes to Consolidated Financial Statements V-XVI
(2) Financial Statement Schedules:
Not applicable.
(3) Exhibits:
(a) Exhibits filed herewith or incorporated by reference are set forth in the
following table prepared in accordance with Item 601 of Regulation S-K.
EXHIBIT TABLE
- - ---------------------------------------------------------------------------
(3.1) Articles of Incorporation of the registrant are
incorporated herein by reference to the
registrant's Form S-4 Registration Statement, File No.
0-17413.
(3.2) By-Laws of the registrant are incorporated herein by
reference to the registrants Form S-4 Registration
Statement, File No. 0-17413.
(4) Instruments defining the rights of security holders,
including indentures are incorporated herein by
reference to the registrant's Form S-4 Registration
Statement, File No. 0-17413.
(13) Annual Report to Security Holders for the year ended
December 31, 1996, filed herewith as exhibit 13.
(21) Subsidiary of the registrant; Century National Bank
and Trust Company, Incorporated in Pennsylvania,
incorporated herewith by reference.
(27) Financial Data Schedule for the year ended December 31,
1996, filed herewith as Exhibit 27.
(b) Reports on Form 8-K
No reports on Form 8-K were required to be filed during the last quarter of
the period covered by this report.
Page 15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Century Financial Corporation
Date: March 20, 1997 By: /s/ Joseph N. Tosh, II
--------------------------
Joseph N. Tosh, II
President and Chief Executive Officer
(Principal Executive Officer)
Date: March 20, 1997 By: /s/ Donald A. Benziger
--------------------------
Donald A. Benziger
Senior Vice President, Chief Financial
Officer and Corporate Secretary
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the persons on behalf of the registrant and in
the capacities and on the dates indicated.
Name Title Date
- - ----------------------------- -------------------- ---------------
/s/ Joseph N. Tosh, II President March 20, 1997
- - -----------------------------
Joseph N. Tosh, II
/s/ Del E. Goedeker Chairman March 20, 1997
- - -----------------------------
Del E. Goedeker
/s/ Elvin W. Batchelor Director March 20, 1997
- - -----------------------------
Elvin W. Batchelor
/s/ A. Dean Heasley Director March 20, 1997
- - -----------------------------
A. Dean Heasley
Page 16
<PAGE>
SIGNATURES
(Continued)
Name Title Date
- - ----------------------------- -------------------- ---------------
/s/ Harry J. Johnston Director March 20, 1997
- - -----------------------------
Harry J. Johnston
/s/ Z. John Kruzic Director March 20, 1997
- - -----------------------------
Z. John Kruzic
/s/ Wayne S. Luce Director March 20, 1997
- - -----------------------------
Wayne S. Luce
/s/ Gino F. Martinetti Director March 20, 1997
- - -----------------------------
Gino F. Martinetti
/s/ Thomas K. Reed Vice Chairman March 20, 1997
- - -----------------------------
Thomas K. Reed
/s/ Harold V. Shank, Jr. Director March 20, 1997
- - -----------------------------
Harold V. Shank, Jr.
/s/ Charles I. Homan Director March 20, 1997
- - -----------------------------
Charles I. Homan
/s/ Sister M. T. Markelewicz Director March 20, 1997
- - -----------------------------
Sister M.T. Markelewicz
/s/ Robert F. Garvin, Jr. Director March 20, 1997
- - -----------------------------
Robert F. Garvin, Jr.
Page 17
<PAGE>
CENTURY FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
- - -----------------------------
<TABLE>
<CAPTION>
December 31,
1996 1995
----------- -----------
(In thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 13,004 $ 10,426
Federal funds sold 8,790 -
Investment securities available for sale 71,873 99,052
Loans (net of unearned income of $10,677 and
$8,539) 308,010 257,612
Less allowance for loan losses 3,234 3,003
----------- -----------
Net Loans 304,776 254,609
Premises and equipment 10,020 8,625
Accrued interest and other assets 4,395 4,277
----------- -----------
TOTAL ASSETS $ 412,858 $ 376,989
=========== ===========
LIABILITIES
Deposits:
Noninterest-bearing demand $ 41,959 $ 41,708
Interest-bearing demand 33,754 33,191
Savings 33,625 35,615
Money market 60,457 47,370
Time 193,599 170,441
----------- -----------
Total deposits 363,394 328,325
Short term borrowings 7,000 10,000
Other borrowings 4,000 3,200
Accrued interest and other liabilities 4,428 3,722
----------- -----------
TOTAL LIABILITIES 378,822 345,247
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, par value $.835;
authorized 8,000,000 shares;
issued 3,383,943 and 3,376,984 shares 2,826 2,820
Additional paid in capital 2,834 2,755
Retained earnings 28,239 25,285
Net unrealized gain on securities 476 898
Treasury stock, at cost (20,490 and 1,259 shares) (339) (16)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 34,036 31,742
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 412,858 $ 376,989
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
I
<PAGE>
CENTURY FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
- - --------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans:
Taxable $ 23,025 $ 20,462 $ 18,100
Tax exempt 1,908 1,344 1,160
Federal funds sold 165 234 240
Investment securities:
Taxable 4,785 5,012 3,255
Tax exempt 681 633 547
----------- ----------- -----------
Total interest income 30,564 27,685 23,302
----------- ----------- -----------
INTEREST EXPENSE
Deposits 13,054 12,234 9,184
Short term borrowings 494 148 40
Other borrowings 318 243 230
----------- ----------- -----------
Total interest expense 13,866 12,625 9,454
----------- ----------- -----------
NET INTEREST INCOME 16,698 15,060 13,848
Provision for loan losses 625 240 270
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 16,073 14,820 13,578
----------- ----------- -----------
OTHER INCOME
Service fees on deposit accounts 1,448 1,496 1,432
Trust Department income 801 673 572
Investment securities gains (losses), net 1 (14) 11
Gain on sale of branch office - - 309
Other 466 419 415
----------- ----------- -----------
Total other income 2,716 2,574 2,739
----------- ----------- -----------
OTHER EXPENSE
Salaries and employee benefits 6,708 5,950 5,994
Net occupancy expense 1,065 1,027 1,072
Equipment expense 1,025 920 802
Deposit insurance premium 2 347 631
Other 3,813 3,496 3,017
----------- ----------- -----------
Total other expense 12,613 11,740 11,516
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 6,176 5,654 4,801
Income taxes 1,270 1,386 1,120
----------- ----------- -----------
NET INCOME $ 4,906 $ 4,268 $ 3,681
=========== =========== ===========
EARNINGS PER SHARE $ 1.46 $ 1.27 $ 1.09
AVERAGE SHARES OUTSTANDING 3,369,380 3,373,322 3,364,439
</TABLE>
See accompanying notes to the consolidated financial statements.
II
<PAGE>
CENTURY FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
- - ---------------------------------------------------------
<TABLE>
<CAPTION> Net
Unrealized
Additional Gain Total
Common Paid in Retained Treasury (Loss) on Stockholders'
Stock Capital Earnings Stock Securities Equity
-------- ---------- --------- -------- ----------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 2,340 $ 2,606 $ 21,016 $ - $ - $ 25,962
Initial net unrealized
gain on securities 54 54
Net income 3,681 3,681
Dividends ($.38 per share) (1,318) (1,318)
Twenty percent stock dividend 468 (468) -
Stock options exercised 2 32 34
Net unrealized loss on securities (757) (757)
-------- -------- -------- ------- -------- ---------
Balance, December 31, 1994 2,810 2,638 22,911 - (703) 27,656
Net income 4,268 4,268
Dividends ($.56 per share) (1,892) (1,892)
Stock options exercised 10 117 127
Purchase of Treasury stock (125) (125)
Reissuance of Treasury stock (2) 109 107
Net unrealized gain on securities 1,601 1,601
-------- -------- -------- ------- -------- ---------
Balance, December 31, 1995 2,820 2,755 25,285 (16) 898 31,742
Net income 4,906 4,906
Dividends ($.58 per share) (1,952) (1,952)
Stock options exercised 6 73 79
Purchase of Treasury stock (522) (522)
Reissuance of Treasury stock 6 199 205
Net unrealized loss on securities (422) (422)
-------- -------- -------- ------- -------- ---------
Balance, December 31, 1996 $ 2,826 $ 2,834 $ 28,239 $ (339) $ 476 $ 34,036
======== ======== ========= ======== ======== =========
</TABLE>
See accompanying notes to the consolidated financial statements.
III
<PAGE>
CENTURY FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
- - ------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,906 $ 4,268 $ 3,681
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 625 240 270
Depreciation, amortization, and
accretion, net 271 1,403 825
Deferred income taxes 60 209 330
Investment securities (gains) losses, net (1) 14 (11)
Decrease (increase) in accrued interest
receivable 330 (382) 55
Increase in accrued interest payable 216 747 264
Gain on the sale of branch office - - ( 309)
Other, net 138 138 (11)
--------- --------- ---------
Net cash provided by operating activities 6,545 6,637 5,094
--------- --------- ---------
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from the sale of securities 2,781 4,984 5,801
Proceeds from maturities
and repayments of securities 29,952 14,502 10,549
Purchases of securities (5,696) (39,222) (17,483)
Investment securities:
Proceeds from the sale of securities - 775 -
Proceeds from maturities and repayments
of securities - 12,951 26,302
Purchases of securities - (14,273) (21,917)
Purchase of loans receivable (3,604) - -
Net increase in loans (47,135) (22,638) (32,103)
Purchases of premises and equipment (2,246) (843) (621)
Sale of branch office - - (13,552)
Other, net 27 - (23)
--------- --------- ---------
Net cash used for investing activities (25,921) (43,764) (43,047)
--------- --------- ---------
FINANCING ACTIVITIES
Net increase in deposits 35,069 30,286 26,516
Net increase (decrease) in short term
borrowings (3,000) 9,530 (2,530)
Net increase in other borrowings 800 - 1,700
Cash dividends (1,887) (1,790) (1,290)
Proceeds from exercise of stock options 79 127 34
Treasury stock purchase (522) (125) -
Proceeds from issuance of treasury stock 205 107 -
--------- --------- ---------
Net cash provided by financing activities 30,744 38,135 24,430
--------- --------- ---------
Increase (decrease) in cash and
cash equivalents 11,368 1,008 (13,523)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 10,426 9,418 22,941
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 21,794 $ 10,426 $ 9,418
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 13,650 $ 11,878 $ 9,190
Income taxes 1,140 945 1,085
</TABLE>
See accompanying notes to the consolidated financial statements.
IV
<PAGE>
CENTURY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except shares and per share data)
- - ------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - ----------------------------------------------
The accounting and reporting policies of Century Financial Corporation
(Corporation), a bank holding Company, and its subsidiaries, the Century
National Bank and Trust Company (Century), and the Independent Bankers'
Computer Services, Inc. (IBCS), conform with generally accepted accounting
principles and with general practice within the banking industry.
A summary of the significant accounting and reporting policies applied in the
presentation of the accompanying financial statements follows:
Nature of Operations and Basis of Presentation
- - ----------------------------------------------
Century Financial Corporation is a Pennsylvania corporation and is
registered under the Holding Company Act. The Corporation was organized to be
the holding company of Century, which provides banking and related services to
Southwestern Pennsylvania. The Corporation and its subsidiary derive
substantially all their income from interest earnings on commercial,
commercial mortgage, residential real estate, consumer loan financing, and
investment securities, as well as a variety of deposit services to its
customers. The Corporation is supervised by the Federal Reserve Board while
Century is subject to regulation and supervision by the Office of the
Comptroller of the Currency.
The consolidated financial statements of the Corporation include its
wholly-owned subsidiary, Century. Significant intercompany items have been
eliminated in consolidation. Independent Bankers' Computer Services,
previously a wholly-owned subsidiary of the Corporation, was dissolved on
March 31, 1995.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the balance sheet
date and revenues and expenses for the period. Actual results could differ
significantly from those estimates.
Investment Securities
- - ---------------------
Investment securities are classified, at the time of purchase, based on
management's intention, as securities held to maturity or securities available
for sale. The Corporation has currently classified all investment securities
as available for sale to serve principally as a source of liquidity.
Unrealized holding gains and losses for available for sale securities are
reported as a separate component of stockholders' equity, net of tax,
until realized. Realized securities gains and losses are computed using the
specific identification method. Interest and dividends on investment
securities are recognized as income when earned.
Loans
- - -----
Interest from installment loans is recognized in income over the life of the
loans using a method which approximates a level yield. Interest on all other
loans is recognized as interest income on the accrual method. For commercial
and real estate mortgage loans on which interest is 90 days past due, accrual
of income is discontinued, and any previously accrued interest is reversed
against current income. Installment and credit card loans are generally
charged off between 90 and 180 days past due or when deemed uncollectible in
the opinion of management.
Loan origination and commitment fees and certain direct loan origination costs
are being deferred and the net amount amortized as an adjustment to the
related loan's yield. These amounts are being amortized over the contractual
life of the related loans.
Allowance for Loan Losses
- - -------------------------
Effective January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by Statement No. 118. Under this Standard, the Corporation
estimates credit losses on impaired loans based on the present value of
expected cash flows or fair value of the underlying collateral if the loan
repayment is expected to come from the sale or operation of such collateral.
Prior to 1995, the credit losses related to these loans were estimated based
on undiscounted cash flows or the fair value of the underlying collateral.
Statement No.118 amends Statement No.114 to permit a creditor to use existing
methods for recognizing interest income on impaired loans eliminating the
income recognition provisions of Statement No. 114. The adoption of these
statements did not have a material effect on the Corporation's financial
position or results of operations.
V
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- - ----------------------------------------------------------
Allowance for Loan Losses (Continued)
- - -------------------------------------
Impaired loans are commercial and commercial real estate loans for which it is
probable that the Corporation will not be able to collect all amounts due
according to the contractual terms of the loan agreement. The Corporation
individually evaluates such loans for impairment and does not aggregate loans
by major risk classifications. The definition of "impaired loans" is not the
same as the definition of "nonaccrual loans," although the two categories
overlap. The Corporation may choose to place a loan on nonaccrual status due
to payment delinquency or uncertain collectibility, while not classifying the
loan as impaired if the loan is not a commercial or commercial real estate
loan. Factors considered by management in determining impairment include
payment status and collateral value. The amount of impairment for these types
of impaired loans is determined by the difference between the present value of
the expected cash flows related to the loan, using the original interest rate,
and its recorded value, or as a practical expedient in the case of
collateralized loans, the difference between the fair value of the collateral
and the recorded amount of the loans. When foreclosure is probable,
impairment is measured based on the fair value of the collateral.
Mortgage loans on one-to-four family properties and all consumer loans are
large groups of smaller balance homogeneous loans and are measured for
impairment collectively. Loans that experience insignificant payment delays,
which are defined as 90 days or less, generally are not classified as
impaired. Management determines the significance of payment delays on a
case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay, the
borrower's prior payment record, and the amount of shortfall in relation to
the principal and interest owed.
The allowance for loan losses represents the amount which management estimates
is adequate to provide for potential losses in its loan portfolio. The
allowance method is used in providing for loan losses. Accordingly, all loan
losses are charged to the allowance and all recoveries are credited to it.
The allowance for loan losses is established through a provision for loan
losses charged to operations. The provision for loan losses is based on
management's periodic evaluation of individual loans, economic factors, past
loan loss experience, changes in the composition and volume of the portfolio,
and other relevant factors. The estimates used in determining the adequacy of
the allowance for loan losses, including the amounts and timing of future cash
flows expected on impaired loans, are particularly susceptible to changes in
the near term.
Premises and Equipment
- - ----------------------
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed on the straight-line method over the
estimated useful lives of the assets. Expenditures for maintenance and
repairs are charged against income as incurred. Costs of major additions and
improvements are capitalized.
Real Estate Owned
- - -----------------
Real estate owned acquired in settlement of foreclosed loans is carried as a
component of other assets at the lower of cost or fair value minus estimated
cost to sell. Direct costs incurred in the foreclosure process and subsequent
holding costs incurred on such properties are recorded as expenses of current
operations. Any subsequent write downs, and gains or losses on property
dispositions, are charged to other income and expense.
Intangible Assets
- - -----------------
Core deposit intangibles are amortized using the straight-line method over a
ten year period.
Trust Department
- - ----------------
Trust Department assets (other than cash deposits) held by Century in
fiduciary or agency capacities for its customers are not included in the
accompanying balance sheet since such items are not assets of
Century. Commissions and fees for services performed by Century in a
fiduciary capacity are reported on a cash basis. The annual results would
not be materially different if such income was accrued.
Pension and Profit Sharing Plans
- - --------------------------------
Pension and employee benefits include contributions, determined actuarially,
to a retirement plan covering the eligible employees of the subsidiaries.
Contributions to the profit sharing plan are made based on the achievement of
certain operating levels and performance ratios.
Income Taxes
- - ------------
The Corporation and its subsidiary file a consolidated federal income tax
return. Deferred tax assets and liabilities are reflected at currently
enacted income tax rates applicable to the period in which the deferred tax
assets or liabilities are expected to be realized or settled. As changes in
tax laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes. Deferred income tax expenses
or benefits are based on the changes in the deferred tax asset or liability
from period to period.
VI
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- - ----------------------------------------------------------
Cash Flow Information
- - ---------------------
The Corporation has defined cash and cash equivalents as those amounts
included in the balance sheet caption Cash and due from banks and Federal
funds sold.
Earnings Per Share
- - ------------------
Earnings per share for the years ended December 31, 1996, 1995, and 1994, have
been calculated based upon the weighted average number of outstanding common
shares, including common stock equivalents, if such items have a dilutive
effect. For the respective years ended, common stock equivalents did not have
a material dilutive effect on earnings per share.
Reclassification of Comparative Amounts
- - ---------------------------------------
Certain comparative amounts for prior years have been reclassified to conform
with current year presentations.
2. COMMON STOCK SPLIT
- - ----------------------
On December 15, 1994, the Board of Directors approved a six for five stock
split. The additional shares resulting from the split were effected in the
form of a 20% stock dividend.
3. INVESTMENT SECURITIES
- - -------------------------
Upon the adoption of Statement 115, Century initially transferred from the
investment securities portfolio to the available for sale classification
investment securities with an amortized cost of $38,781 and an estimated
market value of $38,862. The net appreciation of these securities, at adoption,
was recorded net of federal income taxes to an unrealized securities gain
(loss) account which is a component of stockholders' equity. During 1995, in
accordance with the Financial Accounting Standards Board Special Report, "A
Guide to Implementation of Statement 115 on Accounting for Certain Investments
in Debt and Equity Securities," Century reclassified all of its investments
securities from held to maturity classification to the available for sale
classification with an amortized cost of $38,404 and an estimated market value
of $39,103.
The amortized cost and estimated market values of investment securities are as
follows:
<TABLE>
<CAPTION>
1996
--------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 7,231 $ 46 $ - $ 7,277
U. S. Government agency securities 18,224 100 (6) 18,318
Obligations of states and political
subdivisions 14,829 483 (13) 15,299
Mortgage-backed securities and
collateralized mortgage obligations 21,029 129 (91) 21,067
Other securities 8,540 84 (11) 8,613
---------- ---------- ---------- ---------
Total debt securities 69,853 842 (121) 70,574
Equity securities 1,299 - - 1,299
---------- ---------- ---------- ---------
Total $ 71,152 $ 842 $ (121) $ 71,873
========== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
1995
--------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 9,217 $ 142 $ - $ 9,359
U. S. Government agency securities 25,271 376 (13) 25,634
Obligations of states and political
subdivisions 20,847 538 (18) 21,367
Mortgage-backed securities and
collateralized mortgage obligations 28,224 381 (172) 28,433
Other securities 12,925 152 (25) 13,052
---------- ---------- ---------- ---------
Total debt securities 96,484 1,589 (228) 97,845
Equity securities 1,207 - - 1,207
---------- ---------- ---------- ---------
Total $ 97,691 $ 1,589 $ (228) $ 99,052
========== ========== =========== =========
</TABLE>
VII
<PAGE>
3. INVESTMENT SECURITIES (Continued)
- - -------------------------------------
The amortized cost and estimated market value of debt securities at December
31, 1996, by contractual maturity, are shown below. Expected maturities of
mortgage-backed securities and collateralized mortgage obligations will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
---------- ----------
Due in one year or less $ 14,071 $ 14,146
Due after one year through five years 24,564 24,822
Due after five years through ten years 4,006 4,205
Due after ten years 6,183 6,334
---------- ----------
48,824 49,507
Mortgage-backed securities and
collateralized mortgage obligations 21,029 21,067
---------- ----------
Total $ 69,853 $ 70,574
=========== ==========
Investment securities with a carrying value of $38,719 and $37,101 at December
31, 1996 and 1995, respectively, were pledged to secure deposits and other
purposes as required by law.
Proceeds from the sales of investment securities available for sale were
$2,781, $4,984, and $5,801 in 1996, 1995, and 1994. Gross gains and gross
losses resulting from these sales as follows:
1996 1995 1994
------- ------- -------
Gross gains $ 3 $ - $ 17
Gross losses 2 31 6
On April 17, 1995, the Bank sold two municipal securities that were, at the
time, classified as held to maturity. Proceeds from the sales of these
investment securities were $775, and a gain of $17 was recognized on these
sales. These sales resulted from the Bank determining subsequent to
acquisition that the investment securities did not meet the criteria as
established by Bank policy.
4. NET LOANS
- - -------------
Major classifications of net loans are summarized as follows:
1996 1995
---------- ----------
Commercial, financial, and agricultural $ 78,666 $ 62,945
Real estate - construction 11,042 12,918
Real estate - mortgage 124,957 99,484
Installment loans to individuals 83,637 75,295
Tax exempt loans 20,385 15,509
---------- ----------
318,687 266,151
Less unearned income 10,677 8,539
---------- ----------
308,010 257,612
Less allowance for loan losses 3,234 3,003
---------- ----------
Net loans $ 304,776 $ 254,609
========== ==========
In the normal course of business, loans are extended to executive officers,
directors, and their associates. In management's opinion, all of these loans
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons. A summary of loan activity for those executive officers,
directors, and their associates with aggregate loan balances in excess of $60
for the year ended December 31, 1996, is as follows:
December 31, Amounts December 31,
1995 Additions Collected 1996
------------ --------- --------- ------------
$ 1,098 $ 65 $ 948 $ 215
During 1996, a member of the Board of Directors retired, and the director and
related business affiliates had loans outstanding at December 31, 1995
totaling $793, which are included in amounts collected in the preceding
summary.
Century's primary business activity is with customers located within its local
trade area. Commercial, residential, personal, and agricultural loans are
granted. Century also selectively funds residential loans originated outside
of its trade area provided such loans meet Century's credit policy guidelines.
Although Century has a diversified loan portfolio, at December 31, 1996 and
1995, loans outstanding to individuals and businesses are dependent upon the
local economic conditions in its immediate trade area.
VIII
<PAGE>
5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the years ended December 31,
1996, 1995, and 1994, are as follows:
1996 1995 1994
-------- -------- ---------
Balance, January 1 $ 3,003 $ 3,206 $ 3,070
Add:
Provisions charged to operations 625 240 270
Recoveries 73 32 42
Less loans charged off 467 475 176
-------- -------- ---------
Balance, December 31 $ 3,234 $ 3,003 $ 3,206
======== ======== =========
6. PREMISES AND EQUIPMENT
- - --------------------------
Major classifications of premises and equipment are summarized as follows:
1996 1995
-------- ---------
Land and land improvements $ 2,526 $ 1,098
Buildings 7,389 7,175
Furniture and equipment 4,869 4,473
Leasehold improvements 523 518
-------- ---------
15,307 13,264
Less accumulated depreciation 5,287 4,639
-------- ---------
Total $ 10,020 $ 8,625
======== =========
Depreciation expense amounted to $852 in 1996, $767 in 1995, and $787 in 1994.
7. DEPOSITS
- - ------------
Time deposits include certificates of deposit in denominations of $100 or
more. Such deposits aggregated $29,492 and $27,552 at December 31, 1996 and
1995, respectively.
Interest expense on certificates of deposit over $100 amounted to $2,495 in
1996, $1,863 in 1995, and $1,360 in 1994.
8. SHORT TERM BORROWINGS
- - -------------------------
The outstanding balances and related information for short term borrowings are
summarized as follows:
1996 1995
---------------- ----------------
Amount Rate Amount Rate
-------- ------ -------- ------
Balance at year end $ 7,000 5.71% $ 10,000 5.54%
Average balance outstanding
during the year 8,965 5.51 2,510 5.91
Maximum amount outstanding
at any month end 16,175 12,000
Short term borrowings consist of advances from the Federal Home Loan Bank of
Pittsburgh under a RepoPlus borrowing arrangement and Federal funds purchased.
Average amounts outstanding during the year represent daily average balances
and average interest rates represent interest expense divided by the related
average balance.
Century maintains a revolving line of credit (flexline advance) with the FHLB.
The amount available on this line of credit as of December 31, 1996, is
approximately $8.8 million. Century has pledged, as collateral for advances
from the FHLB of Pittsburgh, all stock in the Federal Home Loan Bank and
certain other qualifying collateral. There were no outstanding balances on
this credit line at December 31, 1996 and 1995.
9. OTHER BORROWINGS
- - --------------------
Other borrowings as of December 31, 1996 and 1995, are summarized as follows:
Description Interest Rate 1996 1995
- - ------------------------------ -------------- -------- -------
Federal Home Loan Bank advance 5.07% $ 4,000 $ -
Federal Home Loan Bank advance 6.13% - 1,700
Subordinated capital notes 9.25% - 1,500
-------- --------
Total $ 4,000 $ 3,200
======== ========
The subordinated capital notes consisted of ten year subordinated notes
which matured on October 1, 1996. Interest on the notes was paid
semi-annually on April 1 and October 1 of each year. The notes were
subordinate in right of payments to the depositors and all claims of creditors
and were not redeemable prior to maturity without the prior written approval
of the Comptroller of the Currency.
Century has pledged, as collateral for borrowings from the FHLB of Pittsburgh,
all stock in the Federal Home Loan Bank and certain other qualifying
collateral.
IX
<PAGE>
10. INCOME TAXES
- - -----------------
The provision for income taxes consists of:
1996 1995 1994
-------- -------- --------
Currently payable $ 1,210 $ 1,177 $ 790
Deferred 60 209 330
-------- -------- --------
Total $ 1,270 $ 1,386 $ 1,120
======== ======== ========
The components of the net deferred tax assets are as follows:
1996 1995
-------- --------
Deferred Tax Assets
Allowance for loan losses $ 838 $ 759
Deferred loan origination fees, net - 59
Other 104 65
-------- --------
Total deferred tax assets 942 883
-------- --------
Deferred Tax Liabilities
Premises and equipment 153 128
Net unrealized gain on securities 245 463
Accrued pension costs 173 124
Deferred loan origination fees, net 20 -
Other 57 32
-------- --------
Total deferred tax liabilities 648 747
-------- --------
Net deferred tax assets $ 294 $ 136
======== ========
No valuation allowance was established at December 31, 1996, in view of the
Corporation's tax strategies and anticipated future taxable income as
evidenced by the Corporation's earnings potential.
The reconciliation of the federal statutory rate and the Corporation's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
% of % of % of
Pre-tax Pre-tax Pre-tax
Amount Income Amount Income Amount Income
-------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Provision at statutory rate $ 2,100 34.0 % $ 1,922 34.0 % $ 1,632 34.0 %
Effect of tax free income (880) (14.3) (672) (11.9) (580) (12.1)
Non-deductible interest
expense 74 1.2 61 1.1 47 1.0
Other, net (24) (0.3) 75 1.3 21 .4
-------- ------- ------- ------- -------- -------
Actual provision and
effective rate $ 1,270 20.6 % $ 1,386 24.5 % $ 1,120 23.3 %
======== ======= ======== ======= ======== =======
</TABLE>
11. PENSION AND PROFIT SHARING PLANS
- - -------------------------------------
Century sponsors a trusteed, non-contributory defined benefit pension plan
covering substantially all employees and officers of Century. The plan calls
for benefits to be paid to eligible employees at retirement based primarily on
years of service and compensation rates near retirement. Contributions are
intended to provide not only for benefits attributed to service to date but
also for those expected to be earned in the future.
The following presents the components of the net periodic pension cost:
1996 1995 1994
-------- -------- --------
Service costs of the current period $ 247 $ 225 $ 264
Interest cost on projected benefit
obligations 341 281 298
Actual return on plan assets (677) (940) 78
Net amortization and deferral 228 583 (424)
-------- -------- --------
Total $ 139 $ 149 $ 216
======== ======== ========
The actuarial present value of the accumulated benefit obligation at December
31, 1996 and 1995, was $3,728 and $3,327 including vested benefit obligations
of $3,666 and $3,287. The following sets forth the funded status of the plan
and the amounts recognized in the accompanying consolidated balance sheet:
1996 1995
-------- --------
Plan assets at fair value $ 6,111 $ 5,291
Actuarial present value of projected
benefit obligation (5,071) (4,622)
-------- --------
Funded status 1,040 669
Unrecognized transition amount (291) (348)
Unrecognized net gain from past experience
different from that assumed and effects
of changes in assumptions (266) 14
-------- --------
Pension asset $ 483 $ 335
======== ========
X
<PAGE>
11. PENSION AND PROFIT SHARING PLANS (Continued)
- - -------------------------------------------------
The plan assets are primarily invested in corporate equity securities and
corporate notes under the control of the plan's trustees as of December 31,
1996.
Assumptions used in determining net periodic pension cost are as follows:
1996 1995 1994
-------- -------- --------
Discount rate 7.50% 7.50% 7.50%
Expected long-term rate of return
on assets 7.50 7.50 7.50
Rate of increase in compensation levels 4.00 4.00 5.00
Century makes payments to a qualified profit sharing plan covering
substantially all employees and officers of Century. Contributions to the
plan are made at the discretion of the Board of Directors and are determined
annually based on the achievement of pre-determined performance goals. The
plan contributions for the years 1996, 1995, and 1994 amounted to $482, $386,
and $263, respectively.
12. DIVIDEND REINVESTMENT PLAN
- - -------------------------------
On May 18, 1995, the Corporation established a Dividend Reinvestment Plan (the
"Plan"). Under the Plan, up to 300,000 authorized but unissued shares were
allocated for dividend reinvestment. Participation in the Plan is available
to all common stockholders who may elect to reinvest dividends on all or part
of their shares to acquire additional common stock of the Corporation.
Plan participants are able to withdraw from the Plan at any time. At December
31, 1996 and 1995, there were 20,490 and 1,259 shares held in treasury to be
used in conjunction with the Plan. During 1996 and 1995, there were 13,028
and 8,820 shares issued under the Plan.
13. COMMITMENTS AND CONTINGENT LIABILITIES
- - -------------------------------------------
Commitments
- - -----------
In the normal course of business, there are various outstanding commitments
and certain contingent liabilities which are not reflected in the accompanying
consolidated financial statements. These commitments and contingent
liabilities represent financial instruments with off-balance-sheet risk. The
contract or notional amounts of those instruments reflect the extent of
involvement in particular types of financial instruments which were comprised
of the following:
1996 1995
--------- ---------
Commitments to extend credit $ 32,115 $ 29,124
Standby letters of credit 341 183
--------- ---------
Total $ 32,456 $ 29,307
========= =========
The instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the balance sheet. The same
credit policies are used in making commitments and conditional obligations as
for on-balance-sheet instruments. Generally, collateral is required to
support financial instruments with credit risk. The terms are typically for a
one year period with an annual renewal option subject to prior approval by
management.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the loan agreement.
These commitments are comprised primarily of available commercial and personal
lines of credit. Standby letters of credit written are conditional
commitments issued to guarantee the performance of a customer to a third
party.
The exposure to loss under these commitments are limited by subjecting them to
credit approval and monitoring procedures. Substantially all of the
commitments to extend credit are contingent upon customers maintaining
specific credit standards at the time of the loan funding. Management
assesses the credit risk associated with certain commitments to extend credit
in determining the level of the allowance for loan losses. Since many of the
commitments are expected to expire without being drawn upon, the contractual
amounts do not necessarily represent future funding requirements.
At December 31, 1996, the minimum rental commitments for all non-cancelable
leases are as follows:
1997 $ 130
1998 118
1999 116
2000 116
2001 109
2002 and thereafter 618
---------
Total $ 1,207
=========
Occupancy and equipment expenses include rental expenditures of $133 for 1996,
$134 for 1995, and $153 for 1994.
XI
<PAGE>
13. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
- - -------------------------------------------------------
Contingent Liabilities
- - ----------------------
The Corporation and its subsidiary are involved in legal actions from normal
business activities which includes a lawsuit initiated by a former employee
alleging wrongful discharge. Management believes that the liability, if any,
arising from such actions will not have a material adverse effect on the
Corporation's financial position.
14. STOCK OPTION PLAN
- - ----------------------
The Corporation maintains an incentive stock option plan under which 336,204
shares of common stock can be issued. The plan provides for the grant of
incentive stock options to certain executive officers, senior management
personnel, and directors of the Corporation. Under the plan, a holder may
elect to exercise options to purchase common stock at fixed prices equal to
the fair value at the date of grant. The period for exercising options is
fixed at the date of the grant and will not exceed ten years.
Effective January 1, 1996, the Corporation adopted Statement of Financial
Accounting Standards Statement No. 123, "Accounting for Stock-Based
Compensation." This statement encourages, but does not require the
Corporation to recognize compensation expense for all awards of equity
instruments issued after December 31, 1995. The statement establishes a
fair value based method of accounting for stock-based compensation plans. The
standard applies to all transactions in which an entity acquires goods or
services by issuing equity instruments or by incurring liabilities in amounts
based on the price of the entity's common stock or other equity instruments.
Statement 123 permits companies to continue to account for such transactions
under Accounting Principles Board No. 25, "Accounting for Stock Issued to
Employees," but requires disclosure in a note to the financial statements pro
forma net income and earnings per share as if the Corporation had applied the
new method of accounting.
Under APB Opinion 25, no compensation expense has been recognized with respect
to the options granted under the stock option plan. Had compensation expense
been determined on the basis of fair value pursuant to SFAS No. 123, net
income and earnings per share would have been reduced as follows:
1996 1995
--------- ---------
Net Income:
As reported $ 4,906 $ 4,268
========= =========
Pro forma $ 4,749 $ 4,162
========= =========
Earnings Per Share:
As reported $ 1.46 $ 1.27
========= =========
Pro forma $ 1.41 $ 1.23
========= =========
The following table presents share data related to the stock option plan:
Shares Under Option
---------------------
1996 1995
--------- ---------
Outstanding, January 1 129,632 100,110
Granted 42,565 49,080
Exercised (6,955) (11,941)
Forfeited (1,034) (7,617)
--------- ---------
Outstanding, December 31 (at prices
ranging from $10.59 - $12.60) 164,208 129,632
========= =========
15. REGULATORY MATTERS
- - -----------------------
The approval of the Comptroller of the Currency is required if the total of
all dividends declared by a national bank in any calendar year exceeds net
profits as defined for that year combined with its retained net profits for
the two preceding calendar years less any required transfers to surplus.
Under this formula, the amount available for payment of dividends by Century
to the Corporation in 1997, without the approval of the Comptroller, is $5,037
plus 1997 profits retained up to the date of the dividend declaration.
Included in cash and due from banks are required federal reserves of $3,159
and $3,215 at December 31, 1996 and 1995, respectively, for facilitating the
implementation of monetary policy by the Federal Reserve System. The
required reserves are computed by applying prescribed ratios to the
classes of average deposit balances. These are held in the form of cash on
hand and/or balances maintained directly with the Federal Reserve Bank.
XII
<PAGE>
16. SALE OF BRANCH OFFICE
- - --------------------------
On January 31, 1994, Century sold certain deposit liabilities and assets of a
branch located in Moon Township, Pennsylvania. Deposit liabilities totaling
$14,411 and assets totaling $367 were sold. The amount by which the sales
proceeds exceeded the net book value of the deposit liabilities sold, net of
an unamortized core deposit intangible asset realized from a previous branch
acquisition, amounted to $309 which is reflected on the consolidated statement
of income as a gain on sale of branch deposits.
17. REGULATORY CAPITAL REQUIREMENTS
- - ------------------------------------
Capital Requirements
- - --------------------
The Corporation (on a consolidated basis) and Century are subject to various
regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory,
and possibly additional discretionary actions by the regulators that, if
undertaken, could have a direct material effect on the Corporation's and
Century's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Corporation and Century
must meet specific capital guidelines that involve quantitative measures of
the Corporation's and Century's assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. The capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by the regulation to ensure capital adequacy
require the Corporation and Century to maintain minimum amounts and ratios of
Total and Tier I capital (as defined in the regulations) to risk-weighted
assets (as defined), and of Tier I capital to average assets (as defined).
Management believes, as of December 31, 1996, that the Corporation and Century
meet all capital adequacy requirements to which they are subject.
As of December 31, 1996, the most recent notification from the Federal Reserve
Board and the Office of the Comptroller of the Currency have categorized
Century as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, they must maintain
minimum Total risk-based, Tier I risk-based and Tier I leverage ratios at
least 100 to 200 basis points above those ratios set forth in the table.
There have been no conditions or events since that notification that
management believes have changed the Corporation's and Century's category.
The following table reflects the Corporation's capital ratios and minimum
requirements at December 31. Century's capital ratios are substantially the
same as the Corporation's.
<TABLE>
<CAPTION>
1996 1995
------------------- --------------------
Amount Ratio Amount Ratio
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Total Capital
(to Risk Weighted Assets)
Actual $ 36,643 11.95% $ 33,671 12.56%
For Capital Adequacy 24,522 8.00% 21,450 8.00%
Tier I Capital
(to Risk Weighted Assets)
Actual $ 33,409 10.90% $ 30,668 11.44%
For Capital Adequacy 12,261 4.00% 10,725 4.00%
Tier I Capital
(to Average Assets)
Actual $ 33,409 8.25% $ 30,668 8.09%
For Capital Adequacy 16,208 4.00% 15,156 4.00%
</TABLE>
18. FAIR VALUE DISCLOSURE
- - --------------------------
The estimated fair values at December 31, 1996 and 1995, of the Corporation's
financial instruments are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------ ------------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 13,004 $ 13,004 $ 10,426 $ 10,426
Federal funds sold 8,790 8,790 - -
Investment securities available for sale 71,873 71,873 99,052 99,052
Net loans 304,776 298,264 254,609 252,273
Accrued interest receivable 2,276 2,276 2,606 2,606
---------- --------- ---------- ----------
Total $ 400,719 $ 394,207 $ 366,693 $ 364,357
========== ========== ========== ==========
Financial liabilities:
Deposits $ 363,394 $ 364,615 $ 328,325 $ 331,204
Short term borrowings 7,000 7,000 10,000 10,000
Other borrowings 4,000 3,957 3,200 3,351
Accrued interest payable 1,971 1,971 1,755 1,755
---------- --------- ---------- ----------
Total $ 376,365 $ 377,543 $ 343,280 $ 346,310
========== ========== ========== ==========
</TABLE>
XIII
<PAGE>
18. FAIR VALUE DISCLOSURE (Continued)
- - --------------------------------------
Financial instruments are defined as cash, evidence of an ownership interest
in an entity, or a contract which creates an obligation or right to receive or
deliver cash or another financial instrument from/to a second entity on
potentially favorable or unfavorable terms.
Fair value is defined as the amount at which a financial instrument could be
exchanged in a current transaction between willing parties other than in a
forced or liquidation sale. If a quoted market price is available for a
financial instrument, the estimated fair value would be calculated based upon
the market price per trading unit of the instrument.
If no readily available market exists, the fair value estimates for financial
instruments should be based upon management's judgment regarding current
economic conditions, interest rate risk, expected cash flows, future estimated
losses and other factors as determined through various option pricing formulas
or simulation modeling. As many of these assumptions result from judgments
made by management based upon estimates which are inherently uncertain, the
resulting estimated fair values may not be indicative of the amount realizable
in the sale of a particular financial instrument. In addition, changes in the
assumptions on which the estimated fair values are based may have a
significant impact on the resulting estimated fair values.
As certain assets such as deferred tax assets and premises and equipment are
not considered financial instruments, the estimated fair value of financial
instruments would not represent the full value of the Corporation.
The Corporation employed simulation modeling in determining the estimated fair
value of financial instruments for which quoted market prices were not
available based upon the following assumptions:
Cash and Due From Banks, Federal Funds Sold, Accrued Interest Receivable,
Short Term Borrowings, and Accrued Interest Payable
- - ---------------------------------------------------
The fair value is equal to the current carrying value.
Investment Securities Available for Sale
- - ----------------------------------------
The fair value of securities available for sale is equal to the available
quoted market price. If no quoted market price is available, fair value is
estimated using the quoted market price for similar securities.
Loans, Deposits, and Other Borrowings
- - -------------------------------------
The fair value of loans is estimated by discounting the future cash flows
using a simulation model which estimates future cash flows and constructs
discount rates that consider reinvestment opportunities, operating expenses,
noninterest income, credit quality, and prepayment risk. Demand, savings, and
money market deposit accounts are valued at the amount payable on demand as of
year end. Fair values for time deposits and other borrowings are estimated
using a discounted cash flow calculation that applies contractual costs
currently being offered in the existing portfolio to current market rates
being offered for deposits and borrowings of similar remaining maturities.
Commitments to Extend Credit and Standby Letters of Credit
- - ----------------------------------------------------------
These financial instruments are generally not subject to sale, and estimated
fair values are not readily available. The carrying value, represented by the
net deferred fee arising from the unrecognized commitment or letter of credit,
and the fair value, determined by discounting the remaining contractual fee
over the term of the commitment using fees currently charged to enter into
similar agreements with similar credit risk, are not considered material for
disclosure. The contractual amounts of unfunded commitments and letters of
credit are presented in Note 13.
19. SELECTED QUARTERLY FINANCIAL DATA
- - --------------------------------------
The unaudited quarterly results for 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996
----------------------------------------------------
Three Months Ended
----------------------------------------------------
March 31, June 30, September 30, December 31,
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Total interest income $ 7,397 $ 7,441 $ 7,762 $ 7,964
Total interest expense 3,383 3,240 3,486 3,757
---------- --------- ---------- ----------
Net interest income 4,014 4,201 4,276 4,207
Provision for loan losses 105 130 180 210
---------- --------- ---------- ----------
Net interest income after provision
for loan losses 3,909 4,071 4,096 3,997
---------- --------- ---------- ----------
Other income 647 667 663 739
Other expense 3,020 3,221 3,205 3,167
---------- --------- ---------- ----------
Income before income taxes 1,536 1,517 1,554 1,569
Income taxes 358 389 257 266
---------- --------- ---------- ----------
Net income $ 1,178 $ 1,128 $ 1,297 $ 1,303
========== ========= ========== ==========
Earnings per share $ 0.35 $ 0.33 $ 0.39 $ 0.39
</TABLE>
XIV
<PAGE>
19. SELECTED QUARTERLY FINANCIAL DATA (Continued)
- - --------------------------------------------------
<TABLE>
<CAPTION>
1995
----------------------------------------------------
Three Months Ended
----------------------------------------------------
March 31, June 30, September 30, December 31,
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Total interest income $ 6,364 $ 6,956 $ 7,254 $ 7,111
Total interest expense 2,736 3,108 3,369 3,412
---------- --------- ---------- ----------
Net interest income 3,628 3,848 3,885 3,699
Provision for loan losses 60 60 60 60
---------- --------- ---------- ----------
Net interest income after provision
for loan losses 3,568 3,788 3,825 3,639
---------- --------- ---------- ----------
Other income 605 663 619 687
Other expense 2,924 3,108 2,925 2,783
---------- --------- ---------- ----------
Income before income taxes 1,249 1,343 1,519 1,543
Income taxes 314 358 342 372
---------- --------- ---------- ----------
Net income $ 935 $ 985 $ 1,177 $ 1,171
========== ========= ========== ==========
Earnings per share $ 0.28 $ 0.29 $ 0.35 $ 0.35
</TABLE>
20. PARENT COMPANY
- - -------------------
Following are condensed financial statements for the Corporation.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Cash $ 159 $ 144
Investment in bank subsidiary 33,831 31,588
Other 568 466
---------- ----------
TOTAL ASSETS $ 34,558 $ 32,198
========== =========
LIABILITIES
Dividends payable $ 504 $ 439
Other 18 17
STOCKHOLDERS' EQUITY 34,036 31,742
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 34,558 $ 32,198
========== ==========
</TABLE>
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
INCOME
Dividends from bank subsidiary $ 2,290 $ 1,905 $ 1,318
Other 6 205 3
EXPENSES
Other 80 219 7
---------- ---------- ----------
Income before income taxes 2,216 1,891 1,314
Income tax benefit (25) (5) (2)
---------- ---------- ----------
Income before equity in
undistributed net
income of subsidiaries 2,241 1,896 1,316
Equity in undistributed net income
of subsidiaries 2,665 2,372 2,365
---------- ---------- ----------
NET INCOME $ 4,906 $ 4,268 $ 3,681
========== ========== ==========
</TABLE>
XV
<PAGE>
20. PARENT COMPANY (CONTINUED)
Following are condensed financial statements for the Corporation.
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,906 $ 4,268 $ 3,681
Adjustments to reconcile net
income to net cash
provided by operating activities:
Equity in undistributed net
income of subsidiaries (2,665) (2,372) (2,365)
Other, net (101) (126) (22)
---------- ---------- ----------
Net cash provided by
operating activities 2,140 1,770 1,294
---------- ---------- ----------
FINANCING ACTIVITIES
Cash dividends (1,887) (1,790) (1,290)
Proceeds from exercise of stock options 79 127 34
Treasury stock purchase (522) (125) -
Proceeds from issuance of treasury stock 205 107 -
---------- ---------- ----------
Net cash used for financing
activities (2,125) (1,681) (1,256)
---------- ---------- ----------
Increase in cash 15 89 38
CASH AT BEGINNING OF YEAR 144 55 17
---------- ---------- ----------
CASH AT END OF YEAR $ 159 $ 144 $ 55
========== ========== ==========
</TABLE>
XVI
<PAGE>
REPORT OF
INDEPENDENT AUDITORS
- - ------------------------------
SNODGRASS
Certified Public Accountants
Board of Directors and Stockholders
Century Financial Corporation
We have audited the accompanying consolidated balance sheet of Century Financial
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Century
Financial Corporation and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As explained in the notes to the consolidated financial statements, the
Corporation changed its method of accounting for the impairment of loans and
related allowance for loan losses effective January 1, 1995, and
accounting for investment securities, effective January 1, 1994.
/s/ S. R. Snodgrass A.C.
Wexford, PA
February 7, 1997
S.R. Snodgrass, A.C.
101 Bradford Road Wexford, PA 15090-6909
Phone: 412-934-0344 Facsimile: 412-934-0345
XVII
<PAGE>
CENTURY FINANCIAL CORPORATION
SELECTED FINANCIAL DATA
- - -----------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS
Interest income $ 30,564 $ 27,685 $ 23,302 $ 22,368 $ 23,515
Interest expense 13,866 12,625 9,454 9,331 10,746
---------- ---------- ---------- ---------- ----------
Net interest income 16,698 15,060 13,848 13,037 12,769
Provision for loan losses 625 240 270 625 747
---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 16,073 14,820 13,578 12,412 12,022
Other income 2,716 2,574 2,739 2,293 2,076
Other expenses 12,613 11,740 11,516 10,819 10,047
---------- ---------- ---------- ---------- ----------
Income before income taxes 6,176 5,654 4,801 3,886 4,051
Income taxes 1,270 1,386 1,120 539 827
---------- ---------- ---------- ---------- ----------
Net income $ 4,906 $ 4,268 $ 3,681 $ 3,347 $ 3,224
========== ========== ========== ========== ==========
PER SHARE DATA (1)
Earnings per share $ 1.46 $ 1.27 $ 1.09 $ 1.00 $ 0.96
Dividends paid 0.56 0.53 0.38 0.35 0.32
Book value per share at period end 10.12 9.40 8.22 7.73 7.17
Average shares outstanding 3,369,380 3,373,322 3,364,439 3,362,283 3,362,180
BALANCE SHEET DATA
(at end of period)
Assets $ 412,858 $ 376,989 $ 331,780 $ 317,936 $ 305,951
Deposits 363,394 328,325 298,039 285,395 274,957
Loans, net of unearned income 308,010 257,612 235,266 203,057 197,902
Allowance for loan losses 3,234 3,003 3,206 3,070 2,472
Investment securities - - 38,213 80,989 81,639
Investment securities available
for sale 71,873 99,052 38,672 - -
Stockholders' equity 34,036 31,742 27,656 25,962 24,098
SIGNIFICANT RATIOS
Return on average assets 1.26% 1.18% 1.14% 1.09% 1.10%
Return on average equity 15.00 14.48 13.67 13.37 14.14
Loans as a percentage of deposits 84.76 78.46 78.94 71.15 71.98
Average equity to average assets 8.41 8.13 8.36 8.14 7.79
Dividends paid as a percentage
of net income 38.47 41.94 35.04 35.23 33.31
</TABLE>
(1) Per share amounts have been restated, giving effect for a six-for-five
stock split declared April 21, 1993, and a six-for-five stock split declared
December 15, 1994.
XVIII
<PAGE>
CENTURY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands, except shares and per share data)
- - ------------------------------------------------
General
- - -------
Century Financial Corporation (Corporation) is a Pennsylvania business
corporation which was organized July 27, 1987, at the direction of the Century
National Bank and Trust Company (Century) for the purpose of engaging in the
business of a bank holding company and of owning all of the common stock of
the Bank. The Corporation is engaged principally in commercial banking
activities through its banking subsidiary. Century became a wholly-owned
subsidiary of the Corporation and the shareholders of Century became
shareholders of the Corporation on June 1, 1988. The Corporation owns all of
the issued and outstanding common stock of Century. In 1989, the Corporation
acquired the Independent Bankers Computer Service (IBCS), a data processing
center. Effective April 1,1995, Independent Bankers Computer Service,
Incorporated was dissolved and its operations integrated with Century National
Bank and Trust Company. IBCS was not a significant segment of the
Corporation's business.
Century, the wholly-owned banking subsidiary of the Corporation, operates
thirteen banking offices. Twelve offices are located in Beaver County,
Century's primary market area. One office is located in Butler County, which
is adjacent to Beaver County.
Summary of Financial Condition
- - ------------------------------
The consolidated assets of Century Financial Corporation were $412,858 at
December 31, 1996, an increase of $35,869 or 9.5% over assets at December 31,
1995. Contributing to 1996's asset growth was an increase in net loans
receivable offset by a reduction in investment securities available for sale.
The increase in net loans receivable was a result of a strong increase in loan
demand during 1996, with much of the growth being funded by a combination of
liability sources consisting of maturing investment securities, deposits and
Federal Home Loan Bank borrowings. Total earning assets which principally
include loans, investment securities and federal funds sold equaled $388,673
at December 31, 1996 and represented an increase of $32,009 or 9.0% over
total earning assets at December 31, 1995. Average earning assets equaled
95.1% of total average assets at year-end for 1996 compared to 94.8% at year-end
1995. The composition of earning assets changed moderately from 1995 to
1996, with loans and securities comprising 76.0% and 23.2% of average earning
assets, respectively, in 1996 compared to 71.7% and 27.2%, respectively, at
year-end 1995. Total consolidated liabilities increased by $33,575 or 9.7%
when compared to total consolidated liabilities as of December 31, 1995. The
increase in total liabilities is attributable to an increase in total
deposits, offset by a decrease in total borrowings.
Investment Securities Available for Sale
- - ----------------------------------------
The investment securities available for sale portfolio serves a primary role
in the overall context of balance sheet management by the Corporation. The
decision to purchase or sell securities is based upon the current assessment
of economic and financial conditions, including the interest rate environment
and other on and off-balance sheet positions. The portfolio's scheduled
maturities and the expected cash flows from the mortgage-backed securities
represent an additional source of liquidity for the Corporation.
The investment portfolio consists primarily of U.S. Treasury and Agency
securities, various types of mortgage-backed securities and collateralized
mortgage obligations. At December 31, 1996 the Corporation's investment
portfolio was $71,873 versus $99,052 at December 31, 1995, a $27,179 or 27.4%
decrease.
During 1996, scheduled maturities and principal repayments totaled $29,952 and
were used primarily to fund higher earning loan growth occurring during the
same period. Also contributing to the decrease in the investment portfolio
during 1996 was the sale of $2,781 in U. S. government agency securities at a
slight net gain, offset by nominal purchases totaling $5,696.
Loans
- - -----
Loans, net of unearned income, grew considerably in 1996, increasing by
$50,398 or 19.6%. At December 31, 1996, loans represented 79.3% of total
earning assets compared to 72.2% at December 31, 1995. The increase in the
loan portfolio occurred mostly in commercial and real estate loans which
increased $15,721 or 25.0% and $25,473 or 25.6%, respectively. The result of
this growth was due to an overall increase in loan demand, which relates in
part to an improving local economy, and to a greater extent, a result of
Management's on-going emphasis to increase the net interest margin by
generating higher yielding assets, particularly high-quality commercial loans.
To support this effort, in 1996 Century hired two additional Business
Development Officers whose primary role is to focus on generating lending
activity in conjunction with developing other new business in southwestern
Pennsylvania.
Deposits
- - --------
Deposits continue to be Century's primary source for funding its earning
assets. Century offers a wide variety of products designed to attract and
retain its customers, with a primary focus on core deposits. Total deposits
increased $35,069 or 10.7% when compared to total deposits at December 31,
1995. Noninterest and interest-bearing demand deposits increased $251 or .6%
and $563 or 1.7%, respectively. Savings decreased $1,990 or 5.6%. The
Corporation's growth occurred mostly in money market and time deposits which
increased $13,087 or 27.6% and $23,158 or 13.6%, respectively. The growth in
time and money market deposits is a result of Century conducting several
deposit promotions during 1996 of specific terms to support its asset-liability
and growth goals. Additionally, this was indicative of trends throughout the
industry which saw consumers becoming more yield conscious, along with more
competition from non-banking entities.
XIX
<PAGE>
Borrowings
- - ----------
Century from time to time uses various funding sources other than deposits to
provide the funds necessary for the loan and investment securities portfolios.
Total borrowings at December 31, 1996 remained relatively stable, decreasing
$2,200 or 16.7% when compared to December 31, 1995. Short term and other
borrowings at December 31, 1996 consisted solely of borrowings from the
Federal Home Loan Bank of Pittsburgh which were used primarily as sources of
funds for 1996 loan growth. Also contributing to 1996's decrease in total
borrowings was the maturity of the Corporation's ten year subordinated capital
notes which matured on October 1, 1996.
Summary of Earnings
- - -------------------
The Corporation's 1996 net income was a record $4,906, increasing $638, or
15.0%, from 1995's net income of $4,268. Earnings per share in 1996 were
$1.46, increasing 15.0% from $1.27 per share in 1995, based on average shares
outstanding of 3,369,380 and 3,373,322, respectively. Net income was $3,681,
or $1.09 per share in 1994 based on 3,364,439 average shares outstanding. The
increase in net income for these periods was achieved through strong increases
in net interest income, offset by slight increases in noninterest expenses.
Key industry performance ratios increased in 1996 over the previous two years.
The Corporation's return on average equity was 15.00%, for 1996, compared to
14.48% and 13.67% for 1995 and 1994, respectively. The Corporation's return
on average assets was 1.26%, 1.18% and 1.14% for 1996, 1995, and 1994,
respectively.
Interest Income
- - ---------------
Total interest income for 1996 increased $2,879 or 10.4% when compared to
fiscal 1995. This increase was due to average earning assets increasing
$26,505 or 7.7% over 1995's balance, as well as the yield earned on these
assets increasing 27 basis points to 8.62%. Total interest income for 1995
increased $4,383 or 18.8% over 1994 as a result of an increase in both the
total balance of outstanding earning assets and the yield earned on these
assets.
Interest income on loans increased $3,127 or 14.3% during 1996 when compared
to 1995. This increase was a result of a $35,019 or 14.2% increase in the
average loan balance outstanding during the 1996 period as well as an increase
on the yield earned. Interest income on loans for 1995 increased $2,546 or
13.2% which was a result of increases in the average balance outstanding and
the yield earned.
Interest income earned on investment securities decreased in 1996 by $179 or
3.2% from 1995. This decrease was a result of a decrease of $7,709 or 8.3% in
the average balance outstanding, offset by an increase in the yield earned on
the investment portfolio. The decrease in the portfolio balance during 1996
was attributable to Century increasing it's net interest margin by funding
higher earning loan growth with maturing investment securities. Interest
income on investment securities for 1995 increased $1,843 or 48.5% over 1994
and was a result of both an increase in the average investment portfolio
outstanding and the yield earned on the portfolio.
Interest Expense
- - ----------------
Total interest expense increased $1,241 or 9.8% in 1996 compared to 1995. The
increase in total interest expense was due to a $21,408 or 7.4% increase in
the average balance of total interest- bearing liabilities outstanding during
1996, and to a lessor extent, an increase of 10 basis points on the average
rate paid on these funds. Total interest expense for 1995 increased $3,171
or 33.5% as a result of an increase of $33,878 in the average balance
outstanding in 1995 over 1994 as well as an increase in the rate paid during
the same period.
Interest expense on deposits for 1996 increased $820 or 6.7% over 1995's
interest expense due to a $13,357 or 4.7% increase in total average interest-
bearing deposits outstanding in 1996 as well as an increase on the rate paid
on these deposits during the same period. Interest expense on deposits for
1995 increased $3,050 or 33.2% when compared to fiscal 1994 and was due to
increases in both the average balance of deposits outstanding and the rate
paid on these balances.
Interest expense on total borrowings increased $421 or 107.7% in 1996 when
compared to 1995. This increase was due to an increase of $8,051 or 141.5% in
the average balance of borrowed funds outstanding, offset by a decrease in
the rate paid on these funds. While the 1996 year-end actual balance of total
borrowed funds decreased, a significant increase in the average balance of
these funds occurred during the first half of 1996 and was attributable to
stagnant deposit growth occurring during the same period. Also contributing
to the increase, was the strong loan growth Century experienced throughout the
year. The decrease in the 1996 average rate paid on total borrowings was due,
in part, to $1,500 of subordinated capital notes paying 9.25% that matured in
October, 1996. Interest expense on total borrowings for 1995 increased $121
or 44.8% over 1994 and was due to an increase in the average balance
outstanding offset by a decrease in the rate paid on these funds.
Net Interest Income
- - -------------------
Net interest income is the amount that interest income generated by earning
assets, including securities and loans, exceeds interest expense associated
with interest-bearing liabilities, including deposits and other borrowed
funds. Net interest income is the principal source of the Corporations'
earnings. Interest rate fluctuations, as well as changes in the amounts and
type of earning assets and interest-bearing liabilities combine to effect net
interest income.
Net interest income for 1996 totaled $16,698, an increase of $1,638, or 10.9%,
over 1995. Net interest income for 1995 was $15,060, or 8.8%, over 1994's
level. The increase in net interest income for both 1996 and 1995 was the
result of an increase in both Century's average earnings assets and the yield
earned on these assets, offset by lessor increases in the average balance and
rates paid on interest bearing-liabilities.
Interest on loans to and investments in securities of states and political
subdivisions are not fully subject to federal income tax. As such, the pretax
yields stated on these assets are lower than taxable assets of similar risk
and maturity. Therefore, it is also meaningful to analyze net interest income
on a tax equivalent basis. The tax equivalent adjustment is based on the
federal corporate income tax rate of 34%. Net interest income on a tax
equivalent basis increased $1,954, or 12.2%, in 1996 and $1,351, or 9.2%, in
1995.
XX
<PAGE>
Net Interest Income (Continued)
- - ------------------------------
The following table illustrates the increases over the last three years in
actual and tax equivalent net interest income:
Year Ended December 31,
1996 1995 1994
--------- --------- ---------
Net interest income, actual $ 16,698 $ 15,060 $ 13,848
Tax equivalent adjustment 1,334 1,018 879
--------- --------- ---------
Tax equivalent net interest income $ 18,032 $ 16,078 $ 14,727
========= ========= =========
Increase in actual net interest income $ 1,638 $ 1,212 $ 811
Percentage increase 10.9% 8.8% 6.2%
Increase in tax equivalent net
interest income $ 1,954 $ 1,351 $ 567
Percentage increase 12.2% 9.2% 4.0%
Net interest margin is equal to net interest income on a tax equivalent basis
divided by average earning assets. It is affected by changes in the level of
earning assets, the proportion of earning assets funded by noninterest-bearing
liabilities and interest rate spread. The table that follows illustrates that
the net interest margin was 4.87% in 1996 compared to 4.68% in 1995 and 4.87%
in 1994. The increase in the margin in 1996 was due to an increase of 27 basis
points on the yield earned on earning assets offset by an increase of 10 basis
points on the rate paid on interest-bearing liabilities. The decline in the
margin during 1995 was due to the yield on average earning assets increasing
only 42 basis points while the rate on interest-paying liabilities increased
66 basis points. The mix of earning assets changed in 1996 as higher yielding
average loans outstanding increased and investment securities decreased.
Average Balances and Average Yields
- - -----------------------------------
The following table sets forth certain information relating to the
Corporation's average balance sheet for December, 1996 and the average
balance sheets and statements of income for the years ended December 31, 1996,
1995 and 1994, and reflects the average yield on assets and average cost of
liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average daily balance of assets or
liabilities, respectively, for the periods shown.
<TABLE>
<CAPTION>
December For the year ended
1996 1996
---------------------- ----------------------------------
Average Average Average Average
Balance Yield/Rate Balance Interest Yield/Rate
--------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold $ 2,868 5.14% $ 3,115 $ 165 5.30%
Taxable investment securities 61,492 6.84% 73,215 4,785 6.54%
Non taxable investment securities (2) 11,659 8.38% 12,510 1,032 8.25%
Loans (1) (2) 308,617 9.12% 281,398 25,916 9.21%
--------- ------ --------- --------- ------
Total interest-earning assets 384,636 8.70% 370,238 31,898 8.62%
---------
Non interest-earning assets 20,361 18,921
--------- ---------
Total assets $ 404,997 $ 389,159
========= =========
Interest-bearing liabilities:
NOW accounts $ 34,116 0.98% $ 34,567 334 0.97%
Money Market accounts 46,155 2.59% 49,304 1,122 2.28%
Savings deposits 33,824 2.05% 34,972 708 2.02%
Time deposits 198,753 6.23% 178,167 10,890 6.11%
Short term borrowings 616 5.56% 9,388 494 5.26%
Other borrowings 11,000 5.37% 4,354 318 7.30%
--------- ------ --------- --------- ------
Total interest-bearing liabilities 324,464 4.70% 310,752 13,866 4.46%
---------
Non interest-bearing liabilities 46,642 45,698
Stockholders' equity 33,891 32,709
--------- ---------
Total liabilities and stockholders'
equity $ 404,997 $ 389,159
========= =========
Net earning assets $ 60,172 $ 59,486
========= =========
Net interest income $ 18,032
=========
Net interest spread (3) 4.00% 4.16%
====== ======
Net interest margin (4) 4.74% 4.87%
====== ======
</TABLE>
(1) For the purpose of these computations, non-accrual loans are included
in the daily average loan amounts outstanding and interest on loans
includes fee income.
(2) Yields are computed on a tax equivalent basis using a 34% federal income
tax rate.
(3) Net interest rate spread represents the difference between the average
yield on interest-earning assets, and the average cost of interest-bearing
liabilities.
(4) Net interest margin is calculated by dividing the difference between
total interest earned and total paid by total interest earning assets.
XXI
<PAGE>
Average Balances and Average Yields (Continued)
- - -----------------------------------------------
<TABLE>
<CAPTION>
For the year ended
-----------------------------------------------------------------
1995 1994
-------------------------------- ------------------------------
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
--------- -------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold $ 3,923 $ 234 5.96% $ 6,352 $ 232 3.65%
Taxable investment securities 81,445 5,012 6.15% 61,765 3,263 5.28%
Non taxable investment securities (2) 11,985 959 8.00% 11,421 829 7.26%
Loans (1) (2) 246,379 22,498 9.13% 222,946 19,857 8.91%
--------- -------- ------ --------- -------- ------
Total interest-earning assets 343,732 28,703 8.35% 302,484 24,181 7.99%
-------- --------
Non interest-earning assets 18,979 19,370
--------- ---------
Total assets $ 362,711 $ 321,854
========= =========
Interest-bearing liabilities:
NOW accounts $ 31,518 303 0.96% $ 31,747 306 0.96%
Money Market accounts 49,178 1,127 2.29% 47,964 1,104 2.30%
Savings deposits 37,483 770 2.05% 41,883 874 2.09%
Time deposits 165,474 10,034 6.06% 129,824 6,900 5.31%
Short term borrowings 2,491 148 5.94% 1,067 40 3.75%
Other borrowings 3,200 243 7.59% 2,981 230 7.72%
--------- -------- ------ --------- -------- ------
Total interest-bearing liabilities 289,344 12,625 4.36% 255,466 9,454 3.70%
-------- --------
Non interest-bearing liabilities 43,889 39,510
Stockholders' equity 29,478 26,878
--------- ---------
Total liabilities and stockholders'
equity $ 362,711 $ 321,854
========= =========
Net earning assets $ 54,388 $ 47,018
========= =========
Net interest income $ 16,078 $ 14,727
======== ========
Net interest spread (3) 3.99% 4.29%
====== ======
Net interest margin (4) 4.68% 4.87%
====== ======
</TABLE>
Rate/Volume Analysis
- - --------------------
The following table presents the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Corporation's interest income and interest
expense during the periods indicated. Information is provided in each
category with respect to (i) changes attributable to changes in volume
(changes in volume multiplied by prior rate), (ii) changes attributable to
changes in rate (changes in rate multiplied by prior volume) and (iii) the
changes attributable to the combined impact of volume and rate. The change in
interest rate due to both rate and volume in the rate/volume analysis table
have been allocated to changes due to rate and volume in proportion to the
absolute amounts of the changes in each.
<TABLE>
<CAPTION>
For the year ended December 31, For the year ended December 31,
1996 vs. 1995 1995 vs. 1994
------------------------------ ------------------------------
Increase (Decrease) due to: Increase (Decrease) due to:
------------------------------ ------------------------------
Total Total
Increase Increase
Volume Rate (Decrease) Volume Rate (Decrease)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold $ (44) $ (25) $ (69) $ (89) $ 83 $ (6)
Taxable investment securities (580) 353 (227) 1,040 717 1,757
Non taxable investment securities (1) 43 30 73 41 89 130
Loans (1) 3,223 195 3,418 2,099 542 2,641
-------- -------- -------- -------- -------- --------
Total interest-earning assets 2,642 553 3,195 3,091 1,431 4,522
-------- -------- -------- -------- -------- --------
Interest-bearing liabilities:
NOW accounts 30 3 33 (1) (2) (3)
Money Market accounts 3 (5) (2) 28 (5) 23
Savings deposits (51) (11) (62) (89) (15) (104)
Time deposits 775 76 851 1,893 1,241 3,134
Short term borrowings 354 (8) 346 53 55 108
Other borrowings 84 (9) 75 17 (4) 13
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities 1,195 46 1,241 1,901 1,270 3,171
-------- -------- -------- -------- -------- --------
Net change in net interest income $ 1,447 $ 507 $ 1,954 $ 1,190 $ 161 $ 1,351
======== ======== ======== ======== ======== ========
</TABLE>
(1) Computed on a tax equivalent basis using a 34% federal income tax rate.
XXII
<PAGE>
Provision and Allowance for Loan Losses
- - ---------------------------------------
The current expense reflecting expected credit losses is called the provision
for loan losses on the Consolidated Statements of Income. Actual losses on
loans are charged against the allowance for loan losses, which is a reserve
built up on the Consolidated Balance Sheets. These losses are referred to as
charge-offs and, after netting out recoveries on previously charged-off
assets, become net charge-offs. The Corporation's policy is to charge off
loans when, in Management's opinion, the collection of loan principal is in
doubt. All loans charged off are subject to continuous review and concerted
efforts are made to maximize the recovery of charged-off loans. In order to
determine the adequacy of the allowance for loan losses, Management considers
the risk classification of loans, delinquency trends, charge-off experience,
credit concentrations, economic conditions and other relevant 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. All
credit relationships in excess of $250,000 are reviewed by management and the
executive committee of Century's Board of Directors on an annual basis. In
addition, loan relationships in excess of $250,000, and any loans rated
substandard or lower are reviewed on a quarterly basis and evaluated for the
adequacy of payment histories, any changes in collateral and loss exposure, if
any, is specifically reserved for. All special mention loans are pooled and a
reserve is determined. All homogeneous loans such as consumer installment
loans, cash reserve, 1-4 family mortgage loans and unfunded commitments are
pooled and the adequacy of the reserve is determined. The allowance is
maintained at a level determined according to this methodology by charging the
provision to operations.
The provision for loan losses charged to operations in 1996 was $625 compared
to $240 and $270 charged in the 1995 and 1994 periods, respectively. Actual
losses, net of recoveries, were $394 in 1996, $443 in 1995 and $134 in 1994.
Net charge-offs as a percentage of the balance of the allowance for loan
losses at the beginning of the year was 13.1% in 1996, 13.8% in 1995 and 4.4%
in 1994. Although actual losses for 1996 decreased and total non-performing
loans for the three year period ended December 31, 1996 remained relatively
stable, the increase in the provision was due to factors such as the
considerable increase in the balance of the loan portfolio outstanding and
Management's ongoing analysis of the adequacy of the allowance for loan
losses.
Century's allowance for loan losses increased at year-end 1996 to $3,234 from
$3,003 at December 31,1995. At December 31,1996, the allowance represented
1.05% of loans, net of unearned income and 295% of total non-performing
assets. This compares to 1.17% of loans, net of unearned income, and 257% of
total non-performing assets at the end of 1995.
The Corporation believes that the allowance for loan losses at December 31,
1996 of $3,234 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 December 31, 1996.
Noninterest Income
- - ------------------
Total noninterest income increased $142 or 5.5% in 1996 compared to 1995. It
decreased $165, or 6.0%, in 1995 compared to 1994. The increase in 1996 was
mainly due to increases in income from Trust Department operations and other
income, offset by a decrease in service charges on deposit accounts. While
service charges on deposit accounts decreased $48 or 3.2% in 1996, they
continue to be a significant portion of noninterest income and represented
53.3%, 58.1% and 52.3% of total noninterest income for 1996, 1995 and 1994,
respectively. Net security gains for 1996 equaled $1 compared to a net loss of
$14 in 1995 and a net gain of $11 in 1994.
Trust income increased $128, or 19.0%, in 1996, after increasing $101, or
17.7%, in 1995. This increased income was attributable to both new accounts
and increased values in existing accounts during 1996, 1995 and 1994.
Other noninterest income increased $47, or 11.2%, in 1996, compared to a $4
increase in 1995. The increase in 1996 was mostly due to an increase in ATM
related fees, particularly interchange fees from Century's MasterMoney debit
cards, which increased $43, and to a lessor extent, fees assessed on ATM
transactions for non-customers, which was implemented in the fourth quarter of
1996. These increases were offset by a gain recognized in 1995 from the sale
of other real estate owned.
In the first quarter of 1994, Century completed the sale of certain assets and
deposit liabilities of its Moon Township Office. Deposits totaled $14,411 and
assets sold amounted to $367. Century recognized a gain on the sale of $309,
net of $188 in unamortized core deposit intangible related to that office.
Noninterest Expense
- - -------------------
Total noninterest expense increased $873, or 7.4%, in 1996, $224, or 1.9%, in
1995 and $697 or 6.4% in 1994. The major components of 1996's increase were
in salaries and employee benefits and other noninterest expenses. These
increases were offset by a decrease in the FDIC insurance premium expense.
While total noninterest expense for 1996 increased 7.4%, Century's net income
grew at a rate of 15.0%, and the efficiency ratio, which measures the portion
of net interest income plus noninterest revenue consumed by noninterest
expense, improved from 63.3% in 1995 to 60.7% in 1996. Major components of
1995's increase in total noninterest expense were equipment expenses and other
noninterest expenses, offset by a decrease in the FDIC insurance premium
expense.
XXIII
<PAGE>
Noninterest Expense (Continued)
- - -------------------------------
Total employee compensation, including salaries, wages and benefits increased
12.5% in 1996. Salaries and wages increased $333 or 7.5% when compared to
1995. On a per employee basis, salaries and wages increased 4.4% due to merit
increases, with the remaining portion of the increase attributable to
increases in 1996 staffing levels. The major portion of 1996's increase in
compensation expense occurred in profit sharing, bonus and the related payroll
taxes on these plans. These plans are all derived directly from the
profitability of the Corporation. Profit sharing is paid to all eligible
employees of the Corporation and is based on total pretax earnings and return
on average equity. Also increasing in 1996 was health insurance costs. Total
compensation expense for 1995 declined .7%. This decrease was due to a
substantial decrease in the pension plan expense for the same period, as well
as a decrease in health insurance costs, all offset by increases in salaries
and wages and profit sharing expense.
Net occupancy expense in 1996 increased $38 or 3.7% compared to a decrease of
$45, or 4.2%, in 1995. The increase in net occupancy expense during 1996 was
due to overall general increases in building maintenance agreements and
related building expenses. The decrease in 1995's expenses were due to lower
utility and maintenance costs incurred in 1995 compared to 1994.
Equipment expense increased $105, or 11.4%, and $118 or 14.7%, for both 1996
and 1995, respectively. These increases are a direct correlation to Century's
commitment to providing exceptional customer sales and services through the
utilization of advanced technologies. During 1996 and 1995, equipment
upgrades included the implementation of a wide area PC network, the addition
of new personal computers, and the purchase of a new mainframe computer
system.
The FDIC deposit insurance premium expense for 1996 and 1995 decreased $345
and $284 when compared to previous years, respectively. These decreases are
due to the elimination of the premium rate paid on those funds insured by the
Bank Insurance Fund (BIF), which was attributable to Century's strong capital
level, supervisory ratings and the overcapitalization of the BIF fund. For
1997, the deposit insurance premium is expected to be approximately 1.29 cents
per $100 of deposits insured under BIF, which management estimates will
increase 1997 FDIC insurance expense by approximately $50,000.
Other expenses increased $317, or 9.0%, in 1996 after increasing $479, or
15.9%, in 1995. The increase in 1996 was due to: (1) the initial setup fee and
annual service fees thereafter, associated with the Corporation becoming a
member of the NASDAQ stock market exchange; (2) an increase in advertising
costs relating to deposit and loan promotions throughout 1996; (3) a general
increase in stationary, supplies and telephone expenses; and (4) an increase
in employee tuition reimbursement expense. 1995's increase was due in large
part to higher professional fees associated with the introduction of the
Corporations' Dividend Reinvestment Plan as well as strategic, process and
technological planning performed by the Corporation. In addition, marketing
expenses were higher due to deposit and loan promotions as well as the
introduction of Century's debit card program in the second half of 1995.
Income Taxes
- - ------------
The provision for income tax was $1,270 in 1996 compared to $1,386 in 1995.
This represents a decrease of $116 in 1996, and a $266 increase in 1995. The
decrease in 1996 is due to a increase in tax exempt income, offset by an
overall increase in taxable income. The increase in 1995 over 1994 is the
result of higher taxable income, offset by an increase in tax exempt income.
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. In addition, the
classification of all investments as available for sale also greatly enhances
liquidity. An important aspect of liquidity lies in maintaining adequate
levels of interest-earning assets that mature within one year. Interest-bearing
deposits in banks, federal funds sold and short-term investment
securities are used for this purpose and totaled $37,433 at December 31, 1996.
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 rate sensitive
assets, i.e. assets which will mature or reprice within the same time period,
and interest rate liabilities, i.e. liabilities which will mature or reprice
within the same time period, is commonly referred to as its "gap." An
institution having more interest rate sensitive assets than interest rate
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."
XXIV
<PAGE>
Liquidity and Interest Rate Sensitivity (Continued)
- - ---------------------------------------------------
The table below is presented in conformity with industry practice and reflects
the effective maturity of various liability products with an indeterminate
maturity as of December 31, 1996:
<TABLE>
<CAPTION>
3 3-12 1-5 Over
Months Months Years 5 Years Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Federal Funds Sold $ 8,790 $ - $ - $ - $ 8,790
Taxable investment securities 10,491 17,482 31,867 - 59,840
Nontaxable investment securities 210 460 7,313 4,050 12,033
Loans 80,521 57,429 94,557 75,503 308,010
--------- --------- --------- --------- ---------
Total earning assets 100,012 75,371 133,737 79,553 388,673
--------- --------- --------- --------- ---------
Interest bearing demand deposits - - 33,754 - 33,754
Savings deposits - - 33,625 - 33,625
Money market deposits 18,690 - 41,767 - 60,457
Time Deposits 28,241 92,729 66,582 6,047 193,599
Short term borrowings 7,000 - - - 7,000
Other borrowings - - 4,000 - 4,000
--------- --------- --------- --------- ---------
Total interest-bearing liabilities 53,931 92,729 179,728 6,047 332,435
--------- --------- --------- --------- ---------
Interest rate sensitivity gap $ 46,081 $ (17,358) $ (45,991) $ 73,506 $ 56,238
========= ========= ========= ========= =========
Cumulative interest rate sensitivity gap $ 46,081 $ 28,723 $ (17,268) $ 56,238
========= ========= ========= =========
Cumulative interest rate sensitivity gap
as a percentage of total earning assets 11.86% 7.39% (4.44%) 14.47%
========= ========= ========= =========
</TABLE>
The above table is a static view of the balance sheet with assets and
liabilities grouped into certain 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 contractual deposit accounts. For
this reason, interest-bearing demand deposits and savings deposits are placed
in the 1-to-5 year category. That portion of money market deposits considered
most volatile in the 3-month time frame with the remainder 1-to-5 year time
frame. Subject to these qualifications, the table above reflects a cumulative
positive gap for assets and liabilities maturing or repricing in 1997. This
cumulative positive gap of $28,723, represents 7.39% of earning assets at
December 31, 1996.
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.
Capital Resources
- - -----------------
The Corporation's total consolidated stockholders' equity increased $2,294 or
7.2% when compared to total stockholders' equity at December 31, 1995. The
increase is primarily a result of a retention of net income of $2,954, net of
cash dividends declared to shareholders of $1,952, offset by a decrease of
$422 in the net unrealized gain on investment securities available for sale
and a net decrease from treasury stock activity. Total cash dividends of
$.56 per share were paid to stockholders in 1996 compared to $.53 per share in
1995 The resulting dividend payout ratio was 38.5% in 1996 and 41.9% in
1995. The total cash dividend of $.53 paid to shareholders in 1995 included a
one-time special dividend of $.10 per share paid in December of 1995. This
approximated the amount of rebate that Century received from the FDIC plus the
reduced FDIC premium expense experienced in the fourth quarter of 1995.
XXV
<PAGE>
Capital Resources (Continued)
- - -----------------------------
Century Financial Corporation, as a bank holding company, is required to meet
certain risk based capital and leverage requirements. The risk-based capital
requirements redefine the components of capital, categorize assets into
different risk classes and include certain off-balance sheet items in the
calculation of the adequacy of capital. A financial institution's capital is
divided into two classes, Tier I and Tier II. The Corporation's Tier I and
Tier II capital consisted of the following at December 31, 1996, and 1995:
1996 1995
--------- ---------
Tier I:
Common shareholders' equity $ 34,036 $ 31,742
Less: Non-exempt intangible assets (151) (176)
Unrealized depreciation (appreciation)
in securities available-for-sale (476) (898)
--------- ---------
Total Tier I 33,409 30,668
--------- ---------
Tier II:
Qualifying allowance for loan losses 3,234 3,003
--------- ---------
Total Tier II 3,234 3,003
--------- ---------
Total Capital $ 36,643 $ 33,671
========= =========
Risk weighted assets $ 306,528 $ 268,131
Tier I capital ratio 10.90% 11.44%
Required Tier I capital ratio 4.00% 4.00%
Total capital ratio 11.95% 12.56%
Required total capital ratio 8.00% 8.00%
In addition to risk-based requirements, a leverage ratio test must also be
met. The leverage ratio is defined as the ratio of Tier I capital to assets
(not risk adjusted). The required ratio for each financial institution will
be determined based on the financial institution's relative soundness. A
minimum ratio of Tier I capital to total assets of three percent has been
established for top rated financial institutions, with less highly rated or
those with higher levels of risk required to maintain ratios of 100 to 200
basis points above the minimum level. The Corporation's leverage ratio was
8.25% at December 13, 1996.
Inflation and Changing Prices
- - -----------------------------
Management is aware of the impact inflation has on interest rates and,
therefore, the impact it can have on the Corporation's performance. The
ability of a financial institution to cope with inflation can be determined by
analysis and monitoring of its asset and liability structure. The Corporation
monitors its asset and liability position with particular emphasis on the mix
of interest rate sensitive assets and liabilities in order to reduce the
effect of inflation upon its performance. However, it must be remembered that
the asset and liability structure of a financial institution is substantially
differenct from that of industrial corporations in that virtually all assets
and liabilities are monetary in nature, meaning that they have been or will be
converted into a fixed number of dollars regardless of changes in prices.
Examples of monetary items include cash, loans and deposits. Nonmonetary
items are those assets and liabilities which do not gain or lose purchasing
power solely as a result of general price level changes. Examples of
nonmonetary items are premises and equipment. Inflation can have a more direct
impact on categories of noninterest expenses such as salaries and wages,
supplies and employee benefit costs. These expenses normally fluctuate more
in line with changes in the general price level and are very closely monitored
by Management for both the effects of inflation and increases related to such
items as staffing levels, usage of supplies and occupancy costs.
XXVI
<PAGE>
CENTURY FINANCIAL CORPORATION
MARKET AND DIVIDEND INFORMATION
- - -------------------------------
Century Financial Corporation's common stock is traded in the over-the-counter
market and, on June 3, 1996 commenced trading through the National Association
of Securities Dealer Automated Quotation "NASDAQ" System under the symbol
"CYFN." Prior to June 3, 1996, the Corporation's stock was not listed on an
organized exchange. At December 31, 1996, the Corporation had approximately
980 shareholders of record. The following tables set forth the high and low
market prices for the periods indicated:
STOCK PRICES
1996
---- HIGH LOW
------ ------
First Quarter $14.38 $13.50
Second Quarter 18.00 15.75
Third Quarter 17.50 16.00
Fourth Quarter 17.00 15.38
1995
----
First Quarter $13.25 $12.25
Second Quarter 12.63 11.50
Third Quarter 12.50 12.00
Fourth Quarter 13.75 13.00
DIVIDENDS
The table below sets forth information regarding cash dividends per share
paid by the Corporation during 1996 and 1995.
1996
----
First Quarter $0.13 per share
Second Quarter 0.13 per share
Third Quarter 0.15 per share
Fourth Quarter 0.15 per share
-----
Total for 1996 $0.56
=====
1995
----
First Quarter $0.10 per share
Second Quarter 0.10 per share
Third Quarter 0.11 per share
Fourth Quarter 0.22 per share
-----
Total for 1995 $0.53
=====
All stock prices and dividends have been restated to reflect the six-for-five
stock split paid in January of 1995.
XXVII
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,004
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,790
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 71,873
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 308,010
<ALLOWANCE> 3,234
<TOTAL-ASSETS> 412,858
<DEPOSITS> 363,394
<SHORT-TERM> 7,000
<LIABILITIES-OTHER> 4,428
<LONG-TERM> 4,000
0
0
<COMMON> 2,826
<OTHER-SE> 31,210
<TOTAL-LIABILITIES-AND-EQUITY> 412,858
<INTEREST-LOAN> 24,933
<INTEREST-INVEST> 5,466
<INTEREST-OTHER> 165
<INTEREST-TOTAL> 30,564
<INTEREST-DEPOSIT> 13,054
<INTEREST-EXPENSE> 13,866
<INTEREST-INCOME-NET> 16,698
<LOAN-LOSSES> 625
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 12,613
<INCOME-PRETAX> 6,176
<INCOME-PRE-EXTRAORDINARY> 6,176
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,906
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.46
<YIELD-ACTUAL> 4.87
<LOANS-NON> 872
<LOANS-PAST> 223
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,003
<CHARGE-OFFS> 467
<RECOVERIES> 73
<ALLOWANCE-CLOSE> 3,234
<ALLOWANCE-DOMESTIC> 3,234
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 768
</TABLE>
