8-K 1 h90650e8-k.txt CENTURY BANCSHARES, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 -------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): September 13, 2001 CENTURY BANCSHARES, INC. (Exact Name of Registrant as Specified in Charter) DELAWARE 0-16234 52-1489098 (State or Other Jurisdiction of (Commission File Number) (IRS Employer Incorporation) Identification No.) 1275 PENNSYLVANIA AVENUE, N.W., WASHINGTON, DC 20004 (Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (202) 496-4100 2 ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE. On March 15, 2001, Century Bancshares, Inc. (the "Company" or "Century") completed its previously announced merger (the "Merger") whereby GrandBanc, Inc. ("GrandBanc") was merged into CBI Holdings Corporation, a subsidiary of the Company ("CBI Holdings"), and became a wholly-owned subsidiary of the Company. GrandBanc is the parent holding company of GrandBank, a Maryland chartered commercial bank headquartered in Rockville, Maryland The merger was structured as a reorganization for federal income tax purposes, and will be accounted for as a "pooling of interests." Completion of the Merger was previously reported on Form 8-K dated March 15, 2001, at which time Century filed (a) audited consolidated financial statements for GrandBanc for the three years ended December 31, 1999, (b) unaudited consolidated financial statements for GrandBanc for the three and nine month periods ended September 30, 2000 and 1999, and (c) unaudited pro forma condensed combined financial statements for the nine months ended September 30, 2000 and the three years ended December 31, 199, 1998 and 1997. Filed herewith are the audited consolidated financial statements of GrandBanc for the three years ended December 31, 2000. -2- 3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of GrandBanc. The following financial statements of GrandBanc are filed herewith. - Independent Auditors' Report - Consolidated Balance Sheets as of December 31, 2000 and 1999 - Consolidated Statements of Operations for Years Ended December 31, 2000, 1999 and 1998 - Consolidated Statements of Changes in Stockholders' Equity for Years Ended December 31, 2000, 1999 and 1998 - Consolidated Statements of Cash Flows for Years Ended December 31, 2000, 1999 and 1998 - Notes to Consolidated Financial Statements for Years Ended December 31, 2000, 1999 and 1998 (c) Exhibits. 23.1 Consent of Stegman & Company, independent auditors for GrandBanc. -3- 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CENTURY BANCSHARES, INC. Dated: September 13, 2001 By: /s/ JOSEPH S. BRACEWELL -------------------------- Joseph S. Bracewell President -4- 5 ITEM 7(a). FINANCIAL STATEMENTS OF GRANDBANC. -5- 6 [Letter of Stegman & Company] INDEPENDENT AUDITORS' REPORT The Stockholders and Board of Directors GrandBanc, Inc. We have audited the accompanying consolidated balance sheets of GrandBanc, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 consolidated financial position of GrandBanc, Inc. and subsidiaries as of December 31, 2000 and 1999, and the consolidated results of their operations and cash flows for each of the three years in the period ended December 31, 2000, are in conformity with accounting principles generally accepted in the United States. /s/ Stegman & Company Baltimore, Maryland February 16, 2001 -6- 7 CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999 ASSETS

See accompanying notes. -7- 8 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

See accompanying notes. -8- 9 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

See accompanying notes. -9- 10 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

-10- 11 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the Years Ended December 31, 2000, 1999 and 1998

See accompanying notes. -11- 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of GrandBanc, Inc. (the Corporation), including its wholly owned subsidiaries, GrandBank (the Bank) and Facility Holdings, Inc, conform to accounting principles generally accepted in the United States and to prevailing practices within the banking industry. Certain reclassifications have been made to amounts previously reported to conform with the classifications made in 2000. Consolidation Policy The consolidated financial statements include the accounts of the Corporation, the Bank, and Facility Holdings, Inc., with all significant intercompany transactions eliminated. The financial statements of the Corporation include the Bank under the equity method of accounting. Nature of Operations The Corporation provides commercial banking services from its four locations in Montgomery County, Maryland and one branch in Alexandria, Virginia. Its primary source of revenue is from providing commercial and real estate loans to customers who are predominately small businesses, professionals and middle income individuals located in Montgomery County, suburban Washington, D.C. and northern Virginia. Use of Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investment Securities Available for Sale Investment securities available for sale, are stated at estimated fair value based on quoted market prices. They represent those securities which management may sell as part of its asset/liability strategy or which may be sold in response to changing interest rates, changes in prepayment risk or other similar factors. The cost of securities sold is determined by the specific identification method. Net unrealized gains and losses on these securities are reported as accumulated other comprehensive income, as a separate component of stockholders' equity, net of related income taxes. Loans Loans are stated at their principal amount outstanding net of any deferred fees and costs. Interest income is accrued and credited to income at the contractual rate based on the principal amount outstanding. Loans are placed on non-accrual when specifically determined to be impaired or when principal or interest is delinquent for 90 days or more. Any unpaid interest previously accrued on those loans is reversed from income. Interest income generally is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. Interest income on other non-accrual loans is recognized only to the extent of interest payments received. -12- 13 Loans are considered impaired when, based on current information, it is probable that the Bank will not collect all principal and interest payments according to the loans' contractual terms. Generally, loans are considered impaired once principal or interest payments become 90 days or more past due and they are placed on non-accrual. Management also considers the financial condition of the borrower, cash flows of the loan and the value of the related collateral. Impaired loans do not include large groups of smaller balance homogeneous loans such as residential real estate and consumer installment loans which are evaluated collectively for impairment. Loans specifically reviewed for impairment are not considered impaired during periods of "minimum delay" in payment (90 days or less) provided eventual collection of all amounts due is expected. The impairment of the loan is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, or the fair value of the collateral if repayment is expected to be provided by the collateral. The majority of the Bank's impaired loans are measured by reference to the fair value of the collateral. Interest income on impaired loans is recognized on the cash basis. Allowance for Loan Losses The allowance for loan losses represents management's current estimate of the amount which adequately provides for possible losses in the portfolio. The adequacy of the allowance is determined by regular review of the loan portfolio considering such factors as current economic conditions and their effect on the creditworthiness of borrowers, changes in the character of the portfolio and historical loan loss experience. The allowance is increased by provisions charged to operating expense and reduced by loans charged-off, net of recoveries of amounts previously charged-off. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Long-Lived Assets Bank premises and equipment are stated at cost and are being depreciated principally on a straight-line basis over the estimated useful lives of the assets. Repair and maintenance costs are charged against income while betterments are capitalized as additions to the related assets. Upon retirement or other disposition of properties, the carrying value and the related accumulated depreciation are removed from the accounts. Intangible assets consisting of goodwill and a premium on purchased deposits are being amortized on the straight-line method over 12 years and 9 years, respectively. Long-lived assets are evaluated regularly for other-than-temporary impairment. If circumstances suggest that their value may be impaired and the write-down would be material, an assessment of recoverability is performed prior to any write-down of the asset. Foreclosed Real Estate Foreclosed real estate represents assets acquired in satisfaction of loans either by foreclosure or deeds taken in lieu of foreclosure. Properties acquired are recorded at the lower of cost or fair value less estimated selling costs at the time of acquisition with any deficiency charged to the allowance for loan losses. Thereafter, costs incurred to operate or carry the properties as well as reductions in value as determined by periodic appraisals or other market studies are charged to operating expense. Gains and losses resulting from the final disposition of the properties are included in noninterest expense. Income Taxes Under the asset and liability method, deferred income taxes reflect the future tax consequences of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end. Deferred tax assets and liabilities are measured using tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are recognized for future deductible temporary differences and tax loss carryforwards if their realization is "more than likely". -13- 14 2. FUTURE APPLICATION OF ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133, which delayed the effective date of SFAS No. 133 to January 1, 2001 for calendar year companies such as the Corporation. This statement requires derivative instruments be carried at fair value on the balance sheet. The statement continues to allow derivative instruments to be used to hedge various risks and sets forth specific criteria to be used in determining when hedge accounting can be used. The statement also provides for offsetting changes in fair value or cash flows of both the derivative and the hedged asset or liability to be recognized in earnings in the same period; however, any changes in fair value or cash flow that represent the ineffective portion of the hedge are required to be recognized in earnings and cannot be deferred. For derivative instruments not accounted for as hedges, changes in fair value are required to be recognized in earnings. The Corporation adopted the provisions of this statement, as amended, for its quarterly and annual reporting beginning January 1, 2001, the statements effective date. There was no effect on the Corporation's financial position upon adoption of this statement. 3. INVESTMENT SECURITIES The amortized cost and estimated fair value of investment securities at December 31 were as follows:

-14- 15 The amortized cost and estimated fair value of investment securities at December 31, 2000, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

At December 31, securities pledged as collateral for public deposits and for other purposes as required or permitted by law were as follows:

Proceeds from sales together with gross gains and losses realized on sales of securities were as follows:

4. LOANS AND ALLOWANCE FOR LOAN LOSSES The composition of the loan portfolio at December 31 was as follows:

-15- 16 Certain senior officers, directors and companies in which officers and directors are partners and principal stockholders have had loan transactions with the Bank. Such extensions of credit have been made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with outsiders, and at the time did not involve more than the normal risk of collectibility or present other unfavorable circumstances. The following summarizes changes in amounts outstanding, both direct and indirect, to such persons during 2000 and 1999:

Activity in the allowance for loan losses for the three years ended December 31 is as follows:

At December 31, 2000, 1999 and 1998, the total recorded investment in impaired loans amounted to $379,294, $591,997 and $535,292, respectively. The average balances of these loans were $115,509, $416,948 and $797,148 for the years ended December 2000, 1999 and 1998, respectively. Following is a summary of cash receipts on impaired loans and how they were applied:

The allowance for loan losses related to impaired loans amounted to approximately $375,000, $59,000 and $2,000 at December 31, 2000, 1999 and 1998, respectively. If interest had been recognized on impaired loans at the original interest rate, interest income would have increased approximately $17,000, $48,000 and $91,000 for the years ended December 31, 2000, 1999 and 1998, respectively. 5. BANK PREMISES AND EQUIPMENT Bank premises and equipment consisted of the following at December 31:

-16- 17 The Bank leases office space under various lease agreements. Rental expense for 2000, 1999 and 1998 totaled $357,283, $393,046 and $563,128. Future, minimum annual lease payments for operating leases are as follows:

6. INTANGIBLE ASSETS Following is a summary of intangible assets, net of accumulated amortization, included in the consolidated balance sheets:

7. DEPOSITS Deposits at December 31 are summarized as follows:

8. SHORT-TERM BORROWINGS At December 31, 2000, the Corporation is indebted to an unaffiliated bank in the amount of $1,700,000. The note bears interest at the prime rate (as defined) plus 1/4% and is adjusted annually. Interest is payable monthly and it requires quarterly principal payments of $25,000 with the remaining balance due June 30, 2001. The common stock of the Corporation's wholly owned subsidiary bank is pledged as collateral for this debt. -17- 18 At December 31, 2000, Facility Holdings, inc. is indebted to an unaffiliated bank in the amount of $780,000. The note bears interest at the prime rate (as defined) plus 1/4%. Interest is payable monthly and the note matures on June 30, 2001. The loan is collateralized by the real property operated as a bank branch in Alexandria, Virginia. Short-term borrowings at December 31, 2000 also consisted of overnight federal funds borrowed, short-term Federal Home Loan Bank advances, securities sold under agreement to repurchase, which are securities sold to the Bank's customers, at the customer's request, under a continuing "roll-over" contract that matures in one business day. The underlying securities sold are U.S. Treasury notes or Federal agencies which are segregated in the Bank's Federal Reserve Bank account from the Company's other investment securities. The following table presents certain information for short-term borrowings:

9. LONG-TERM DEBT At December 31, 2000, the Corporation is also indebted to an unaffiliated bank in the amount of $177,500. The note bears interest at the prime rate (as defined) plus 1/4% and is adjusted annually. Interest is payable monthly and the principal is due September 30, 2001. The common stock of the Corporation's wholly owned subsidiary bank is pledged as collateral for this debt. 10. STOCK OPTION PLAN The Corporation maintains a stock option plan for outside directors and an incentive stock option plan for key employees. The plans provide that 100,000 and 200,000 shares of common stock of the Corporation be reserved for each Plan, respectively. The option price shall be the fair market value of the common stock on the date the option is granted, and the option must be exercised within ten years and five years from the date granted for director and incentive stock option plans, respectively. The following is a summary of changes in shares under option for each of the years ended December 31:

-18- 19 The following summarizes information about options outstanding at December 31, 2000:

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants during the three years ended December 31:

The Corporation has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123), but applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its Plans. No compensation expense related to the Plans was recorded during the three years ended December 31, 1998. If the Corporation had elected to recognize compensation cost based on the fair value at the grant dates for awards under the Plans consistent with the method of prescribed by SFAS 123, net income and earnings per share would have been changed to the pro forma amounts as follows:

11. NET EARNINGS PER COMMON SHARE Basic net earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted net earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the year including any potential dilutive common shares outstanding, such as options and warrants. There is no adjustment for stock options in the calculation of diluted earnings per share for 1999 because the effect would have been antidilutable. The calculation of net earnings per common share follows:

-19- 20 12. INCOME TAXES Federal and state income tax (benefit) expense consists of the following:

A reconciliation of the differences between the maximum federal statutory income tax rate and the Corporation's effective tax rate for the years ended December 31 is as follows:

At December 31 net deferred tax assets consisted of the following:

The Company has recorded a deferred tax asset of $2,497,535, which includes the benefit of $4,437,694 in tax loss carryforwards, which expire in varying amounts between 2007 and 2019. Realization depends on generating sufficient taxable -20- 21 income before the expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. The amount of loss carryforward available for any one year may be limited if the Company is subject to the alternative minimum tax. 13. REGULATORY MATTERS Capital The Corporation is 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 regulators that, if undertaken, could have a direct material effect on the Corporation's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation must meet specific capital guidelines that involve quantitative measures of the Corporation's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The Corporation is required to maintain risk-based and leverage capital as defined by federal banking agencies. The measurement of risk-based capital takes into account the risk of both the balance sheet assets and off-balance sheet exposures. The regulatory guidelines require minimum risk-based capital ratios of 4% for Tier 1 capital and 8% for total capital. In addition a minimum leverage ratio of Tier 1 capital to quarterly average assets of 3% is required for strong banking organizations. A bank is considered "well capitalized", the highest regulatory category, if it has the following minimum ratios: Tier 1 capital of 6%, total risk-based capital of 10%, and Tier 1 leverage ratio of 5%. Quantitative measures established by regulation to ensure capital adequacy require the Corporation and its bank affiliate to maintain at least the minimum amounts of ratios of total Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined). Management believes, as of December 31, 2000, that the Corporation and its bank affiliate met all capital adequacy requirements to which they are subject. As of December 31, 2000, the most recent notification from the primary regulators for the Corporation's affiliate banking institution categorized the bank as well capitalized under the prompt corrective action regulations. To be categorized as well capitalized a bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the tables below. There are no conditions or events since the last notifications that management believes have changed the affiliate bank's category. The capital ratios of GrandBank, the Corporation's banking subsidiary, were as follows:

-21- 22 Dividends Dividends payable by the Corporation are unrestricted, although the ability of the Corporation to pay dividends depends upon dividends received by it from the Bank. The Board of Directors adopted a resolution specifying that no dividends will be paid by the Bank to the Corporation, except from the undivided profits of the Bank, or with the prior approval of the Bank Commissioner of the State of Maryland and the Regional Director of the FDIC, from the Bank's surplus in excess of 100% of its required capital stock. In addition, restrictions are also imposed upon the ability of the Bank to make loans to the Corporation, purchase stock in the Corporation, or use the Corporation's securities as collateral for indebtedness of the Bank. Cash and Due From Banks The Federal Reserve System requires that banks maintain reserve balances based on the type and amount of deposits. At December 31, 2000 and 1999, the Bank was required to maintain reserves of $496,000 and $495,000, respectively. 14. LITIGATION At December 31, 2000, the Corporation was involved in litigation arising from normal banking, financial, and other activities of the Bank. Management, after consultation with legal counsel, does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on the Corporation's financial condition. 15. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK The Bank is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments as well as its exposure to credit loss in the event of nonperformance by the other party. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At December 31, 2000 and 1999, the Bank's total unfunded commitments to extend credit were $8,199,000 and $12,248,000, respectively. These commitments included unused credit card lines of credit of $3,046,000 and $6,364,000 for 2000 and 1999 respectively. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on management's credit evaluation of the counterparty. Collateral held varies but may include loans, property, equipment, commercial properties, and other business assets as may be deemed appropriate. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party and totaled $104,000 and $234,000 at December 31, 2000 and 1999, respectively. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies but may include accounts receivable, inventory, equipment, marketable securities, property, and other business -22- 23 assets as may be deemed appropriate. Since most of the letters of credit are expected to expire without being drawn upon, they do not necessarily represent future cash requirements. 16. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, Disclosure About Fair Value of Financial Instruments, requires the disclosure of estimated fair values of financial instruments. Quoted market prices, where available, are shown as estimates of fair market values. Because no quoted market prices are available for a significant part of the Corporation's financial instruments, the fair values of such instruments have been derived based on the amount and timing of future cash flows and estimated discount rates. Present value techniques used in estimating the fair value of many of the Corporation's financial instruments are significantly affected by the assumptions used. The fair values derived from using present value techniques are not substantiated by comparisons to independent markets, and in many cases, could not be realized in immediate settlement of the instruments. Statement No. 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Corporation. The estimated fair values of the Corporation's financial instruments at December 31 are as follows:

The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments: o Cash and due from banks, federal funds sold and time deposits: The carrying amounts reported in the balance sheet for these assets are considered to approximate their fair values. o Investment securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. o Loans: For variable-rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair values for other loans (for example, fixed rate real estate, consumer and commercial and industrial loans) are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. The carrying amount of accrued interest receivable approximates its fair value. -23- 24 o Deposits: The fair values disclosed for demand deposits (for example, interest-bearing checking and savings accounts) are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts.) The fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated contractual maturities on such time deposits. The carrying amount of accrued interest payable approximates fair value. o Federal funds purchased and other short-term borrowings: The carrying amounts approximate their fair values. o Long-term borrowings: The fair value is estimated based on interest rates currently available for borrowings with similar terms and remaining maturities. 17. PARENT COMPANY FINANCIAL INFORMATION Condensed balance sheets, statements of income and statements of cash flows for GrandBanc, Inc. (parent only) are presented below: BALANCE SHEETS

-24- 25 STATEMENTS OF OPERATIONS

-25- 26 STATEMENTS OF CASH FLOWS

18. PENDING MERGER On October 11, 2000, GrandBanc, Inc. ("GrandBanc") entered into an Agreement and Plan of Merger with Century Bancshares, Inc. ("Century") whereby the stockholders of GrandBanc will receive .3318 shares of the common stock of Century for each GrandBanc common share. The merger is structured as a pooling-of-interests. The transaction is subject to various regulatory approvals and the approval of the stockholders of Century and GrandBanc. -26- 27 EXHIBIT INDEX 23.1 Consent of Stegman & Company, independent auditors of GrandBanc. -27-

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