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unlocking capacity
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Centric Financial Corporation
Annual Report 2018
Letter to Our Shareholders, Customers, and Friends . . . . . . . . . . . . . . . .
Intelligent Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Enhancing Communities of Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Community Connected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Health and Wellness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Bank with Presence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
4
6
8
10
12
Centric Financial Corporation:
Financial Report 2018
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . .
17
Consolidated Statement of Changes in Stockholders’ Equity . . . . . . . . . 18
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statement . . . . . . . . . . . . . . . . . . . . . . .
19
20
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Senior Leadership Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Branch Management, Business Development, and Lending Teams . . .
50
Doctor Centric Bank Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Millennial Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Centric Bank Financial Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
52
Investor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inside Back Cover
C ONTENTS 2 018 A NNUA L REP ORT 1
TO OUR SHAREHOLDERS, CUSTOMERS,
AND FRIENDS:
It is said that the pace of technology has
never been as fast as it is today, yet it will
never be this slow again . Growing a financial
institution against the winds of market
fluctuations and cybersecurity threats can
feel like flying in flat light—a space of no
visibility, where instruments are rendered
useless and triumph depends on human
instinct .
From our takeoff in 2007, we have trusted
those instincts and assembled a dedicated,
high-performance team . We believe
the people we serve are full of capacity
and potential, and every new business
relationship reaffirms that understanding
and caring about people is where Centric
Bank thrives .
2018 was a year of record-breaking results
and system-wide digital transformation .
Our story comes to life in the business
owners who are expanding offices and
infrastructure, reinvesting in research and
innovation, and hiring their best teams .
We are pushing into new territories, im-
proving the financial health of communities,
energizing entrepreneurs, teaching STEM
in banking to teens, inspiring business
leaders through Women Centric, educating
homebuyers, and hosting our first Gen Z
video competition in partnership with the
American Bankers Association .
Dedicated to the success of American
small business and an evolving Main Street
economy, Centric Bank is delivering safer,
stronger banking products and services
where and when you need them, a top-
ranked SBA 7(a) lending program, total
revenue growth of 37%, and organic loan
growth of 26% .
Adding national talent to an award-winning
team of 126 people rich in leadership and
inclusivity, we welcomed Timothy J . Merrell
as SVP, Director of Cash Management and
Treasury Services and Kimberly L . Turner as
SVP, Chief Risk Officer .
Our reputation for outperformance and
potential continues to spark allegiance, and
on May 29, Centric Financial Corporation
completed a private placement of common
stock totaling $21 million from local
investors and select institutional investors .
The success of the capital raise reflects the
strength of our franchise, management, and
team; and we were pleased to add a number
of institutional and new retail investors as
shareholders .
This additional capital provided resources
for Centric to meet the entrepreneurial and
expansion demands of small business
owners who comprise approximately 85% of
our customer base; as well as undergirded
organic loan growth, technological and
cybersecurity advancements, and corporate
commitments .
Impact and Influence
For the year ended December 31, 2018,
Centric Financial Corporation reported
annual results of $8,004,000 in net income,
or $1 .03 earnings per basic shares, an
DONALD E. ENDERS, JR.
Chairman of the Board
PATRICIA A. HUSIC
President & CEO
celebrated Year 11
with a Centric
Bank team who is
unlocking capacity
for our business
clients, financing
unprecedented
potential, and
deeply committed
to service. Our
‘Best Banks to
Work For’ win
was an incredible
achievement.
We are nothing
without the passion,
spirit, and drive of
our people.
Patti Husic
President & CEO
2 C ENTRI C FINA NC I A L C ORP ORATI ON
At year-end 2018, we opened a Philadelphia
office for our commercial lending and cash
management teams in Devon, Chester
County . We also announced a new financial
center location in Devon, across from the
Devon Horse Show, a pillar of Chester
County . This financial center is expected to
open by the end of the third quarter 2019 .
Our culture and entrepreneurial DNA
complement the strong work ethic and
community values of this region .
Whether it’s testifying before the U .S . House
Small Business Committee in Washington,
D .C ., discussing the small business index
with policymakers on a U .S . Chamber panel,
or turning a Sweet Confections Cakes dream
into a reality with an SBA loan, we are
proud to be the voice and champion of small
business .
Our promise is to revolve around you— our
shareholders and customers— through every
business cycle, and introduce opportunities
for unexplored capacity and unrealized
potential .
Thank you for your trust and loyalty as
we continue to invest in technology, people,
and service . Together, we are leading our
communities on a path to greater prosperity
for all .
DONALD E. ENDERS, JR.
Chairman of the Board
PATRICIA A. HUSIC
President & CEO
increase of $4,260,000, or 114% over the
same period as 2017 . Total assets increased
$149,000,000 or 27% over December
31, 2017 . We saw net growth in loans
outstanding of $128,000,000 or 26% during
the last 12 months .
Total deposits grew $101,000,000 or 21%
from December 31, 2017 . Total revenue
grew $10,000,000 or 37% over the 12 months
ended December 2017 .
Year-to-date net interest margin declined
by five basis points to 3 .95% compared to
the same period year over year . Year-to-date
Return on Average Assets was 1 .22%, which
was a significant increase from 0 .72% for the
year ended December 31, 2017 .
For the year ending December 2018, non-
interest income totaled $4,434,000, an
increase of $1,255,000 or 39% over the
same period 2017 . The year-to-date growth
in non-interest income is largely for the
gain on sale of SBA and other government-
guaranteed loans and is impacted by the
increased dollar volume sold over prior year
of $8,234,000 or 42% . Gain on the sale of
other real estate owned increased $184,000
or 313% over the prior year-end; other fees
on loans increased $120,000 or 32% over
year-end 2017; and miscellaneous income
increased $123,000 over year-end 2017 .
Total assets at December 31, 2018
were $704,396,000 compared to
$555,786,000 at December 31, 2017,
an increase of $148,610,000 or 27% .
The increase is due to strong loan growth
and an increase in investment securities .
Total loans for the period ended
December 31, 2018 were $625,727,000,
an increase of $129,133,000 or 26% over
prior year-end . The increase in loans from
the prior year is attributed to the growth
in commercial and industrial loans
of $53,953,000 or 41%, and commercial
real estate loans of $70,750,000 or 23% .
Total deposits ended December 31, 2018
at $586,185,000, an increase of
$101,351,000 or 21% over the same period
2017 . The growth in deposits is attributed to
non-interest bearing deposits, money
market funds, and certificates of deposit .
The increase in non-interest bearing
deposits was $22,447,000 or 32% over the
prior year-end . The increase in money
market deposits was $38,014,000 or 62%
over prior year . The increase in both
portfolios has been generated by new
growth in the relationships at our financial
centers and expanded commercial lending
relationships . The increase in time deposits
of $60,866,000 or 30% year over year has
been the combined result of new and
increased financial center relationships and
wholesale funding .
Shareholders’ equity ended the period at
$69,773,000, an increase of $28,208,000 or
68% from December 31, 2017 . Regulatory
capital ratios for the bank exceeded
“well capitalized” at December 31, 2018 .
Asset quality continues to be pristine .
Non-performing assets to total assets was
0 .41%, a decrease from the fourth quarter
2017 of 0 .05% .
Making Presence a Priority
In a world where decisions are made at the
speed of market, we have made presence
a priority . Our 26-point Centric Bank Way
culture initiative codifies our principles and
defines our heart . Customers appreciate
the refreshing in-bank experiences, our
family rapport, always-on response, and
our sincerity and concern for each client’s
business health .
In 2018, we celebrated our first American
Banker Best Banks to Work For award—an
extraordinary achievement by a team who
finds purpose and meaning in deep work .
Our robust growth trajectory and success in
delivering on our strategic plan would not
be possible without the commitment of our
entire team .
On February 21, during National
Entrepreneurship Week, we held a ribbon
cutting ceremony for our new 23,000 SF
Executive and Operations Center in Enola,
Cumberland County . Joined by our
entrepreneur clients, state and local officials,
chamber presidents and members, and
Hampden Township veterans, we celebrated
a new collaborative and innovative
workplace complete with a health and
wellness facility .
LETTE R TO SHA REHOLDE R S 2 018 A NNUA L REP ORT 3
e
growing business needs of entrepreneurs,
physicians, and CEOs from Doylestown to
Devon, and Camp Hill to Chambersburg .
Whether it’s a medical practice, an
authentic Mexican restaurant, or an artisan
jeweler, our team is unlocking capacity and
financing potential,” says Husic .
In December, the Philadelphia Business
Journal highlighted “Central Pa . bank adds
locations on the Main Line” announcing
our entrance into Chester County . With
existing locations in Bucks and Lancaster
counties, the Main Line presence is a
natural extension of our footprint . Led
by Christopher J . Bickel, SVP, Main Line
Market Leader, the team includes two
commercial lenders with plans to add more,
Timothy J . Merrell, SVP, Director of
Cash Management and Treasury Services,
and his team, as well as a business
development group .
“A hometown team is critical to
strengthening relationships in the
community with our principles of
We Revolve Around You . As we expand our
services in the greater Philadelphia region,
Chris Bickel, a strong, experienced leader
within Centric Bank and a Berwyn native,
is building essential partnerships with the
business community,” says Husic .
Kimberly L . Turner, MBA, JD, was hired as
the bank’s first Chief Risk Officer to oversee
risk management and organizational
compliance . “As Centric Bank continues
its legacy of developing and maintaining
strong risk management, Kimberly’s
extensive financial experience and deep
understanding of sound risk management
and compliance practices are integral to
our ability to expand and better serve the
lending needs of entrepreneurs and small
businesses in our markets,” says Husic .
“We are honored to attract such high-level
national talent and add to our award-
winning leadership team in the C-suite .”
INTELLIGENT GROWTH
Centric Bank’s premier strategic goal
is to meet small business needs in
entrepreneurial, high-potential regions .
Our board and executive leadership team
are committed to smart growth and
creating new opportunity zones to fuel
job creation and American enterprise .
“As we enter our twelfth year of community
banking and crest $705 million in asset
size, we see a bright future . Our teams are
finding new efficiencies for customers,
digging into market data to help prepare
companies for the future, and managing
risk and growth . Driven by an innovative
mindset, our Centric Bank Way culture
allows employees the freedom to push
back on stale practices, to challege each
other with what ifs, and to think beyond
transactions . We spend in-person time
with our customers every day,” says Husic .
Focused on a unified user experience
(UUX) and micro-personalization,
Clair Finkenbinder III, Chief Information
Officer and Director of Operations,
led a core processing conversion with
zero disruption to the customers . “We
deployed digital Signature pads and eSign
to streamline customer account opening
processes and introduced nCino, a new
commercial lending platform that vastly
improves service and decreases time-to-
market for commercial customers,” says
Finkenbinder . Commercial loans appear
on an internal dashboard for immediate
visualization and access to data in the life
cycle of the loan . “Our improved disaster
recovery capabilities ensure our customer
data is secure and protected at all times .
Data is continuously replicated throughout
the day currently providing a Recovery
Point Objective of less than one minute,”
he says .
“With an emphasis on IT and a digital-
first strategy, we ensure our employees
have the best tools and resources to deliver
extraordinary service . Our leaders and
lenders bring fresh business insights
and financial opportunities to the small
business lending table . We serve the
people who serve
are the heart of
our bank and the
people we serve are
leading, changing,
and building
brighter futures. We
have an attractive
growth story, and
it’s deeply rooted in
the communities we
call home.
Patti Husic
President & CEO
4 C ENTRI C FINA NC I A L C ORP ORATI ON
Centric Bank was touring Artisan
Exchange, a shared kitchen that we leased,
when one of the bankers introduced herself.
Within a week, we met and started the
process of an SBA loan and a credit line.
Every time we call, the staff is super
courteous, always able to take care of our
requests, and follows up with a phone call to
make sure we’re satisfied.
Olga and Troy Sorzano, owners
Baba’s Brew
Phoenixville, Pa
5 C ENTRI C FINA NC I A L C ORP ORATI ON
INTELLI GENT GROW TH 2 018 A NNUA L REP ORT 5
ENHANCING COMMUNITIES
OF COMMERCE
Proud to be honored with a three-time Best
Places to Work and six-time Top 50 Fastest
Growing Companies award, the Centric
Bank team was ecstatic to be recognized
as a 2018 American Banker Best Banks to
Work For .
Unlocking capacity and potential includes
an investment in our 126-member
workforce . The Make Healthy Choices Fair,
Employee Appreciation Picnic, and Centric
Bank Way weekly emails fortify the brand
and affirm the value of each employee .
An Employee Assistance Program was
also added to support employees and their
families during challenging experiences .
“Our team talks the talk and walks the
walk,” says Christine Pavlakovich, SVP,
Director of Human Resources . With an
admirable employee retention rate of 90%,
the Centric family is 60% female, 37% Baby
Boomer, 34% Gen X, and 29% Millennial .
Teaching financial literacy, exploring
STEM in banking, and increasing
participation in college job fairs across
the state, Centric is attracting a diverse,
committed workforce .
As the chief brand ambassador, Patti
Husic advocates for small business in
national, statewide, and neighborhood
conversations, and the entire leadership
team looks for opportunities to share the
We Revolve Around You story . On January
17, Patti testified to the U .S . Committee
on Small Business in Washington, D .C .
in support of strengthening SBA’s 7(a)
program: “I was honored to testify to
legislators and policymakers about the
profound, life-changing benefits of SBA
loans . Pennsylvania has nearly 1 million
small business owners, and we are their
bank of potential .”
As of September 30, 2018, Centric Bank
ranked #6 in SBA 7(a) loan volume in
the Eastern District, a region serving
40 of the Commonwealth’s 67 counties .
The bank awarded 49 SBA 7(a) loans
totaling $28,203,000 with an average loan
size of $575,571 . SBA loans continue to
drive economic growth with industry
concentrations in accommodation and food
services (22 .5%), manufacturing (15%), and
arts, entertainment, and recreation (12 .9%) .
In March, Patti joined SBA Administrator
Linda McMahon on a U .S . Chamber of
Commerce panel discussing the Small
Business Index .
In April, Patti and Appalachian Brewing
Company (ABC) hosted the Administrator
on a private tour where she and her team
saw firsthand the impact of Centric’s SBA
lending power . “Most small businesses fail
because they’re undercapitalized, and our
Centric Bank lenders here were actually
talking about how they provide advice and
counsel so they can help small businesses
grow,” said SBA Administrator McMahon
to the media .
Positioning Centric Bank as a national
talent magnet for rising female bankers
strengthens the brand story and enhances
shareholder value . Patti Husic was
recognized for the fourth consecutive year
as one of the 25 Most Powerful Women in
Banking in the U .S . by American Banker .
“High performance is not the only factor
we consider when choosing women for
this list . Initiatives like Women Centric:
Prepared to Lead, which Patti developed
to facilitate getting more women in the
local business community on company
boards, demonstrate her commitment to
driving positive change beyond the bank,”
says Bonnie McGeer, Executive Editor of
American Banker and Chair of the
Most Powerful Women in Banking and
Finance program .
increase in assets to
$704,396,000
isn't just one
aspect of the game,
it is the game.
In the end, an
organization is
nothing more than
the collective
capacity of its people
to create value.
Louis V. Gerstner, Jr .
Former CEO of IBM
increase in net income
net growth in loans
6 C ENTRI C FINA NC I A L C ORP ORATI ON
When we decided to open a restaurant
of our own, a business colleague
recommended Centric Bank. They not
only worked diligently to provide a
financing package to meet our needs,
they also became a strong advocate of our
restaurant, Lumbrada. Tania Fleming
was helpful, patient, and understanding as
we started our business. Centric Bank
is a partner in our success. We would
recommend them to any business owner.
Daniel and Anselmo Torres, owners
Lumbrada Cocina Mexicana
wayne, PA
7 C ENTRI C FINA NC I A L C ORP ORATI ON
ENHA NC ING C OMMUNITIE S OF C OMME RC E 2 018 A NNUA L REP ORT 7
increase in commercial
and industrial lending
increase in deposits
Patti Husic recognized
as an American Banker
Most Powerful Women
in U.S. Banking
As former Chair of PA Bankers and
founder of the Women in Banking
initiative for the association, Patti was
proud to present the Patricia A . Husic
Woman of Influence award to an aspiring
female banker at the 2018 conference .
A commitment to diversity and inclusion
begins in the C-suite, and “See one to
be one” is the most successful driver to
advance equity in the workplace . With a
60% female executive team, the leadership
models inclusion through informal
mentoring, as well as deep engagement
in community, educational, and business
events . “Talent acquisition is how we will
continue to excel . We hire the best and
the brightest who bring diversity of ideas,
opinions, and experiences . You can’t
outwork or outlearn a Centric Bank team
member,” says Husic .
We highly recommend Centric
Bank for anyone chasing their
dreams! We talked to numerous
banks about obtaining a loan
to open Desperate Times
Brewery, but Centric Bank was
the only bank willing to help
us. We are now on our third
year of operations, and the
team has been great to work
with every step of the way.
Matt Dunn, Owner
Desperate Times Brewery
Carlisle, Pa
A COMMUNITY CONNECTED
Findings from a recent PwC Consumer
Intelligence Series (CIS) survey of 15,000
global consumers confirms what our Centric
Bank team already knows: the human
touch still matters . Seventy-five percent of
survey respondents reported they want
more human interaction in the future, not
less . We believe that regardless of how robust
your online interface, how nimble your
mobile app, or how sophisticated your VoIP
system is, customers want to know there’s a
person on the other side of the screen .
In fact, Centric Bank’s 17-person Millennial
Advisory Board sees financial centers
shifting away from being mere transactional
locations and toward becoming community
centers and gathering places .
Digitization matters, but personalization
is still king . It’s the power of personal
relationships that has propelled 26%
organic loan growth, a 21% increase in
total deposits, and a 37% increase in total
revenue . Centric’s banking experience and
services are propelling business owners to
relevance, success, and prosperity .
Beyond deposits and loans, Centric is
connecting with Gen Z, a new generation
of customers . At a recent presentation,
Patti Husic encouraged a roomful of Milton
Hershey School students: “We need problem
solvers and risk takers . We need young
people who want to change the world
and put their curiosity to work for others .
We need big thinkers!”
8 C ENTRI C FINA NC I A L C ORP ORATI ON
We were looking to purchase a commercial property for our bakery and our
realtor suggested Centric Bank. Throughout the process, they offered
personal, intimate assistance. Working with a community bank gave us the
opportunity to get to know our banker and build a relationship.
Darmayne & Robbie Robertson, owners
Sweet Confections Cakes, Inc.
harrisburg, pa
9 C ENTRI C FINA NC I A L C ORP ORATI ON
A C OMMUNIT Y C ONNE CTED 2 018 A NNUA L REP ORT 9
FINANCIAL HEALTH AND
WELLNESS
As investments in health and wellness
increase quality of life and economic vitality,
Doctor Centric Bank continues to expand
financial services to health care professionals
and meet the unique banking needs of the
medical community . For private practices,
organizations, and health care institutions,
Doctor Centric Bank provides turnkey
services in practice expansion, equipment
acquisition, facility purchase, technology
upgrades, buy-ins and buy-outs, as well
as highly personalized banking at the
convenience of medical professionals .
“When the complexity of the business of
health care overshadows opportunities for
practices to grow and expand services,
Doctor Centric Bank provides capital and
a private concierge banking solution,”
says Husic .
“Dr . Brian Sowatsky and I were engaged
with a large, multi-state Dental Service
Organization which was in the process of
reducing its assets . We were approached to
consider the purchase of the Pennsylvania
portion of the operation—a segment
consisting of multiple dental practices .
“When we were introduced to Michael
Watson and Bruce Straub, it was clear from
the very first meeting that we shared an
excellent rapport . Over the next months,
we faced numerous challenges and obstacles
that seemingly had no solution; but through
Doctor Centric Bank’s leadership and
teamwork, a transaction financing option
was created to meet our needs,” says
Dr . Thomas Dudas, Jr ., CEO of D/S Dental .
In February, Doctor Centric Bank entered
into an exclusive endorsed financing
partnership with the Pennsylvania Dental
Association and Pennsylvania Dental
Association Insurance Services . “Centric
Bank was chosen based on their leadership
in the medical concierge banking
marketplace, their deep understanding of
dental practice financing, and on the
strength of their reputation for small
business lending,” says Camille Kostelac-
Cherry, Esq ., CEO of the Pennsylvania
Dental Association .
The relationships we formed with Centric Bank over the course of
our journey have been remarkable. Their financial solution has
put our company on a path to becoming more significant in the
communities we serve and is allowing us to pursue personal and
professional goals that most people call dreams.
Thomas p. Dudas, jr., DMD, CEO & Brian d. Sowatsky, DDS, president
D/S Dental management, LLC
Lancaster, Pa
When my partners and I had a
vision to grow our dental
office into a premier dental
health care system, we realized
we needed more than a bank.
We needed a partner. We chose
Centric Bank because we felt
their core values matched our
own. Everyone we have dealt
with, from CEO Patti Husic to
the tellers at our local
financial center, has helped us
successfully purchase real
estate, build out offices,
and open six new practices in
the last 18 months. Centric has
done more than just take care
of our banking, they have
provided the support, guidance,
and creative solutions to meet
daily challenges.
Michael C. Verber, DMD, FICOI
CEO & President
Verber Dental Group
camp hill, pa
10 C ENTRI C FINA NC I A L C ORP ORATI ON
From our initial contact and prequalification
phase with Sean Burns at Centric Bank, we
were reassured we chose the right bank to guide
our family through the commercial lending
process. As extremely hands-on business owners
in all of our ventures, we truly appreciate being
treated with the same level of courtesy and
service we extend to our customers. This is a lost
art in today’s world, but not at Centric Bank!
Engaging with a bank that appreciates your
business and guides you through every step is
invaluable. Their lending process exceeded our
expectations, and we are now securing our third
loan with Sean in a little over one year.
Todd and Gayle Rindfuss, franchise owners
Duck Donuts
king of prussia, pa & collegeville, pa
FINA NC I A L HE A LTH A ND WELLNE S S 2 018 A NNUA L REP ORT 11
A BANK WITH PRESENCE
Giving back for Centric Bank is personal
and carries meaning well beyond check
donations and media mentions . Being
present means a fully engaged team
donating time, leadership, and resources
to more than 120 organizations for a total
impact exceeding $140,000 . It’s sleeves-
rolled-up time from the CEO to the interns .
The diversity of organizations Centric
champions illustrates a deep passion for
service . For example, the team supported the
American Heart Association Capital Region,
Girls on the Run Capital Area, YWCA
Bucks County and Greater Harrisburg,
Feel Your Boobies Foundation, Salvation
Army WIN, Central Pennsylvania Food
Bank, Susquehanna SCORE, Hospice of
Central PA, AJ Foundation for Children
with Autism, and Children’s Charity of the
Delaware Valley . There were 21 Dress Down
Days with participation across all financial
centers . “It doesn’t get more organic than
making sure a family has food and shelter or
the underserved have access to free health
screenings,” says Husic .
Displaying financial presence in 2018 with a
record third quarter net income of $2 .4
million, the bank also expanded their
presence through awards, achievements, and
traditional and social media stories . Sandie
Schultz, CFO, was named a Woman of
Influence by the Central Penn Business
Journal, as well as a YWCA Tribute to
Women of Excellence recipient . Centric
hosted three Women Centric: Prepared to
Lead events on topics including how to
navigate fierce conversations, how to build
powerful relationships, and how to become
a more purposeful leader . Women Centric is
committed to being the catalyst for
community, professional, and economic
growth in Centric Bank service areas . In
addition, Patti Husic was featured in
Susquehanna Style’s Women of Style and on
Women@Work with CBS 21 News anchor
Jasmine Brooks .
“We’re privileged to work in regions that are
defined by hard work ethics, a spirit of
enterprise, a heart of compassion, and a
belief in service to others—this is our creed
boldly displayed throughout our culture,”
says Husic . “As our banking becomes
increasingly digitized, you will always have
a trusted friend and loyal partner with the
individual on the other side of the screen,
keypad, or app . In an era of now service,
we promise to stand out with presence .”
Top 50
Fastest Growing
Companies
After I graduated from optometry school, my husband and I were
ready to build our forever home. Centric Bank was the only local
bank that offered a construction loan as part of a program for
recent physician graduates. As first-time homebuyers, we thought
the financial process could be complicated; however, Getty
Wilson was able to simplify everything, confidently answer our
questions, and make herself readily available. Centric Bank has
exceeded our expectations!
Logan o’neal, o.d. and Eric O’Neal
first-time homebuyers
harrisburg, Pa
Financing partner for
Pennsylvania Dental
Association
SBA 7(a) lender by
volume in Pennsylvania
12 C ENTRI C FINA NC I A L C ORP ORATI ON
post tells a story and Centric Bank’s digital
and communications strategy emphasizes
building connections with communities, small business owners, and
future banking customers. Visit us on Facebook, Instagram, LinkedIn,
Twitter, and YouTube to see our passion for making a difference.
A BA NK WITH PRE SENC E 2 018 A NNUA L REP ORT 13
i n de pe n de n t au di tor' s r e p ort
BOARD OF DIRECTORS
CENTRIC FINANCIAL CORPORATION
HARRISBURG, PENNSYLVANIA
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Centric Financial Corporation and subsidiary which comprise the
consolidated balance sheets as of December 31, 2018 and 2017; the related consolidated statements of income, comprehensive income,
changes in stockholders’ equity, and cash flows for the years then ended; and the related notes to the consolidated financial statements .
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of
internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error .
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits . We conducted our audits in
accordance with auditing standards generally accepted in the United States of America . Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement .
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements . The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error . In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control .
Accordingly, we express no such opinion . An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements .
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion .
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Centric Financial Corporation and subsidiary as of December 31, 2018 and 2017, and the results of their operations and their cash flows for
the years then ended, in accordance with accounting principles generally accepted in the United States of America .
Cranberry Township, Pennsylvania
February 26, 2019
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Note 1 | Significant Accounting Policies
Organization and Nature of Operations
Centric Financial Corporation (“Centric”) or (the “Company”) is a financial holding company which includes its wholly owned subsidiary,
Centric Bank (the “Bank”) .
The Bank comprises most of Centric’s ongoing operations . The Bank offers customers a range of deposit, loan, and other services typical of
community banks through four full service offices in south central Pennsylvania, and two loan production offices in Bucks and Lancaster
Counties, as well as online banking channels . The Bank’s principal sources of revenue is interest income generated from the portfolio of
commercial and residential real estate loans, commercial loans and consumer loans, income from the generation and subsequent sale of
loans, as well as interest income generated from the investment portfolio .
Centric is subject to regulation and supervision of the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation
(“FDIC”) .
Basis of Presentation
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America .
The accounts of Centric and the Bank are consolidated with the elimination of all significant intercompany transactions and balances .
Estimates
Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expense,
and the nature and extent of disclosures . Ultimate results could differ from those estimates and assumptions . Centric’s material estimates
that are particularly susceptible to significant change in the near term relate to the valuation of impaired loans, allowances for loan and other
credit losses, other-than-temporary impairment evaluations of securities, evaluation of goodwill impairment, deferred tax valuation, and
fair value of financial instruments .
In the ordinary course of business, Centric and the Bank are parties to legal proceedings that entail uncertainty . In management’s opinion,
Centric’s financial position and results of operations would not be materially impacted by the outcome of such proceedings individually or
in the aggregate .
Cash and Cash Equivalents
Cash and cash equivalents with original maturities of 90 days or less include cash, balances due from banks, interest-bearing demand
deposits in other banks, and federal funds sold . Federal funds sold are generally for one-day periods . The Bank is required to maintain
average balances with the Federal Reserve Bank, the required minimum balance was $845,000 and $907,000 at December 31, 2018 and
2017, respectively . The Bank is engaged in a deposit reclassification program that evaluates the unused balance of transaction accounts . The
unused portion is then reclassified as a non-transaction account for regulatory reporting only . This allows the Bank to reclaim the balances
held at the Federal Reserve Bank for investment or operating use . The Federal Reserve Bank of Philadelphia approved the use of this
program for Centric Bank .
Credit Risk Concentrations
As a community bank, most of Centric’s loans and credit commitments are comprised of Pennsylvania customers, primarily individuals and
entities situated in Dauphin, Cumberland, Lancaster, and Bucks counties . Because of the Bank’s concentration of business in these market
areas, the Company’s financial condition and results of operations, depend on the general economic conditions in the aforementioned
immediate geographic regions .
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Note 1 | Significant Accounting Policies (Continued)
Securities
Investment securities are classified when purchased as either “securities available for sale” or “securities held to maturity .”
Securities classified as “available for sale” are those debt securities that the Bank intends to hold for an indefinite period of time but not
necessarily to maturity, and are carried at fair value . Unrealized gains or losses are included in other comprehensive income, net of the
related deferred tax effect . Realized gains and losses on disposition of securities are recognized as noninterest income measured on specific
identification of the simple difference between net proceeds and adjusted book value . Premiums and discounts are recognized in interest
income using the interest method over the terms of the securities .
Securities classified as “held to maturity” are those debt securities the Bank has both the intent and ability to hold to maturity regardless of
changes in market conditions, liquidity needs, or changes in general economic conditions . These securities are carried at cost adjusted for
the amortization of premium and accretion of discount, computed by the interest method over the terms of the securities .
Securities are periodically reviewed for other-than-temporary impairment based upon a number of factors, including, but not limited to, the
length of time and extent to which market value has been less than cost, the financial condition of the underlying issuer, the ability of the
issuer to meet contractual obligations, the likelihood of the security’s ability to recover any decline in its market value, and whether or not
management intends to sell the security or whether it is more likely than not that they would be required to sell the security before its
anticipated recovery in market value, to determine whether the loss in value is other than temporary . A decline in value that is considered to
be other-than-temporary is recorded as a loss within noninterest income in the Consolidated Statement of Income .
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding
unpaid principal balances, net of any allowance for loan losses and any deferred fees or costs . Interest income is accrued on the unpaid
principal balance .
The Bank engages in lease financing for commercial customers to purchase equipment or vehicles . Leases are stated at their outstanding
unpaid principal balances, net of any deferred costs, residual receivable and unearned income . Lease contracts are classified as direct finance
leases . Lessees guarantee 100 percent of the leases’ residual value at the conclusion of the lease term .
Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of
the related loans . The Bank is generally amortizing these amounts over the contractual life of the loan .
The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or
management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing . A loan
may remain on accrual status if it is in the process of collection and is either guaranteed or well secured . When a loan is placed on
nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged
against the allowance for loan losses . Interest received on nonaccrual loans generally is either applied against principal or reported as
interest income, according to management’s judgment as to the collectability of principal . Generally, loans are restored to accrual status
when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the
ultimate collectability of the total contractual principal and interest is no longer in doubt .
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Note 1 | Significant Accounting Policies (Continued)
Allowance for Loan Losses
The allowance for loan losses is established through provisions for loan losses charged against income as losses are estimated to have
occurred . Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited
to the allowance .
The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated .
Management’s periodic evaluation of the adequacy of the allowance is based on known and inherent risks in the portfolio, adverse situations
that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current
economic conditions, and other relevant factors . This evaluation is inherently subjective, since it requires material estimates that may be
susceptible to significant change .
The allowance consists of specific and general components . The specific component relates to loans that are classified as Substandard or
Special Mention . For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral
value or observable market price) of the impaired loan is lower than the carrying value of that loan . The general component covers non-
classified loans and is based on historical loss experience adjusted for qualitative factors .
A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the
scheduled payments of principal or interest when due according to the original contractual terms of the loan agreement . Factors considered
by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal
and interest payments when due . Loans that experience insignificant payment delays and payment shortfalls generally are not classified as
impaired . Management determines the significance of payment delays and payment shortfalls 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 reasons for the delay,
the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed . Impairment is measured
on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair
value of the collateral if the loan is collateral-dependent .
Purchased loans with evidence of credit quality deterioration for which it is probable at purchase that all contractually required payments
will not be collected are acquired with deteriorated credit quality . Centric accounts for differences between contractual cash flows and cash
flows expected to be collected from an investor's initial investment in loans acquired in a transfer if those differences are attributable, at least
in part, to credit quality . Centric records impaired loans at fair value and did not carry over a valuation allowance in the initial accounting
for loans acquired in a transfer, including loans acquired in a purchase business combination . The excess of cash flows expected at purchase
over the purchase price is recognized as interest income over the life of the loans . Subsequent increases in cash flows expected to be
collected are recognized prospectively through an adjustment of the loan's yield over its remaining life . Decreases in expected cash flows are
recognized as impairments .
Unfunded Credit Commitments
In the ordinary course of business, the Bank enters into commitments to extend credit and letters of credit . Such financial instruments are
recorded when funded . A reserve for unfunded lending commitments under contract, lines and letters of credit, is included in other
liabilities .
Regulatory Stock
Under membership agreement, the Bank is required to own stock issued by Atlantic Community Bankers Bank . Because stock ownership
and disposition is restricted, the shares lack a market for measuring fair value and are recorded at cost .
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Note 1 | Significant Accounting Policies (Continued)
The Bank is also a member of the Federal Home Loan Bank (“FHLB”) of Pittsburgh and as such is required to maintain a minimum
investment in stock of the FHLB, which varies with the level of advances and letters of credit outstanding with the FHLB . The stock is
bought from and sold to the FHLB based upon its $100 par value . The stock does not have a readily determinable fair value and as such is
classified as restricted stock, carried at cost and evaluated by management . The stock’s value is determined by the ultimate recoverability of
the par value rather than by recognizing temporary declines . The determination of whether the par value will ultimately be recovered is
influenced by criteria such as the following: (a) the significance of the decline in net assets of the FHLB as compared to the capital stock
amount and the length of time this situation has persisted; (b) commitments by the FHLB to make payments required by law or regulation
and the level of such payments in relation to the operating performance; (c) the impact of legislative and regulatory changes on the customer
base of the FHLB; and (d) the liquidity position of the FHLB . Management evaluated the stock and concluded that the stock was not
impaired for the periods presented herein .
Goodwill
Goodwill represents the amount paid to acquire the Bank beyond the fair value of the identifiable net assets acquired . Goodwill is not
amortized but rather is tested for impairment . The Company utilizes a two-step process for testing the impairment of goodwill on at least an
annual basis . For federal tax purposes, goodwill is amortized on a straight-line basis over 15 years . There was no impairment of goodwill as
of December 31, 2018 or 2017 .
Mortgage Servicing Rights and Credit Enhancement Fees
The Bank previously sold residential mortgages to FHLB under the Mortgage Partnership Finance Program (“MPF”) . The Bank is no longer
an active participant in the MPF program . Under this program, the Bank continues to service the portfolio sold to the FHLB and receives
corresponding fees . MPF portfolio fees earned amounted to $5,000 and $7,000 during 2018 and 2017 . The MPF portfolio balance was
$1,213,000 and $1,553,000 at December 31, 2018 and 2017, respectively . The FHLB maintains a first-loss position for the MPF portfolio that
totals $315,000 . Should the FHLB exhaust its first-loss position, recourse to the Bank’s credit enhancement would cover the next $8,000 of
losses . The Bank has not experienced any losses for the MPF portfolio . There were no credit enhancement fees receivable, net of an
estimated liability, at December 31, 2018 or 2017 .
The Bank sells the guaranteed portion of Small Business Administration (SBA) approved loans . The loans are serviced by the Bank and
generate corresponding mortgage servicing rights . The portfolio balance of SBA loans generating mortgage servicing rights was $77,234,000
and $57,617,000 at December 31, 2018 and 2017, respectively . Additionally, they are subject to an impairment analysis based on their fair
value in future periods . The Bank did not record any impairment of the mortgage servicing assets in 2018 or 2017 . The mortgage servicing
rights balance at December 31, 2018 and 2017 and the activity that occurred during the year consisted of the following:
Transfers of Financial Assets
The Bank sells interests in loans receivable through loan participation sales . The Bank accounts for these transactions as sales, when control
over the assets has been surrendered . Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated
from the Bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or
exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets through an agreement to
repurchase them before their maturity .
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Note 1 | Significant Accounting Policies (Continued)
The Bank retains servicing responsibilities for the loan participation sales . The Bank does not recognize a servicing asset or liability, since
the amount received for servicing the loan participations is a reasonable approximation of market rates and servicing costs .
Advertising and Marketing Costs
The Bank charges advertising costs to expense as incurred .
Earnings Per Share
Basic earnings per share represents income available to common stockholders divided by the weighted-average number of shares
outstanding during the period . Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive
potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance . Potential
common shares that may be issued by Centric relate to outstanding stock options and warrants and non-vested restricted stock .
Options and warrants to purchase, 1,261 and 23,074 shares of common stock, at a weighted-average price of $11 .55 and $7 .02, outstanding
at December 31, 2018 and 2017, respectively; and unvested restricted shares of 9,421 and 8,154 at December 31, 2018 and 2017, at a
weighted-average price of $10 .32 and $6 .11, respectively, were not included in dilutive earnings per share because the result would be anti-
dilutive .
Stock-Based Compensation
Centric records the cash flow from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for stock-
based awards (excess tax benefit) as an increase or deduction from income tax expense . During 2018 and 2017, $246,000 and $41,000 in
stock options were exercised, with a tax benefit of $53,000 and $2,000, respectively . No warrants were exercised during 2018 or 2017 .
Accumulated Other Comprehensive Loss
Centric recognizes revenue, expenses, gains, and losses in net income . Certain changes in assets and liabilities, such as unrealized gains and
losses on available-for-sale securities, are reported as a separate component of the equity section of the Consolidated Balance Sheet .
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Note 1 | Significant Accounting Policies (Continued)
Such items are included as components of accumulated other comprehensive loss, as follows, net of taxes:
There were no amounts reclassified out of any components of accumulated other comprehensive loss for 2018 or 2017 . The Consolidated
Balance Sheet presents “available-for-sale” securities at fair value . Corresponding unrealized gains and losses do not affect net income but
are recorded in accumulated other comprehensive loss, net of related deferred income taxes .
Note 2 | Revenue Recognition
Effective January 1, 2018, the Company adopted Accounting Standards Update ASU 2014-09 Revenue from Contracts with Customers –
Topic 606 and all subsequent ASUs that modified ASC 606 . The Company has elected to apply the standard to all prior periods presented
utilizing the full retrospective approach . The implementation of the new standard had no material impact to the measurement or
recognition of revenue of prior periods . Management determined that the primary sources of revenue emanating from interest income on
loans and investments along with noninterest revenue resulting from net gain on sale of loans, other loan fees and servicing income, and
earnings of cash surrender value of life insurance are not within the scope of ASC 606 . As a result, no changes were made during the period
related to these sources of revenue, which cumulatively comprise 98 .8 percent of the total revenue of the Company . The main types of
noninterest income within the scope of the standard are as follows:
Service charges on deposit accounts
The Company has contracts with its deposit customers where fees are charged if certain parameters are not met . These agreements can be
cancelled at any time by either the Company or the deposit customer . Revenue from these transactions is recognized on a monthly basis as
the Company has an unconditional right to the fee consideration . The Company also has transaction fees related to specific transactions or
activities resulting from a customer request or activity that include overdraft fees, cycle service fees, online banking fees, interchange fees,
ATM fees and other transaction fees . All of these fees are attributable to specific performance obligations of the Company where the revenue
is recognized at a defined point in time upon the completion of the requested service/transaction .
Gain (loss) on sale of other real estate owned and other assets
Gains and losses are recognized at the completion of the sale when the buyer obtains control of the real estate and all of the performance
obligations of the Company have been satisfied . Evidence of the buyer obtaining control of the asset include transfer of the property title,
physical possession of the asset, and the buyer obtaining control of the risks and rewards related to the asset . In situations where the
Company agrees to provide financing to facilitate the sale, additional analysis is performed to ensure that the contract for sale identifies the
buyer and seller, the asset to be transferred, payment terms, and that the contract has a true commercial substance and that collection of
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Note 2 | Revenue Recognition (Continued)
amounts due from the buyer are reasonable . In situations where financing terms are not reflective of current market terms, the transaction
price is discounted impacting the gain/loss and the carrying value of the asset .
The Company determined that the level of disaggregation of revenue as reported on the Consolidated Statement of Income provided a
sufficient level of detail in order to properly analyze the significant revenue streams of the Company and therefore no further disaggregation
of any revenue streams within the scope of ASC 606 was considered to be necessary .
Note 3 | Investment Securities
A summary of securities available for sale is as follows:
A summary of securities held to maturity is as follows:
Securities with a fair value of $21,051,000 and $7,914,000 were pledged to collateralize bank deposits by Pennsylvania local governments
and the discount window as of December 31, 2018 and 2017, respectively .
No securities were sold during 2018 or 2017 .
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Note 3 | Investment Securities (Continued)
The amortized cost and fair value of debt securities owned at December 31, 2018, by contractual maturity, are shown below:
A summary of securities which were in an unrealized loss position is as follows:
Securities are evaluated on an ongoing basis to determine whether a decline in their value is other-than-temporary . For debt securities,
management considers whether the present value of cash flows expected to be collected is less than the security’s amortized cost basis (the
difference defined as the credit loss), the magnitude and duration of the decline, the reasons underlying the decline and management’s intent
to sell the security or whether it is more likely than not that they would be required to sell the security before its anticipated recovery in
market value, to determine whether the loss in value is other-than-temporary . Once a decline in value is determined to be other-than-
temporary, if the investor does not intend to sell the security, and it is more likely than not that it will not be required to sell the security,
before recovery of the security’s amortized cost basis, the charge to earnings is limited to the amount of credit loss . Any remaining difference
between fair value and amortized cost (the difference defined as the non-credit portion) is recognized in other comprehensive income, net
of applicable taxes . Otherwise, the entire difference between fair value and amortized cost is charged to earnings .
Centric reviews investment securities on an ongoing basis for potential impairment which would be other-than-temporary and has adopted
the provision which provides for the bifurcation of OTTI into two categories: (a) the amount of the total OTTI related to a decrease in
expected cash flows to be collected (credit loss) which is recognized through earnings; and (b) the amount of OTTI related to all other
factors, which is recognized, net of income taxes, as a component of other comprehensive income . For the year ended December 31, 2018
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Note 3 | Investment Securities (Continued)
and 2017, Centric did not record any credit-related impairment . There were 34 securities that were temporarily impaired at
December 31, 2018 .
Changes in credit losses during 2018 and 2017 associated with investment securities for which other-than-temporary impairment losses
have been previously recognized in both earnings and other comprehensive income follows:
Note 4 | Loans
The composition of loans, net of unamortized loan origination fees of $3,355,000 and $2,459,000 at December 31, 2018 and 2017,
respectively, are as follows:
Note 5 | Allowance for Loan Losses
Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses
inherent in the loan portfolio . For purposes of determining the allowance for loan losses, the Bank has grouped certain loans in the portfolio
into the following segments: commercial; real estate - construction; real estate - residential owner occupied; real estate - residential non-
owner occupied; real estate - commercial; and consumer . Historical loss percentages for each risk category are calculated and used as the
basis for calculating allowance allocations . These historical loss percentages are calculated over a three-year period for all portfolio
segments . Certain qualitative factors are then added to the historical allocation percentage to get the adjusted factor to be applied to non-
classified loans . The following qualitative factors are analyzed for each portfolio segment:
n Levels of and trends in delinquencies and nonaccruals
n Trends in volume and terms of loans
n Changes in lending policies, underwriting and procedures
n Volatility of losses within each risk category
n Trends in underlying collateral values
n Economic factors
n Concentrations of credit
n Experience, depth and ability of management
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Note 5 | Allowance for Loan Losses (Continued)
The total allowance reflects management's estimate of loan losses inherent in the loan portfolio at the balance sheet date .
The Bank considers the allowance for loan losses of approximately $6,913,000 adequate to cover loan losses inherent in the loan portfolio,
as of December 31, 2018 .
Allowance for loan losses activity during 2018 is as follows:
During 2018 the allowance for commercial loans increased due to increased volume of loans, an increase in the historical loss factor as
charge-offs increased, offset by a decrease in classified loans . Real estate - construction reserves increased primarily due to increased
volume . Real estate – residential non-owner occupied reserves decreased due to a significant decrease in historical loss factors . The increase
in reserves for real estate – commercial were driven largely by an increase in loan volume, an increase in classified loans, offset slightly by a
decline in the historical loss factors . The changes in the reserve for the remaining portfolio segments were primarily due to changes in
volume .
Allowance for loan losses activity during 2017 is as follows:
During 2017 the allowance for commercial loans increased due to increased volume of loans an increase in the historical loss factor as
recoveries decreased, as well as an increase in classified loans, and specific reserves for impaired loans . Real estate - construction reserves
increased primarily due to an increase in the volume and terms of loans . The increase in reserves for real estate – commercial were driven
largely by an increase in loan volume and also by a slight increase in loss adjustments, and off set slightly by a decline in the historical loss
factor in multifamily loans . The changes in the reserve for the remaining portfolio segments were primarily due to changes in volume .
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Note 5 | Allowance for Loan Losses (Continued)
The following tables present, by portfolio segment, the allowance for loan losses broken down between loans individually evaluated for
impairment and loans collectively evaluated for impairment, as well as the recorded investment in those loans:
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Note 5 | Allowance for Loan Losses (Continued)
Credit Quality and Aging
The following tables represent credit exposures for the Bank’s commercial loan classes by internally assigned grades for the periods ended
December 31, 2018 and 2017 . The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan
agreements as scheduled or at all . The Bank's internal credit risk grading system is based on experiences with similarly graded loans .
The Bank's internally assigned grades are as follows:
n Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral .
n Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected .
n Substandard – loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that
the Bank will sustain some loss if the deficiencies are not corrected .
n Doubtful – Loans classified as “Doubtful” have all the weaknesses inherent in a Substandard asset . In addition, these weaknesses make
collection or liquidation in full highly questionable and improbable, based on existing circumstances .
n Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted .
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Note 5 | Allowance for Loan Losses (Continued)
Payment activity for the noncommercial portfolio is reviewed by management on a monthly basis to determine how loans are performing .
Loans are considered nonperforming when they become 90 days past due or the Bank is in possession of other information that would
deem the loan nonperforming .
The following tables present performing and nonperforming loans based on payment activity for the period ended:
Past-Due and Nonaccrual Loans
Generally, loans will be considered nonaccrual upon reaching 90 days of delinquency, although the Bank may be receiving partial payments
of interest and partial repayments of principal on such loans . When a loan is placed in nonaccrual status, previously accrued but unpaid
interest is deducted from interest income . Payment activity is reviewed by management on a monthly basis to determine how loans are
performing . Loans are generally considered to be nonperforming when they become 90 days past due .
The following table presents an aging analysis of the recorded investment of past-due financing receivables, broken down by segment and
sub-segment, based on payment activity for the years ended December 31, 2018 and 2017 .
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Note 5 | Allowance for Loan Losses (Continued)
At December 31, 2018 there were $1,211,000 of loans 90 days past due or greater still accruing interest . There were no loans 90 days past due
or greater still accruing interest at December 31, 2017 .
Impaired Loans
Management analyzes commercial and commercial real estate loans which are 90 days or more past due for impairment to determine if it is
probable that all amounts will not be collected according to the contractual terms of the loan agreement . Additionally, any loan modified in
a troubled debt restructuring is impaired regardless of the loan class . If management determines that the value of the impaired loan is less
than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs, and unamortized premium or discount),
impairment is recognized through an allowance estimate or a charge-off to the allowance .
The following tables include the recorded investment and unpaid principal balances for impaired financing receivables with the associated
allowance amount, if applicable, as of and for the periods ended December 31, 2018 and 2017 .
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Note 5 | Allowance for Loan Losses (Continued)
Loan Modifications
Situations may arise that would cause the Bank to grant a concession for other-than-temporary purpose to a borrower experiencing
financial difficulty that the Bank would not otherwise consider . The loan receiving the concession would then be classified as a troubled debt
restructuring (“TDR”) . The situations leading to the concession may be economic or legal in nature and affect the borrower’s ability to meet
the contractual obligation to the Bank . Management actively attempts to identify borrowers having financial difficulty early, and work with
them to modify terms prior to the loan becoming nonaccrual . Modifications may include rate reductions, payment forbearance, principal
reduction, or other actions with the intent to minimize the loss and/or avoid foreclosure or repossession of collateral . In cases where a
restructure occurs, management measures impairment based on collateral to support the revised terms of the loan . If the loan is not
collateral dependent, impairment is calculated using the present value of the revised loan terms compared to the recorded investment in the
loan at the measurement date . TDRs are individually evaluated and provided for in the allowance for loan losses and are therefore excluded
from pooled portfolio allocations . Management continually evaluates loans that are considered TDRs under the modified loan terms,
including payment history and the borrower’s ability to continue to repay the loan based on continued evaluations of their results of
operation and cash flow from operations .
No loan modifications considered TDRs were completed during the twelve month periods ended December 31, 2018 and 2017 .
Amounts within the allowance for loan losses allocated to TDRs are $311,000 and $330,000 at December 31, 2018 and 2017, respectively .
Foreclosed Assets
Foreclosed assets acquired in settlement of loans, or received via a deed in lieu transaction prior to the period end, are carried at fair value,
less estimated costs to sell, and are included in other assets on the Consolidated Balance Sheet . There were no foreclosed assets remaining as
of December 31, 2018 . Foreclosed assets, comprised of consumer residential mortgages, amounted to $506,000 at December 31, 2017 . As of
December 31, 2018, the Company has initiated formal foreclosure proceedings on $20,000 of consumer residential mortgages, which have
not yet been transferred into foreclosed assets .
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Note 6 | Premises and Equipment
Ongoing additions to premises and equipment are recorded at cost . Occupancy and equipment expense includes depreciation expense of
$519,000 and $486,000 for the years ended December 31, 2018 and 2017, respectively . Depreciation expense is calculated on the straight-
line method over estimated economic lives: buildings and improvements, 15 to 40 years; leasehold improvements, 10 years; furniture,
fixtures, and equipment, 3 to 10 years . Disposals during 2018 amounted to $73,000, and resulted in a net gain on disposal of $11,000 .
Premises and equipment were comprised of the following:
Commitments payable related to the building of a branch and renovating leased space, amounted to $154,000, and commitments payable
related to software systems and computer network equipment and services amounted to $291,000 .
Lease expense amounted to $753,000 and $423,000 for the years ended December 31, 2018 and 2017, respectively . Future minimum lease
payments as of December 31, 2018 are as follows:
Note 7 | Deposits
Centric’s deposits were comprised of the following:
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Note 7 | Deposits (Continued)
Scheduled maturities of time deposits are as follows:
Time deposits in denominations greater than $250,000 totaled $112,223,000 and $51,350,000 for December 31, 2018 and 2017, respectively .
Note 8 | Short-Term Borrowings
Short-term borrowings, which consist of federal funds purchased and other short-term borrowings are summarized as follows:
Average amounts outstanding during the year represent daily averages . Average interest rates represent interest expense divided by the
related average balances . These borrowing transactions can range from overnight to one year in maturity . The average maturity was 114 days
for the year ended December 31, 2018 . The average maturity was 58 days for the year ended December 31, 2017 .
Note 9 | Long-Term Debt
As one avenue for funding, the Bank is approved by the FHLB for borrowings of up to $299,672,000 of which $30,000,000 was outstanding
in the form of advances and $67,035,000 was outstanding in the form of letters of credit at December 31, 2018 . Advances from the FHLB are
secured by qualifying assets of the Bank .
During 2015, the Company issued $6,000,000 in junior subordinated debentures, which are held by a financial institution . The debt bears
interest at a fixed rate of 4 .85 percent until December 2020, at which time the interest rate converts to a floating rate equal to Prime Rate
plus one percent with a floor of 4 .25 percent . The Company maintains the ability to redeem the debenture on or after December 2020 .
During 2017, the Company issued $4,000,000 in additional subordinated debentures to four institutions all with the following terms: fixed
rate of 5 .50 percent for five years, then to a floating rate of WSJ prime + 1 .00 percent, each maturing in June 2027 . The Company maintains
the ability to redeem these debentures on or after June 2022 . Subordinated debentures issued by the company are unsecured .
A $6,000,000 borrowing, issued by the Company, was outstanding at December 31, 2018 and 2017, with a rate of 4 .85 percent, maturing
in April 2022 .
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Note 9 | Long-Term Debt (Continued)
The following table presents borrowings that mature at various dates through 2027 with weighted-average rates as follows:
The aggregate amount of future principal payments required on these borrowings at December 31, 2018, is as follows:
Note 10 | Stock Plans and Other Employee Benefits
401(k) Plan
The Bank has a 401(k) plan whereby all employees are eligible to participate after 90 days of employment . Employees may make
contributions to the plan, subject to certain limitations based on federal tax laws . The Bank makes matching contributions of 50 percent of
employees’ contributions, subject to a maximum contribution of 6 percent of an employee’s compensation . Matching contributions vest to
the employee on a graded percentage and are fully vested in five years . For the years ended December 31, 2018 and 2017, expense
attributable to the plan amounted to $143,000 and $116,000, respectively . These expenses are included in salaries and employee benefits on
the Consolidated Statement of Income .
Supplemental Executive Retirement Plan
During the year ended December 31, 2018, the Company entered into deferred compensation agreements with certain members of
executive management which provide benefits payable beginning at age sixty seven, or upon subsequent retirement from the Company, or if
the executive(s) becomes totally disabled . Under certain circumstances, benefits are payable to designated beneficiaries . The present value of
the estimated liability under the agreement is being accrued using a discount rate of 4 .0% ratably over the remaining years to the date when
the executives are first eligible for benefits . The deferred compensation charged to expense totaled $70,000 for the year ended December 31,
2018 . As of December 31, 2018, the total accrued liability is $70,000 .
Stock Options and Warrants
The Company’s Stock Incentive Plan of 2007 (the “2007 Plan”) enables the Company to grant stock options, warrants, or restricted stock to
directors and other designated employees . Shares from the 2007 Plan were issued from 2007 through 2017, and each issuance of this plan
have an expiration date of ten years . The Stock Incentive Plan of 2017 (the “2017 Plan”) was approved by shareholder vote during the 2017
Annual Meeting and will expire in 2027 . The 2017 Plan covers 250,000 shares of common stock and each issuance of this plan have an
expiration date of ten years . .
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Note 10 | Stock Plans and Other Employee Benefits (Continued)
The number of shares available for grant at December 31, 2018 was 209,875 .
Options granted under the Plan will have an option price at least equal to the fair market value of the common stock on the date of the
grant . The options expire not more than ten years after the date of the grant . Exercise and vesting dates and terms may vary and are specified
at the date of the grant .
Options and warrants of the Plans outstanding at December 31, 2018, and the activity that occurred during the year consisted of the
following:
At December 31, 2018, the aggregate intrinsic value of all options is $419,000 and $361,000 outstanding and exercisable, respectively .
At December 31, 2018, the weighted-average remaining life of outstanding options is 5 .27 years and exercisable options is 4 .10 years . Stock
options of 44,388 and 7,444 were exercised at a weighted average price of $5 .57 and $5 .35 during 2018 and 2017, respectively .
For the years ended December 31, 2018 and 2017, stock option compensation expense of $20,000 and $8,000 was recognized in connection
with the option plan, respectively . A tax benefit of $3,000 and $3,000 was recognized relative to these stock options at December 31, 2018
and 2017, respectively . As of December 31, 2018, related future compensation expense is $18,000, $12,000 and $6,000 for 2019, 2020, and
2021, respectively .
In addition to the options and warrants included in the Plan above, during 2010, the Company also granted one warrant to each of the
directors of the Company, which are not part of the Plan . Each warrant represents the right to purchase 31,500 shares for a total of 315,000
shares at December 31, 2018 and 2017 . These warrants would vest only upon a change in control of the Company and have an exercise price
of $5 .44 . A warrant was issued to the President and Chief Executive Officer in July 2013 also for 31,500 shares at an exercise price of $5 .50
and will vest only upon a change in control of the Company . During 2018 and 2017, no warrants vested and the Company recorded no
compensation expense associated with these grants .
The fair value of the options granted for the years ended December 31, 2018 and 2017, was calculated using the Black-Scholes option pricing
model with the following weighted-average assumptions:
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Note 10 | Stock Plans and Other Employee Benefits (Continued)
Restricted Stock
As of December 31, 2018, over the life of the plans, the Company has awarded 49,688 and 16,197 restricted shares under the 2007 Plan and
2017 Plan, respectively, to non-employee directors and officers subject to vesting and other provisions .
The following table summarizes transactions regarding restricted stock under the Plan:
For the years ended December 31, 2018 and 2017, compensation expense of $71,000 and $48,000 was recognized in connection with the
vesting of restricted stock, respectively . Tax benefits of $15,000 and $16,000 were recognized relative to these shares at December 31, 2018
and 2017, respectively . Future compensation expense related to non-vested restricted stock at December 31, 2018 is $78,000, $58,000 and
$22,000 in 2019, 2020 and 2021, respectively .
Employee Stock Purchase Plan
The Company approved and implemented an Employee Stock Purchase Plan (ESPP) in 2015 . This plan is intended to provide employees of
Centric Financial Corporation and its subsidiary with an opportunity to acquire an interest in the Company through the purchase of
common stock . Under the plan, eligible employees may purchase shares at fair market value, with no restrictions on the amount of shares
they can purchase, up to a 5% ownership of combined voting power or value of all classes of stock of the Company . The Company reserved
200,000 shares of its common stock subject to adjustment of shares and price due to any recapitalization, reorganization, reclassification,
stock dividends, combination of shares, or similar event in which the number or kind of shares is changed . Over the life of the plan, 15,223
shares have been issued . The number of shares issued during 2018 and 2017 was 6,811 and 4,295, respectively .
Note 11 | Federal Income Taxes
The provision for income taxes consists of the following for the period ended:
The December 22, 2017 passage of the Tax Cuts and Jobs Act reduced the base federal corporate tax rate from 35% to 21% effective January
1, 2018 . GAAP requires corporations with net deferred tax assets or liabilities to account for the adjustment in the period enacted . As a
result, the carrying value of net deferred tax assets was reduced, which increased income tax expense by $800,000 in 2017 .
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Note 11 | Federal Income Taxes (Continued)
The following temporary differences gave rise to the net deferred tax assets at December 31:
The total provision for income taxes is different from that computed at the statutory rates due to the following items for the years ended
December 31:
The Company utilizes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return . Benefits from tax positions should be recognized in the financial statements only
when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have
full knowledge of all relevant information . A tax position that meets the more-likely-than-not recognition threshold is measured at the
largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement . Tax positions that previously failed
to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which
that threshold is met . Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be
derecognized in the first subsequent financial reporting period in which that threshold is no longer met .
There is currently no liability for uncertain tax positions and no known unrecognized tax benefits . The Company recognizes, when
applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statement of
Income . With few exceptions, the Company is no longer subject to U .S . federal, state, or local income tax examination by tax authorities for
years before 2015 .
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Note 12 | Related-Party Transactions
Centric has transactions in the ordinary course of business with its directors, their immediate families, and affiliated companies (commonly
referred to as related parties) .
In management’s opinion, all loans and deposits with related parties are on the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other customers . At December 31, 2018, loans to related parties were $3,182,000 and
deposits by related parties totaled $5,675,000 . At December 31, 2017, loans to related parties were $5,431,000 and deposits by related parties
totaled $7,181,000 .
Related-party loan activity is summarized as follows:
All of Centric’s directors are customers of the Bank . As of December 31, 2018, Centric’s shareholders number 339, many of which are Bank
customers situated in the south central Pennsylvania community . Conversely, the Bank is a customer of some shareholder-related entities in
the ordinary course of business . For the years ended December 31, 2018 and 2017, related-party transactions include $1,000 and $9,000 of
purchases, respectively . There was no revenue generated on related-party transactions for any of the periods listed .
Note 13 | Unfunded Credit Commitments
The Company is a 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 letters of credit by the Bank . Such instruments involve,
to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet .
The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument is represented by the
contractual amount of those instruments . The Bank uses the same credit policies in making commitments and conditional obligations as it
does for on-balance sheet instruments .
Unfunded lending commitments at year-end:
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 . Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements . Commitments generally have fixed expiration dates or other termination clauses and may
require payment of a fee . The Bank evaluates each customer’s creditworthiness on a case-by-case basis .
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Note 13 | Unfunded Credit Commitments (Continued)
The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation . Collateral held
varies but may include personal or commercial real estate, accounts receivable, inventory, and equipment . Commitments under lines of credit
presented above include lines that will be funded only to the extent that the Bank receives corresponding augmentation of satisfactory collateral .
Outstanding letters of credit are conditional commitments issued by the Bank to guarantee performance of a customer to a third-party and
are reviewed annually . The credit risk involved in issuing letters of credit is essentially the same as in extending comparable loans to
customers . The Bank requires collateral supporting these letters of credit as deemed necessary . Management believes that the proceeds
through liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the
corresponding guarantees .
Note 14 | Regulatory Matters
The Company and the Bank are subject to the Basel III Capital Rules that were effective at the beginning of 2015 . These rules introduced the
“capital conservation buffer”, which will be phased in over a four-year period . Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s
assets, liabilities, and certain off-balance-sheet items as calculated under U .S . GAAP, regulatory reporting requirements, and regulatory
capital standards . 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 Company's financial statements . The Bank’s capital
amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors .
Quantitative measures established by regulatory capital standards to ensure capital adequacy require the Bank to maintain minimum
amounts and ratios (set forth in the following table) of total and Tier 1 capital to risk-weighted assets, common equity Tier 1 capital to total
risk-weighted assets, and of Tier 1 capital to average assets . Management believes, as of December 31, 2018 and 2017, that the Bank met all
capital adequacy requirements to which it was subject .
As of December 31, 2018, the Bank is categorized as well capitalized under the regulatory framework for prompt corrective action . To be
categorized as well capitalized the Bank must maintain minimum total risk-based capital, Tier 1 risk-based capital, common equity Tier 1
risk-based capital, and Tier 1 leverage ratios as set forth in the table . There are no conditions or events since that notification that
management believes have changed the Bank’s category . The Company and the Bank’s capital ratios as of December 31, 2018 and 2017,
are presented below:
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Note 14 | Regulatory Matters (Continued)
Dividends are generally restricted by federal banking laws based upon regulatory defined profit . The Company does not intend to declare
cash dividends for the foreseeable future .
Note 15 | Fair Value Measurements
The following disclosures show the hierarchal disclosure framework associated with the level of pricing observations utilized in measuring
assets and liabilities at fair value . The three broad levels are defined as follows:
Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date .
Level II:
Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the
reported date . The nature of these assets and liabilities includes items for which quoted prices are available but traded less
frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed .
Level III: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are
unobservable .
This hierarchy requires the use of observable market data when available .
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Note 15 | Fair Value Measurements (Continued)
The following tables present the assets reported on the Consolidated Balance Sheet at their fair value as of December 31, 2018 and 2017, by
level within the fair value hierarchy . Financial assets and liabilities are classified in their entirety based on the lowest level of input that is
significant to the fair value measurement .
Investment Securities
The fair market value of investment securities 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 . Fair value for certain held-to-maturity securities were determined utilizing
discounted cash flow models, due to the absence of a current market to provide reliable market quotes for the instruments .
Impaired Loans
The Company has measured impairment on loans generally based on the fair value of the loan’s collateral . Fair value is generally determined
based upon independent third-party appraisals of the properties . In some cases, management may adjust the appraised value due to the age
of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed . Additionally,
management makes estimates about expected costs to sell the property which are also included in the net realizable value . If the fair value of
the collateral dependent loan is less than the carrying amount of the loan, a specific reserve for the loan is made in the allowance for loan
losses, or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included in the
table above as a level III measurement . If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is not
included in the table above as it is not currently being carried at its fair value . At December 31, 2018 and 2017, the fair values shown above
exclude estimated selling costs of $46,000 and $8,000 .
Other Real Estate Owned
OREO is carried at the lower of cost or fair value measured at the date of foreclosure . If the fair value of the collateral exceeds the carrying
amount of the loan, no charge-off or adjustment is necessary, the loan is not considered to be carried at fair value, and is, therefore, not
included in the table above . If the fair value of the collateral is less than the carrying amount of the loan, management will charge the loan
down to its estimated realizable value . The fair value of OREO is based on the appraised value of the property, which is generally unadjusted
by management and is based on comparable sales for similar properties in the same geographic region as the subject property, and is
included in the above table as a Level II measurement . In some cases, management may adjust the appraised value due to the age of the
appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed . In this case, the
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Note 15 | Fair Value Measurements (Continued)
property is categorized in the above table as level III measurement, because the adjustment is considered to be an “unobservable” input .
Income and expenses from operations and further declines in the fair value of the collateral subsequent to foreclosure are included in net
expenses from OREO . For the years ended December 31, 2018 and 2017, write-downs of the same one property were required in each year,
and therefore are considered to be carried at fair value . This remaining property was sold during 2018, and no properties remained in
OREO at the end of 2018 .
The following tables present quantitative information about the Level III significant unobservable inputs for assets and liabilities measured
at fair value on a non-recurring basis at December 31, 2018 and 2017 .
Note 16 | Fair Value of Financial Instruments
The fair value of the Company’s financial instruments that are not carried at fair value on the Consolidated Balance Sheet is as follows:
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Note 16 | Fair Value of Financial Instruments (Continued)
Cash and Cash Equivalents, Investments in Certificates of Deposits, Regulatory Stock, Cash Surrender Value Life Insurance, Accrued
Interest Receivable, Non-maturity deposits, Short-term borrowings, and Accrued Interest Payable
The fair value is equal to the current carrying value .
The methods of determining the fair value of assets and liabilities presented in the note are consistent with our methodologies in the prior
year, except for the valuation of loans held for investment which was impacted by the adoption of ASU 2016-01 . In accordance with ASU
2016-01, the fair value of loans held for investment, excluding impaired loans measured at fair value on a non-recurring basis, is estimated
using discounted cash flow analyses . The discount rates used to determine fair value use interest rate spreads that reflect factors such as
liquidity, credit and nonperformance risk of the loans . Loans are considered a Level 3 classification .
Note 17 | Adoption of Accounting Policies
In May 2014, the FASB issued ASU No . 2014-09, “Revenue from Contracts with Customers .” The standard’s core principle is that a company
will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the
company expects to be entitled in exchange for those goods or services . Subsequent to the issuance of ASU 2014-09, the FASB issued
targeted updates to clarify specific implementation issues including ASU No . 2016-08, “Principal versus Agent Considerations (Reporting
Revenue Gross versus Net),” ASU No . 2016-10, “Identifying Performance Obligations and Licensing,” ASU No . 2016-12, “Narrow-Scope
Improvements and Practical Expedients,” and ASU No . 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from
Contracts with Customers .” For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the
standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most
current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of
initial application . Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that
are accounted for under other GAAP, the new guidance did not have a material impact on revenue most closely associated with financial
instruments, including interest income and expense . The Company completed its overall assessment of revenue streams and review of
related contracts potentially affected by the ASU, including service charges on deposit accounts, other loan fees, gain/loss on sale of other
real estate owned and other assets, and certain components of other noninterest income . Based on this assessment, the Company concluded
that ASU 2014-09 did not materially change the method in which the Company currently recognizes revenue for these revenue streams . The
Company also completed its evaluation of certain costs related to these revenue streams to determine whether such costs should be
presented as expenses or contra-revenue (i .e ., gross vs . net) resulting in no material reclassifications of income or expense . The Company
adopted ASU 2014-09 and its related amendments on its required effective date of January 1, 2018 utilizing the full retrospective approach .
Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was
not deemed necessary . See Note 2 Revenue Recognition for more information .
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Note 17 | Adoption of Accounting Policies (Continued)
In January 2016, the FASB finalized ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of
Financial Assets and Financial Liabilities . This accounting standard (a) requires separate presentation of equity investments (except those
accounted for under the equity method of accounting or those that result in consolidation of the investee) on the balance sheet and
measured at fair value with changes in fair value recognized in net income; (b) simplifies the impairment assessment of equity investments
without readily determinable fair values by requiring a qualitative assessment to identify impairment; (c) eliminates the requirement to
disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (d) eliminates the
requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required
to be disclosed for financial instruments measured at amortized cost on the balance sheet; (e) requires public business entities to use the exit
price notion when measuring the fair value of financial instruments for disclosure purposes; (f) requires separate presentation of financial
assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the
balance sheet or the accompanying notes to the financial statements; and (g) clarifies that an entity should evaluate the need for a valuation
allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets .
The Company has adopted this standard during the reporting period . On a prospective basis, the Company implemented changes to the
measurement of the fair value of financial instruments using an exit price notion for disclosure purposes included in Note 16 to the financial
statements . The December 3l, 2018, fair value of each class of financial instruments disclosure utilized the exit price notion when measuring
fair value and, therefore, may not be comparable to the December 3l, 2017 disclosure .
In February 2018, the FASB issued ASU No . 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive
Income .” This ASU allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for certain
income tax effects stranded in AOCI as a result of the Tax Act . Consequently, the reclassification eliminates the stranded tax effects resulting
from the Tax Act and is intended to improve the usefulness of information reported to financial statement users . However, because the ASU
only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires the effect of a change in tax
laws or rates to be included in income from continuing operations is not affected . ASU No . 2018-02 is effective for the Company's reporting
period beginning on January 1, 2019; early adoption is permitted . The Company elected to adopt ASU No . 2018-02 during the first quarter
of 2018, and elected to reclassify the income tax effects of the Tax Act from AOCI to retained earnings . The reclassification decreased AOCI
and increased retained earnings by approximately $36,000, with no effect on total stockholders’ equity .
Note 18 | Stock Offering
On May 21, 2018, the Company began a private placement offering to “accredited investors” (as defined in Regulation D promulgated under
the Securities Act of 1922, as amended) offering up to 2,162,163 shares of common stock at a purchase price of $9 .25 per share . The
Company’s private placement offering was fully subscribed by the close of the offering on June 30, 2018, issuing a total of 2,275,000 shares at
an offering price of $9 .25 per share . The direct costs of the offering through December 31, 2018 totaled $1,355,000, resulting in additional
capital of $19,689,000 during 2018 .
Note 19 | Subsequent Events
Management has reviewed events occurring through February 26, 2019, the date the financial statements were issued, and no subsequent
events have occurred requiring accrual or disclosure .
FINA NC I A L S 2 018 A NNUA L REP ORT 47
B OA R D OF DI R E C TOR S
Front row (left to right): Jeffrey W . Keiser, DDS, Partner & President, Forest Hills Dental Associates, P .C .; Donald E . Enders, Jr ., Chairman
of the Board, President & CEO, Colonial Park Realty Company, t/a Enders Insurance Associates; Patricia A . Husic, President & CEO,
Centric Financial Corporation and Centric Bank; and Frank A . Conte, CLU, ChFC, Founding Partner, Conte Wealth Advisors, LLC .
Back row (left to right): Nicole S . Kaylor, Attorney, McNees Wallace & Nurick, LLC; Thomas H . Flowers, CPA, Managing Partner,
Flowers & Flowers CPAs; John A . Maher, CPA, Vice Chairman of the Board, Pennsylvania House of Representatives (Retired);
Kerry A . Pae, Secretary for Centric Financial Corporation, President & Owner, Kerry Pae Auctioneers, Inc .; Steven P . Dayton,
Business Development, RVG Management & Development Company; and Fred M . Essis, Director Emeritus, President & CEO,
Essis & Sons Carpet One .
48 C ENTRI C FINA NC I A L C ORP ORATI ON
se n ior l e a de r sh i p t e a m
Patricia A. Husic
President & CEO
Jeffrey W. Myers, SEVP
Chief Lending Officer
Sandra J. Schultz, EVP
Chief Financial Officer
Terrence M. Monteverde, EVP
Chief Credit Officer
Clair M. Finkenbinder, III, EVP
Chief Information Officer &
Director of Operations
Leslie A. Meck, SVP
Chief Retail Officer
Kimberly L. Turner, SVP
Chief Risk Officer
Christine Pavlakovich, SVP
Director of Human Resources
Paul B. Zwally, SVP
Director of Mortgage Services
and Commercial Lender
Shane E. McNaughton, SVP
Management Information
Systems
s e n ior l e n di ng t e a m
Clockwise from left:
Donald J. Bonefede, SVP, Senior
Commercial Lending Officer;
Michael J. Watson, SVP, Senior
Commercial Lending Officer;
Michele E. Light, SVP,
Bucks County Market Leader;
and Christopher J. Bickel, SVP,
Main Line Market Leader.
SENI OR LE A DE R SHIP TE A M 2 018 A NNUA L REP ORT 49
br a nc h m a n ag e m e n t, bus i n e s s de v e l opm e n t, a n d l e n di ng t e a m s
BR ANCH MANAGEMENT
COMMERCIAL LENDing
business development
n Mary Anne E . Bayer, VP
n Tania J . Fleming, SVP
n Patrick N . Snyder, VP
Silver Spring Financial Center Mgr .
Commercial Lending Officer
Senior Business Development Officer
n Wendy S . Buell
Camp Hill Financial Center Mgr .
n Christopher E . McDermott, SVP
Commercial Lending Officer
n Bruce E . Straub, VP
Senior Business Development Officer
n Timothy C . Mayersky, VP
n Andrea R . Ahern, VP
n Terence J . McGlinchey, VP
Commercial Lending Officer
Business Development Officer
n Cory G . Bishop, VP
n Molly R . O’Keefe, AVP
Commercial Lending Officer
Business Development Officer
Derry Township Financial Center
Senior Mgr .
n Joseph M . Rebarchak, VP
Lower Paxton Financial Center Mgr .
n Shelley A . George
Camp Hill Financial Center
Assistant Mgr .
n Patricia A . Kuhn
Silver Spring Financial Center
Assistant Mgr .
n Lori L . Moyer
Lower Paxton Financial Center
Assistant Mgr .
n John H . Dean, VP
Commercial Lending Officer
n Joseph N . Desiderio, VP
Commercial Lending Officer
n Cheryl C . Sakalosky, VP
Commercial Lending Officer
n Sean P . Burns, AVP
Commercial Lending Officer
n Amber N . Spotts
MORTGAGE LENDING
Derry Township Financial Center
Assistant Mgr .
n Gethan K . Wilson, VP
Mortgage Department Team Leader
n Brian S . Connor
Mortgage Lending Officer
n Chris Conrad
Mortgage Lending Officer
tr easury management
n Timothy J . Merrell, SVP
Director of Cash Management
and Treasury Services
n John K . Kroos, VP
Cash Management Sales Officer
n Mark A . Holst, AVP
Cash Management Customer
Care Officer
50 C ENTRI C FINA NC I A L C ORP ORATI ON
Doctor centr ic bank
Adv isory boar d member s
n Ram S . Trehan, MD
Hematology & Oncology
Managing Partner, Greater Washington
Oncology Associates, Chairman of
Doctor Centric Advisory Board
n Nitin Jaluria, MD, FACC, FASNC, FASE
Cardiology/Cardiovascular Disease,
UPMC Pinnacle, Vice Chairman of
Doctor Centric Advisory Board
n Donald E . Enders, Jr .
President & CEO, Colonial Park Realty
Company, t/a Enders Insurance
Associates
n Mark Guise, VMD
Lockwillow Avenue Animal Clinic
n Jeffrey W . Keiser, DDS
Partner & President, Forest Hills
Dental Associates, PC
2 018 m i l l e n n i a l a dv i s ory B oa r d
Harrisburg Young Professionals Members: Trevin Shirey, Senior Business Development Manager, WebFX (co-chair); Ariel Jones,
Development Director, Cultural Enrichment Fund (not pictured); Cody Wanner, Vlogger, codywanner .com (not pictured);
Derek Whitesel, Executive Director, HYP; Devin Langan, Director of Planning, Legacy Business Advisors; Michael Manley, Provider
Partnerships Consultant, Highmark Health; Nick Barbera, Manager, SunStone Consulting; Ruth Ritchie, Operations & Leasing Associate,
WCI Partners, LP; Heather Thomas, Happiness Manager, WebFX .
Centric Bank Members: Stacy Durbin, Marketing Specialist (co-chair); Bethany Herring, Mortgage Settlement Coordinator; Cory Bishop,
VP, Commercial Lending Officer; Flow Lynch, AVP, Branch Operations Manager & Security Officer; Katrina Taughinbaugh,
Loan Servicing Specialist; Mike St . Hilaire, Portfolio Manager; Nicole Cooper, Branch Operations Analyst; Sean Burns, AVP, Commercial
Lending Officer .
MILLENNI A L A DVI S ORY B OA RD 2 018 A NNUA L REP ORT 51
CENTR IC BANK financial center s and
commercial lending offices
HEADQUARTERS, MORTGAGE CENTER, AND
LOWER PAXTON FINANCIAL CENTER
4320 Linglestown Road
Harrisburg, PA 17112
(717) 657-7727
Fax (717) 657-5036
Lobby & Drive-Thru Hours
M-Th 8:30 a .m . to 5:00 p .m .
F 8:30 a .m . to 6:00 p .m .
Sat 8:30 a .m . to 12 noon
CAMP HILL FINANCIAL CENTER
1625 Market Street
Camp Hill, PA 17011
(717) 730-2816
Fax (717) 730-2813
Lobby & Drive-Thru Hours
M-Th 8:30 a .m . to 5:00 p .m .
F 8:30 a .m . to 6:00 p .m .
Sat 8:30 a .m . to 12 noon
corporate, executive, and operations center
SILVER SPRING FINANCIAL CENTER
1826 Good Hope Road
Enola, PA 17025
(717) 657-7727
Fax (717) 657-7748
Office Hours
M-F 8:30 a .m . to 5:00 p .m .
Lobby & Drive-Thru Hours
6480 Carlisle Pike
Mechanicsburg, PA 17050 M-Th 8:30 a .m . to 5:00 p .m .
(717) 591-1360
Fax (717) 591-1363
F 8:30 a .m . to 6:00 p .m .
Sat 8:30 a .m . to 12 noon
bucks county LENDING OFFICE
DERRY TOWNSHIP FINANCIAL CENTER
2003 S . Easton Road, Ste . 205
Doylestown, PA 18901
(267) 880-4250
Fax (215) 489-2705
Office Hours
M-F 8:30 a .m . to 5:00 p .m .
Lobby & Drive-Thru Hours
1201 West Governor Road
Hummelstown, PA 17036 M-Th 8:30 a .m . to 5:00 p .m .
(717) 533-7626
Fax (717) 533-7670
F 8:30 a .m . to 6:00 p .m .
Sat 8:30 a .m . to 12 noon
LANCASTER LENDING OFFICE
main line LENDING OFFICE
22 E . Roseville Road, Unit D
Lancaster, PA 17601
(717) 614-6855
Fax (717) 522-5287
Office Hours
M-F 8:30 a .m . to 5:00 p .m .
80 W . Lancaster Avenue, Ste . 200 Office Hours
Devon, PA 19333
(610) 710-4800
Fax (610) 688-2151
M-F 8:30 a .m . to 5:00 p .m .
COMING SOON | September 2019
Main Line Financial Center, 105 Lancaster Avenue, Devon, PA 19333
52 C ENTRI C FINA NC I A L C ORP ORATI ON
O U R M I S S I O N
Centric Bank is a locally owned, locally loaned community bank that provides a variety
of core financial services to businesses, professionals, and individuals. We promise our
customers immediate, direct access to our bank decision makers and deliver the finest
personalized service in the industry. Centric has committed people and resources to enrich
the communities where we live and work. Because trust is our most important commodity,
we are focused on building and sustaining long-term generational relationships with our
customers, our community, our employees, and our shareholders. In every transaction,
We Revolve Around You.
O U R V I S I O N
We aspire to become the locally owned, independent, community bank of choice for
small and medium-size businesses, professionals, and individuals in central Pennsylvania.
We will combine steady growth, consistent earnings, and firm control of risk factors
to provide safety for our depositors. Our people will be the difference in establishing
consistency in earnings and enhanced shareholder value.
C O R E V A L U E S
We trust our principles are clear to every customer from the moment you enter our facilities
or speak to a Centric Bank representative:
n We value an uncompromising dedication to understanding and meeting our
clients’ financial needs.
n We recognize and reward the contributions of our team members and believe
that qualified, loyal, and committed professionals are our most valuable asset.
n We practice prudent business planning and cost management strategies to
ensure financial viability and responsible growth.
I N V E S T O R
R E L A T I O N S
Common Stock Transactions
Centric Financial Corporation’s
Common Stock is traded for investors
as OTC Pink: CFCX. Centric
Financial Corporation uses the
following registered market makers
for their Common Stock.
n Boenning & Scattergood, Inc.
4 Tower Bridge
200 Barr Harbor Dr., Suite 300
West Conshohocken, PA 19428
n FIG Partners
1475 Peachtree St. NE, Suite 800
Atlanta, GA 30309
n Keefe, Bruyette & Woods
787 Seventh Avenue
New York, NY 10019
n Raymond James & Associates, Inc.
222 South Riverside Plaza
Seventh Floor
Chicago, IL 60606
n Wedbush Securities, Inc.
One SW Columbia St., Suite 1000
Portland, OR 97258
n We embrace change and continually seek ways to provide quality, cost-effective services
Registrar & Transfer Agent
that meet or exceed our clients’ expectations.
n We seek to establish a relationship of trust and respect with our clients and value
integrity as an organization and as individuals.
n We are committed to providing the best possible service to our clients. We will go
above and beyond what is required to attract and retain cherished business relationships.
Our goal is to build relationships. We Revolve Around You.
AST Financial
ATTN: Centric Financial
Corporation
6201 15th Ave., Brooklyn, NY 11219
(800) 937-5449 | info@amstock.com
entric Bank serves a Commonwealth rich
in capacity and potential. We are preparing
tomorrow’s technologists, inventors, doctors,
builders, manufacturers, and doers to move ideas, to
push beyond geographical and digital boundaries, and
to unlock business capacity and human potential.
We believe in the power of small business to deeply impact
our economy, to create jobs, and to transform communities.
As We Revolve Around You, we will continue to say Yes to
Main Street, to work harder for the best solutions, and to
strengthen relationships well beyond financial transactions.
This is the heart of our mission in the communities we serve.
Centric Financial Corporation
4320 Linglestown Road, Harrisburg, PA 17112 | T (717) 657-7727 | F (717) 657-7748
www.centricbank.com