ITEM 1. DESCRIPTION OF BUSINESS - -----------------------
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 CENTURY. THE CORPORATION IS ENGAGED PRINCIPALLY IN COMMERCIAL BANKING ACTIVITIES THROUGH ITS BANKING SUBSIDIARY. CENTURY BECAME A WHOLLY-OWNED SUBSIDIARY OF THE CORPORATION ON JUNE 1, 1988. THE CORPORATION OWNS ALL OF THE ISSUED AND OUTSTANDING COMMON STOCK OF CENTURY. ON MARCH 1, 1989, CENTURY BECAME THE SOLE STOCKHOLDER OF THE INDEPENDENT BANKERS COMPUTER SERVICE, INC. (IBCS), A DATA PROCESSING CENTER. ON JUNE 1, 1989, THE CORPORATION ACQUIRED ALL OF THE STOCK OF IBCS FROM CENTURY AND WAS OPERATING THE CENTER AS A NON-BANK SUBSIDIARY. EFFECTIVE APRIL 1, 1995, INDEPENDENT BANKERS COMPUTER SERVICE, INCORPORATED WAS DISSOLVED AND ITS OPERATIONS INTEGRATED WITH CENTURY NATIONAL BANK AND TRUST COMPANY.
GENERAL - -------
CENTURY 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, PENNSYLVANIA, WERE MERGED INTO CENTURY. EACH OF THESE BUSINESS COMBINATIONS WAS ACCOUNTED FOR AS A POOLING OF INTERESTS.
CENTURY ENGAGES IN FULL SERVICE COMMERCIAL AND CONSUMER BANKING AND TRUST BUSINESS. CENTURY PROVIDES SERVICES TO ITS CUSTOMERS THROUGH ITS NETWORK OF TWELVE FULL SERVICE OFFICES WHICH INCLUDES DRIVE-IN FACILITIES. CENTURY'S SERVICES INCLUDE ACCEPTING TIME, DEMAND AND SAVINGS DEPOSITS INCLUDING NOW ACCOUNTS, REGULAR SAVINGS ACCOUNTS, MONEY MARKET ACCOUNTS, INVESTMENT CERTIFICATES, 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
ITEM 1. DESCRIPTION OF BUSINESS (CONTINUED) - -----------------------
OVERDRAFT CHECKING PROTECTION, SMALL BUSINESS LOANS, ETC. CENTURY'S BUSINESS LOANS INCLUDE SEASONAL CREDIT COLLATERAL LOANS, AND TERM LOANS. DURING THE FIVE YEAR PERIOD BEGINNING IN 1991 AND ENDING IN 1995, THE CORPORATION'S COMBINED TOTAL ASSETS HAVE GROWN FROM APPROXIMATELY $279 MILLION IN 1991 TO APPROXIMATELY $377 MILLION IN 1995. NET INCOME FOR EACH OF THE YEARS IN THIS PERIOD HAS INCREASED.
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 NINE OTHER PROPERTIES LOCATED AT 2552 DARLINGTON ROAD, BEAVER FALLS, PENNSYLVANIA; FREEDOM AND HAINES SCHOOL ROAD, MARS, PENNSYLVANIA; THIRD AVENUE, FREEDOM, PENNSYLVANIA; SEVENTH STREET AND MIDLAND AVENUE, MIDLAND, PENNSYLVANIA; 1001 PENNSYLVANIA AVENUE, MONACA, PENNSYLVANIA; THIRD AVENUE, NEW BRIGHTON, PENNSYLVANIA; 800 BRODHEAD ROAD, ALIQUIPPA, PENNSYLVANIA; 700 MERCHANT STREET, AMBRIDGE, PENNSYLVANIA AND 716 FOURTEENTH STREET, BEAVER FALLS, PENNSYLVANIA. CENTURY LEASES THREE ADDITIONAL PROPERTIES LOCATED AT 613 BEAVER VALLEY MALL, MONACA, PENNSYLVANIA; NORTHERN LIGHTS SHOPPERS CITY, BADEN, PENNSYLVANIA AND THIRD AVENUE AND BUFFALO STREET, BEAVER, PENNSYLVANIA.
ALL FACILITIES AND EQUIPMENT ARE PERIODICALLY APPRAISED FOR INSURANCE PURPOSES AND ARE ADEQUATELY INSURED.
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.
THE FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989 ("FIRREA") WAS ENACTED ON AUGUST 9, 1989.
ITEM 1. DESCRIPTION OF BUSINESS (CONTINUED) - -----------------------
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 IMPROVEMENT ACT OF 1991 ("THE FDIC IMPROVEMENT ACT") COVERS A WIDE EXPANSE OF BANKING REGULATORY ISSUES. THE FDIC IMPROVEMENT ACT DEALS WITH THE RECAPITALIZATION OF THE BANK INSURANCE FUND, 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 CORPORATION EXPECTS SUBSTANTIALLY LOWER FDIC EXPENSE IN 1996.
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 HIGHLY COMPETITIVE. CENTURY'S MARKET AREA INCLUDES ALL OF BEAVER COUNTY IN ADDITION TO SELECTED COMMUNITIES IN NEIGHBORING BUTLER (CRANBERRY TOWNSHIP AREA) COUNTY. CENTURY COMPETES WITH LOCAL COMMERCIAL BANKS AND THRIFT INSTITUTIONS WITH BRANCHES IN CENTURY'S MARKET AREA. CENTURY CONSIDERS ITS MAJOR COMPETITION TO BE MELLON BANK, N.A. AND INTEGRA/PITTSBURGH, BOTH HEADQUARTERED IN PITTSBURGH, PENNSYLVANIA ALONG WITH FIRST WESTERN BANK, N.A, HEADQUARTERED IN NEW CASTLE, PENNSYLVANIA.
CENTURY COMPETES WITH COMMERCIAL BANKS, SAVINGS BANKS, SAVINGS AND LOAN ASSOCIATIONS, INSURANCE COMPANIES, REGULATED SMALL LOAN COMPANIES AND CREDIT UNIONS WITH RESPECT TO ATTRACTING LOAN ACTIVITY AND DEMAND DEPOSITS.
ITEM 1. DESCRIPTION OF BUSINESS (CONTINUED) - -----------------------
COMPETITION (CONTINUED) - ----------------------- 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.
LOAN COMMITMENTS AS OF DECEMBER 31, 1995 AND 1994, WERE APPROXIMATELY $29,307,000 AND $27,783,000, RESPECTIVELY.
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 THE BANK'S DEPOSITS ARE FROM OUTSIDE OF THE UNITED STATES.
MARKET AREA - -----------
CENTURY HAS TWELVE OFFICES IN BEAVER COUNTY AND ONE OFFICE IN BUTLER COUNTY, BORDERING BEAVER COUNTY. THE BANK IS HEADQUARTERED IN ROCHESTER, PENNSYLVANIA. BEAVER COUNTY IS APPROXIMATELY 20 MILES NORTHWEST OF PITTSBURGH.
THE BEAVER COUNTY AREA WAS ONCE LARGELY DEPENDENT ON HEAVY INDUSTRY MANUFACTURING, PRIMARILY STEEL. DUE TO THE NATIONWIDE RECESSION IN THE EARLY 1980s 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 USAIR WHICH OPERATES ITS HUB FROM THE PITTSBURGH AIRPORT. OTHER MAJOR EMPLOYERS INCLUDE THE MEDICAL CENTER, BEAVER COUNTY GOVERNMENT, STATE GOVERNMENT AND DUQUESNE LIGHT CORPORATION.
STATISTICAL DISCLOSURE FOR BANK HOLDING COMPANIES INFORMATION REGARDING STATISTICAL DISCLOSURE FOR BANK HOLDING COMPANIES REQUIRED BY GUIDE 3, IS SET FORTH AS FOLLOWS:
(1) FOR THE PURPOSE OF THESE COMPUTATIONS, NONACCRUING LOANS ARE INCLUDED IN THE DAILY AVERAGE LOAN AMOUNTS OUTSTANDING. (2) INTEREST ON LOANS INCLUDES FEE INCOME. (3) YIELDS WERE COMPUTED ON A TAX EQUIVALENT BASIS USING A 34% FEDERAL INCOME TAX RATE AND WERE DETERMINED ON THE BASIS OF COST, ADJUSTED FOR AMORTIZATION OF PREMIUM OR ACCRETION OF DISCOUNT.
STATISTICAL DISCLOSURE FOR BANK HOLDING COMPANIES INFORMATION REGARDING STATISTICAL DISCLOSURE FOR BANK HOLDING COMPANIES REQUIRED BY GUIDE 3, IS SET FORTH AS FOLLOWS:
(1) FOR THE PURPOSE OF THESE COMPUTATIONS, NONACCRUING LOANS ARE INCLUDED IN THE DAILY AVERAGE LOAN AMOUNTS OUTSTANDING. (2) INTEREST ON LOANS INCLUDES FEE INCOME. (3) YIELDS WERE COMPUTED ON A TAX EQUIVALENT BASIS USING A 34% FEDERAL INCOME TAX RATE AND WERE DETERMINED ON THE BASIS OF COST, ADJUSTED FOR AMORTIZATION OF PREMIUM OR ACCRETION OF DISCOUNT.
STATISTICAL DISCLOSURE FOR BANK HOLDING COMPANIES INFORMATION REGARDING STATISTICAL DISCLOSURE FOR BANK HOLDING COMPANIES REQUIRED BY GUIDE 3, IS SET FORTH AS FOLLOWS:
(1) FOR THE PURPOSE OF THESE COMPUTATIONS, NONACCRUING LOANS ARE INCLUDED IN THE DAILY AVERAGE LOAN AMOUNTS OUTSTANDING. (2) INTEREST ON LOANS INCLUDES FEE INCOME. (3) YIELDS WERE COMPUTED ON A TAX EQUIVALENT BASIS USING A 34% FEDERAL INCOME TAX RATE AND WERE DETERMINED ON THE BASIS OF COST, ADJUSTED FOR AMORTIZATION OF PREMIUM OR ACCRETION OF DISCOUNT.
CENTURY FINANCIAL CORPORATION ANALYSIS OF CHANGES IN NET INTEREST INCOME
(1) CHANGES IN INTEREST INCOME/EXPENSE NOT ARISING SOLELY AS A RESULT OF VOLUME OR RATE VARIANCES ARE ALLOCATED PROPORTIONATELY TO RATE AND VOLUME.
(2) ADJUSTED TO TAXABLE EQUIVALENT BASIS OF 34% TAX RATE.
CENTURY FINANCIAL CORPORATION ANALYSIS OF CHANGES IN NET INTEREST INCOME
(1) CHANGES IN INTEREST INCOME/EXPENSE NOT ARISING SOLELY AS A RESULT OF VOLUME OR RATE VARIANCES ARE ALLOCATED PROPORTIONATELY TO RATE AND VOLUME.
(2) ADJUSTED TO TAXABLE EQUIVALENT BASIS OF 34% TAX RATE.
CENTURY FINANCIAL CORPORATION AVAILABLE FOR SALE INVESTMENT SECURITIES AS OF DECEMBER 31, 1995 (IN THOUSANDS)
WEIGHTED AVERAGE YIELDS WERE COMPUTED ON A TAX EQUIVALENT BASIS USING A 34% FEDERAL INCOME TAX STATUTORY RATE AND WERE DETERMINED ON THE BASIS OF COST, ADJUSTED FOR AMORTIZATION OF PREMIUM OR ACCRETION DISCOUNTED.
CENTURY FINANCIAL CORPORATION INVESTMENT SECURITIES
AS OF DECEMBER 31,
EXCLUDING THOSE HOLDINGS OF THE INVESTMENT PORTFOLIO IN U.S. TREASURY SECURITIES AND OTHER AGENCIES AND CORPORATIONS OF THE U.S. GOVERNMENT, THERE WERE NO INVESTMENTS IN SECURITIES OF ANY ONE ISSUER WHICH EXCEEDED 10% OF THE CORPORATION'S SHAREHOLDERS EQUITY AT DECEMBER 31, 1995.
LOAN MATURITY DISTRIBUTION AND INTEREST SENSITIVITY OF COMMERCIAL AND REAL ESTATE-CONSTRUCTION LOANS:
THERE ARE NO LOAN CONCENTRATIONS EXCEEDING 10% OF TOTAL LOANS AS OF DECEMBER 31, 1995.
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 BORROWERS' 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 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 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 PURPOSES OF CONSTRUCTING 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.
LOANS TO INDIVIDUALS REPRESENT FINANCING EXTENDED TO CONSUMERS 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 CARD OR REVOLVING CREDIT TRANSACTIONS. CONSUMER CREDITWORTHINESS IS EVALUATED ON THE BASIS OF ABILITY TO REPAY, STABILITY OF INCOME SOURCES AND PAST CREDIT HISTORY.
SUMMARY OF LOAN LOSS EXPERIENCE
INCLUDED IN NON-ACCRUAL LOANS AT DECEMBER 31, 1994 ARE THREE COMMERCIAL LOANS. TWO OF THE THREE LOANS WERE SUBSEQUENTLY BROUGHT CURRENT IN 1995, RESULTING IN A REDUCTION IN THE NON-ACCRUAL BALANCE AT DECEMBER 31, 1995.
IN ESTABLISHING A CHARGE TO THE PROVISION FOR LOAN LOSSES, AND THE RELATED BALANCE IN THE ALLOWANCE FOR LOAN LOSSES, MANAGEMENT CONSIDERS A VARIETY OF FACTORS, INCLUDING ACTUAL LOSSES INCURRED, THE LEVEL OF THE ALLOWANCE FOR LOAN LOSSES, LOAN GROWTH, DELINQUENCY TRENDS AND RATIOS, THE EXISTING ECONOMIC CLIMATE, AND MANAGEMENT'S ASSESSMENT OF POTENTIAL FUTURE LOSSES ON OUTSTANDING LOANS.
CENTURY MONITORS ITS LOAN PORTFOLIO AND ON A MONTHLY BASIS PROVIDES DETAILED ANALYSIS OF DELINQUENCIES, NON-PERFORMING ASSETS, AND POTENTIAL PROBLEM LOANS TO THE PROBLEM LOAN COMMITTEE OF THE BOARD. MANAGEMENT CONDUCTS A FORMAL, QUALITATIVE ANALYSIS OF THE ADEQUACY OF CENTURY'S ALLOWANCE FOR LOAN LOSSES. ALL LOAN RELATIONSHIPS IN EXCESS OF $250,000 ARE REVIEWED ANNUALLY BY THE EXECUTIVE COMMITTEE OF CENTURY'S BOARD OF DIRECTORS. ON A QUARTERLY BASIS, ALL LOAN RELATIONSHIPS IN EXCESS OF $250,000 RATED SUBSTANDARD OR LOWER ARE REVIEWED BY CENTURY'S LOAN REVIEW OFFICER AND THE PROBLEM LOAN COMMITTEE. THESE LOANS ARE REVIEWED FOR PAYMENT HISTORY, ANY CHANGES IN COLLATERAL AND ANY EXPOSURE IS SPECIFICALLY RESERVED FOR. ALL SPECIAL MENTION LOANS ARE POOLED AND A RESERVE IS DETERMINED FROM BOTH CENTURY'S HISTORICAL EXPERIENCE AND HISTORICAL LOSS PERCENTAGES FROM ROBERT MORRIS ASSOCIATES.
ALL OTHER HOMOGENEOUS LOAN POOLS SUCH AS CONSUMER INSTALLMENT LOANS, CASH RESERVE AND 1-4 FAMILY MORTGAGE LOANS ARE POOLED AND THE ADEQUACY OF THE RESERVE IS DETERMINED BASED ON SUCH FACTORS AS GENERAL ECONOMIC CONDITIONS, HISTORICAL CHARGE-OFF EXPERIENCE AND DELINQUENCY TRENDS. ADDITIONALLY, CONSIDERATION IS GIVEN TO COMMITMENTS TO EXTEND CREDIT BASED ON THE CHARACTERISTICS OF THE RISKS ASSOCIATED WITH THESE SPECIFIC COMMITMENTS. MANAGEMENT CONSIDERS THE LEVEL OF ITS ALLOWANCE TO BE ADEQUATE. NON-PERFORMING LOANS AT DECEMBER 31, 1995, WERE 0.45% OF OUTSTANDING LOANS NET OF UNEARNED INCOME VERSUS 0.79% AT DECEMBER 31, 1994.
WHILE IT IS IMPOSSIBLE TO PREDICT WHAT 1996 LOAN LOSSES WILL BE, MANAGEMENT ESTIMATES THAT GROSS LOSSES SHOULD NOT EXCEED APPROXIMATELY 0.25% OF LOANS OUTSTANDING AT DECEMBER 31, 1995.
INFORMATION WITH RESPECT TO NONACCRUAL LOANS AT DECEMBER 31, 1995 THRU 1991 IS AS FOLLOWS:
THE GROSS AMOUNT OF INTEREST WHICH WOULD HAVE BEEN RECORDED IF ALL NONACCRUAL LOANS HAD BEEN ACCRUING INTEREST AT THEIR ORIGINAL TERMS IS:
LOANS CLASSIFIED FOR REGULATORY PURPOSES AS LOSS, DOUBTFUL, SUBSTANDARD, OR SPECIAL MENTION DO NOT REPRESENT OR RESULT FROM TRENDS OR UNCERTAINTIES WHICH WILL MATERIALLY IMPACT FUTURE OPERATING RESULTS, LIQUIDITY OR CAPITAL RESOURCES; NOR DOES MANAGEMENT HAVE ANY INFORMATION WHICH WOULD CAUSE IT TO HAVE SERIOUS DOUBTS AS TO THE ABILITY OF SUCH BORROWERS TO COMPLY WITH LOAN REPAYMENT TERMS.
SUMMARY OF DEPOSITS
THE AVERAGE DAILY AMOUNT OF DEPOSITS AND RATES PAID ON SUCH DEPOSITS IS SUMMARIZED FOR THE PERIODS INDICATED IN THE FOLLOWING TABLE:
THE FOLLOWING TABLE SETS FORTH, BY TIME REMAINING TO MATURITY, TIME CERTIFICATES OF DEPOSIT OF $100,000 OR MORE.
CENTURY FINANCIAL CORPORATION
THE FOLLOWING TABLE SHOWS CONSOLIDATED CAPITAL RATIOS FOR THE CORPORATION FOR EACH OF THE LAST THREE YEARS:
MANAGEMENT IS NOT AWARE OF ANY KNOWN TRENDS, EVENTS, OR UNCERTAINTIES THAT WILL HAVE OR ARE LIKELY TO HAVE A MATERIAL EFFECT ON THE LIQUIDITY, CAPITAL RESOURCES OR OPERATIONS OF THE CORPORATION.
ITEM 1. DESCRIPTION OF BUSINESS (CONTINUED) - -----------------------
AS OF DECEMBER 31, 1995, CENTURY HAD A TOTAL OF 158 FULL-TIME EMPLOYEES AND 44 WHO WERE PART-TIME.
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 OTHER 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 AS ESCROW AGENT. ON JANUARY 1, 1996, THE CORPORATION APPOINTED CHEMICAL MELLON SHAREHOLDER SERVICES AS OUR TRANSFER AGENT AND REGISTRAR OF STOCK.
ITEM 2.
ITEM 2. PROPERTIES - ----------
THIS INFORMATION IS INCLUDED IN ITEM 1 DESCRIPTION OF BUSINESS.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS - -----------------
ON JANUARY 2, 1996, A FORMER EMPLOYEE OF THE BANK FILED A CIVIL ACTION IN U.S. DISTRICT COURT IN PITTSBURGH AGAINST THE BANK. THE LAWSUIT ALLEGES WRONGFUL DISCHARGE AND THAT THE BANK VIOLATED THE AGE DISCRIMINATION IN EMPLOYMENT ACT (ADEA) AND PENNSYLVANIA PUBLIC POLICY. MANAGEMENT BELIEVES THAT THE LIABILITY, IF ANY, ARISING FROM SUCH ACTIONS WILL NOT HAVE A MATERIAL EFFECT ON THE CORPORATION'S FINANCIAL POSITION.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ---------------------------------------------------
THERE WERE NO MATTERS SUBMITTED DURING THE FOURTH QUARTER OF THE FISCAL YEAR COVERED BY THIS REPORT TO A VOTE OF SECURITY HOLDERS.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED MATTERS - ------------------------------------------------------------
THE INFORMATION REQUIRED BY THIS ITEM IS INCORPORATED BY REFERENCE TO THE INFORMATION APPEARING UNDER THE CAPTION "MARKET AND DIVIDEND INFORMATION" ON PAGE XXIV IN THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1995.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA - -----------------------
THE INFORMATION REQUIRED BY THIS ITEM IS INCORPORATED BY REFERENCE TO THE INFORMATION APPEARING UNDER THE CAPTION "SELECTED FINANCIAL DATA" ON PAGE XVII IN THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1995.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - ----------------------------------------------------------- AND OPERATING RESULTS - ---------------------
THE INFORMATION REQUIRED BY THIS ITEM IS INCORPORATED BY REFERENCE TO THE INFORMATION APPEARING UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OPERATING RESULTS" ON PAGES XVIII THROUGH XXIII IN THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1995.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - -------------------------------------------
THE INFORMATION REQUIRED BY THIS ITEM AND THE INDEPENDENT ACCOUNTANT'S REPORT THEREON ARE INCORPORATED BY REFERENCE ON PAGES I THROUGH XVII TO THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1995.
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - ----------------------------------------------------
NO REPORTS ON FORM 8-K REPORTING A CHANGE OF ACCOUNTANTS HAVE BEEN FILED SINCE THE INCEPTION OF CFC (JUNE 1, 1988) AND NEITHER A CHANGE IN ACCOUNTANTS NOR ANY DISAGREEMENTS WITH ACCOUNTANTS HAS OCCURRED FOR THE SUBSIDIARY - CENTURY NATIONAL BANK AND TRUST COMPANY.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT --------------------------------------------------
THE INFORMATION REQUIRED BY THIS ITEM REGARDING DIRECTORS IS INCORPORATED BY REFERENCE FROM THE DEFINITIVE PROXY STATEMENT OF THE REGISTRANT WHICH WAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1996.
THE INFORMATION REQUIRED BY THIS ITEM REGARDING EXECUTIVE OFFICERS OF THE CORPORATION IS AS FOLLOWS:
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION ----------------------
THE INFORMATION REQUIRED BY THIS ITEM IS INCORPORATED BY REFERENCE FROM THE DEFINITIVE PROXY STATEMENT OF THE REGISTRANT WHICH WAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1996.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT --------------------------------------------------------------
THE INFORMATION REQUIRED BY THIS ITEM IS INCORPORATED BY REFERENCE FROM THE DEFINITIVE PROXY STATEMENT OF THE REGISTRANT WHICH WAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1996.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ----------------------------------------------
THE INFORMATION REQUIRED BY THIS ITEM IS INCORPORATED BY REFERENCE FROM THE DEFINITIVE PROXY STATEMENT OF THE REGISTRANT WHICH WAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1996.
ITEM 14.
ITEM 14. EXHIBITS - FINANCIAL STATEMENT SCHEDULES AND REPORTS ON -------- -------------------------------------------- FORM 8-K -------- (A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT, EXCEPT AS INDICATED:
(1) (2) THE FINANCIAL STATEMENTS FILED HEREWITH OR INCORPORATED BY REFERENCE ARE LISTED IN THE ACCOMPANYING INDEX TO FINANCIAL STATEMENTS.
(3) EXHIBITS FILED HEREWITH OR INCORPORATED BY REFERENCE HEREIN ARE SET FORTH IN THE FOLLOWING TABLE PREPARED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K. NO REPORTS ON FORM 8-K WERE REQUIRED TO BE FILED DURING THE LAST QUARTER OF THE PERIOD COVERED BY THIS REPORT. EXHIBIT TABLE -------------
(3) ARTICLES OF INCORPORATION AND BY-LAWS A. ARTICLES OF INCORPORATION OF THE REGISTRANT ARE INCORPORATED BY REFERENCE TO FORM S-4 OF THE REGISTRANT, NO. 0-17413.
B. BY-LAWS OF THE REGISTRANT ARE INCORPORATED BY REFERENCE TO FORM S-4 OF THE REGISTRANT, 0-17413.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
ARTICLES OF INCORPORATION AND BY-LAWS: SEE ITEM 14 (A) (3) ABOVE.
(13) ANNUAL REPORT TO SECURITY HOLDERS FOR THE YEAR ENDED DECEMBER 31, 1995 (FILED HEREWITH AS EXHIBIT 13).
(21) SUBSIDIARY OF THE REGISTRANT.
(27) FINANCIAL DATA SCHEDULE FOR THE YEAR ENDED DECEMBER 31, 1995 (FILED HEREWITH AS EXHIBIT 27).
NAME STATE OF INCORPORATION ---- ---------------------- CENTURY NATIONAL BANK & TRUST COMPANY PENNSYLVANIA
3. EXHIBITS -------- THE EXHIBITS LISTED ON THE EXHIBIT INDEX ON PAGE 26 ARE FILED HEREWITH IN RESPONSE TO THIS ITEM.
(B) REPORTS ON FORM 8-K THE REGISTRANT FILED NO FORM 8-K CURRENT REPORT DURING THE FOURTH QUARTER OF THE YEAR ENDED DECEMBER 31, 1995.
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS - -----------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
THE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AS PERTAINING TO THE CONSOLIDATED FINANCIAL STATEMENTS OF CENTURY FINANCIAL CORPORATION AND RELATED NOTES IS INCORPORATED BY REFERENCE TO THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1995.
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES ARE INCORPORATED BY REFERENCE TO THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1995.
BALANCE SHEETS, DECEMBER 31, 1995 AND 1994.
STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993.
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993.
THE CORPORATION DOES NOT MEET BOTH OF THE TESTS REQUIRED UNDER ITEM 302(a)(5) OF REGULATION S-K AND THEREFORE IS NOT REQUIRED TO PROVIDE SUPPLEMENTARY FINANCIAL DATA.
EXHIBITS - --------
FOR INFORMATION REGARDING EXHIBITS, INCLUDING THOSE INCORPORATED BY REFERENCE, SEE PAGE 25 OF THIS REPORT.
SIGNATURES ----------
PURSUANT TO THE REQUIREMENTS OF SECTION 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.
(REGISTRANT) CENTURY FINANCIAL CORPORATION
BY /s/ Joseph N. Tosh, II ----------------------------------------------------------- JOSEPH N. TOSH, II - PRESIDENT AND CHIEF EXECUTIVE OFFICER
DATE: March 21, 1996 --------------------------------------------------------
BY /s/ Donald A. Benziger ----------------------------------------------------------- DONALD A. BENZIGER - SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
DATE: March 21, 1996 --------------------------------------------------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES
(CONTINUED)