U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[ X ] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2000
[ ] Transition Report Under Section 13
or 15(d) of the Exchange Act
For the transition period ended______________
Commission File Number 000-21881
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CENTURY BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
North Carolina 56-1981518
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
22 WINSTON STREET, THOMASVILLE, NC 27360
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(Address of principal executive office)
(336) 475-4663
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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As of November 6, 2000, 1,105,019 shares of the issuer's common stock, no par
value, were outstanding. The registrant has no other classes of securities
outstanding.
This report contains 10 pages.
Page No.
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Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
September 30, 2000 and June 30, 2000...................... 3
Consolidated Statements of Operations
Three Months Ended September 30, 2000 and 1999............ 4
Consolidated Statements of Cash Flows
Three Months Ended September 30, 2000 and 1999............ 5
Notes to Consolidated Financial Statements................ 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K................. 9
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Part I. Financial Information
Item 1 - Financial Statements
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Century Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
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September 30,
2000 June 30,
ASSETS (Unaudited) 2000 *
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(In Thousands)
Cash on hand and in banks $ 1,351 $ 1,105
Interest-bearing balances in other banks 1,408 889
Investment securities available for sale, at fair value 4,751 4,737
Investment securities held to maturity, at amortized cost 4,365 4,433
Loans receivable, net 88,373 87,254
Accrued interest receivable 493 504
Premises and equipment, net 642 621
Stock in the Federal Home Loan Bank, at cost 734 734
Other assets 259 265
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TOTAL ASSETS $ 102,376 $ 100,542
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposit accounts $ 74,381 $ 73,846
Advances from Federal Home Loan Bank 9,000 8,000
Accrued interest payable 221 142
Advance payments by borrowers for property taxes and insurance 78 233
Accrued expenses and other liabilities 545 453
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TOTAL LIABILITIES 84,225 82,674
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STOCKHOLDERS' EQUITY
Preferred stock, no par value, 5,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, 20,000,000 shares authorized;
1,105,019 shares issued and outstanding 8,096 8,099
ESOP loan and unearned compensation (2,160) (2,285)
Retained earnings, substantially restricted 11,750 11,734
Accumulated other comprehensive income 465 320
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TOTAL STOCKHOLDERS' EQUITY 18,151 17,868
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 102,376 $ 100,542
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* Derived from audited financial statements
See accompanying notes.
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Century Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
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Three Months Ended
September 30,
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2000 1999
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(In Thousands
except per share data)
INTEREST INCOME
Loans $ 1,690 $ 1,501
Investments and deposits in other banks 160 197
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TOTAL INTEREST INCOME 1,850 1,698
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INTEREST EXPENSE
Deposit accounts 997 880
Borrowings 147 17
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TOTAL INTEREST EXPENSE 1,144 897
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NET INTEREST INCOME 706 801
PROVISION FOR LOAN LOSSES 5 4
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 701 797
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OTHER INCOME 9 8
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GENERAL AND ADMINISTRATIVE EXPENSES
Compensation and benefits 277 274
Occupancy 20 21
Data processing expenses 30 30
Other expenses 96 99
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TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES 423 424
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INCOME BEFORE
INCOME TAXES 287 381
PROVISION FOR INCOME TAXES 104 139
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NET INCOME $ 183 $ 242
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NET INCOME PER COMMON SHARE
Basic and diluted $ .19 $ .25
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Weighted average shares outstanding 977,721 967,654
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DIVIDENDS DECLARED PER COMMON SHARE $ .17 $ .17
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See accompanying notes.
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Century Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
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Three Months Ended
September 30,
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2000 1999
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(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 183 $ 242
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 11 10
Deferred compensation 5 5
Amortization of discounts and premiums on securities (2) 2
Provision for loan losses 5 4
Amortization of unearned stock compensation 142 143
Change in assets and liabilities:
Decrease in accrued interest receivable 11 18
Increase (decrease) in accrued interest payable 79 (7)
Other (23) 69
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 411 486
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales, maturities and calls of:
Available for sale investment securities 227 721
Held to maturity investment securities 70 554
Net increase in loans (1,124) (2,976)
Purchases of property and equipment (32) (1)
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NET CASH USED BY
INVESTING ACTIVITIES (859) (1,702)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in demand deposits (468) (262)
Net increase in certificate accounts 1,003 430
Increase in advances form FHLB 1,000 2,000
Decrease in advances from borrowers (155) (146)
Repurchase of common stock - (286)
Cash dividends paid (167) (167)
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,213 1,569
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NET INCREASE IN CASH
AND CASH EQUIVALENTS 765 353
CASH AND CASH EQUIVALENTS, BEGINNING 1,994 3,537
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CASH AND CASH EQUIVALENTS, ENDING $ 2,759 $ 3,890
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See accompanying notes.
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Century Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
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NOTE A - BASIS OF PRESENTATION
In management's opinion, the financial information, which is unaudited, reflects
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial information as of and for the three
months ended September 30, 2000 and 1999, in conformity with generally accepted
accounting principles. The financial statements include the accounts of Century
Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Home Savings,
Inc., SSB ("Home Savings" or the "Bank"). Operating results for the three months
ended September 30, 2000 are not necessarily indicative of the results that may
be expected for the fiscal year ending June 30, 2001.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the consolidated
financial statements filed as part of the Company's annual report on Form
10-KSB. This quarterly report should be read in conjunction with such annual
report.
NOTE B - NET INCOME PER SHARE
Net income per share has been computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. In
accordance with generally accepted accounting principles, management recognition
plan shares and employee stock ownership plan shares are only considered
outstanding for the basic earnings per share calculations when they are earned
or committed to be released. Outstanding options and unearned shares in the
management recognition plan had no dilutive effect for the three months ended
September 30, 2000 and 1999.
NOTE C - PENDING ACQUISITION OF THE COMPANY
On October 20, 2000, the Company's Board of Directors announced the execution of
a definitive merger agreement (the "agreement") regarding a merger of Century
Bancorp, Inc. ("Century") with and into First Bancorp, the holding company for
First Bank of Troy, North Carolina. The terms of this agreement provide that the
shareholders of Century will have the option to receive either $20.00 in cash or
1.333 shares of First Bancorp common stock for each share of Century common
stock that they own. This election is subject to the requirement that, subject
to certain possible adjustments that may be necessary to achieve the intended
tax treatment, 60% of Century's shares outstanding will be exchanged for cash
and 40% of Century's shares outstanding will be exchanged for shares of First
Bancorp stock. To the extent that Century shareholders elect to receive more
than the aggregate stock or cash consideration permitted by the agreement, pro
rata allocations will be made. Century has filed a Current Report on Form 8-K,
dated October 19, 2000, regarding this matter.
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Item 2 - Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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This Quarterly Report on Form 10-QSB may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products and services.
Comparison of Financial Condition at September 30, 2000 and June 30, 2000
Consolidated total assets increased by $1.9 million during the three months
ended September 30, 2000, from $100.5 million at June 30, 2000 to $102.4 million
at September 30, 2000. Increases of $535,000 and $1.0 million, respectively, in
deposit accounts and Federal Home Loan Bank advances were the principal sources
of funding for increases of $246,000, $519,000 and $1.1 million, respectively,
in cash, interest-bearing balances in other banks, and loans receivable. There
have been no significant changes in the nature of the Company's operations
during the three months ended September 30, 2000 as compared with the three
months ended September 30, 1999.
Total stockholders' equity was $18.1 million at September 30, 2000, as compared
with $17.9 million at June 30, 2000, an increase of $283,000. Stockholders'
equity was increased during the quarter principally as a result of amortization
of unearned compensation of $142,000 and an increase of $145,000 in accumulated
other comprehensive income, representing an increase in the net unrealized gain
on available for sale securities. Net income of $183,000 was sufficient to fund
the regular quarterly dividend which aggregated $167,000 or $.17 per share. At
September 30, 2000, both the Holding Company and the Bank continued to
significantly exceed all applicable regulatory capital requirements.
Comparison of Results of Operations for the Three Months Ended
September 30, 2000 and 1999
Net Income. Net income for the quarter ended September 30, 2000 was $183,000 or
$.19 per share, as compared with net income of $242,000, or $.25 per share, for
the three months ended September 30, 1999. This decrease in net income is
principally attributable to a decrease of $95,000 in net interest income. While
there have been no significant changes in the nature of the Company's operations
during the three months ended September 30, 2000 as compared with the three
months ended September 30, 1999, interest rates have increased during the past
year. Since the Company's cost of funds generally increase more quickly than its
yield on assets during periods of rising interest rates, the Company's net
interest income has been negatively impacted.
Net Interest Income. Net interest income was $705,000 for the quarter ended
September 30, 2000 as compared with $801,000 for the corresponding quarter of
the previous fiscal year, a decrease of $95,000. The Company's average balance
of net interest earning assets (average interest earning assets minus average
interest bearing liabilities) was $1.1 million lower during the current quarter.
However, because of the overall increase in interest rates, the average yield on
interest earning assets increased by only 10 basis points while the average cost
of interest bearing liabilities increased by 87 basis points, resulting in the
decrease in net interest income identified above.
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Provision for Loan Losses. The provision for loan losses was $5,000 and $4,000,
respectively, for the quarters ended September 30, 2000 and 1999. There were no
loan charge-offs during either period. Nonaccrual loans aggregated $349,000 at
September 30, 2000, while the allowance for loan losses totaled $591,000 at that
date.
General and Administrative Expenses. General and administrative expenses
slightly decreased to $423,000 for the quarter ended September 30, 2000 as
compared with $424,000 for the quarter ended September 30, 1999, a decrease of
$1,000.
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 36.2% and 36.5% for the three months ended
September 30, 2000 and 1999, respectively.
Liquidity and Capital Resources
The objective of the Company's liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on opportunities for expansion. Liquidity management addresses Home
Savings' ability to meet deposit withdrawals on demand or at contractual
maturity, to repay borrowings as they mature, and to fund new loans and
investments as opportunities arise.
Home Savings' primary sources of internally generated funds are principal and
interest payments on loans receivable, cash flows generated from operations, and
repayments of mortgage-backed securities. External sources of funds include
increases in deposits and advances from the FHLB of Atlanta.
As a North Carolina-chartered savings bank, Home Savings must maintain liquid
assets equal to at least 10% of assets. The computation of liquidity under North
Carolina regulations allows the inclusion of mortgage-backed securities and
investments with readily marketable value, including investments with maturities
in excess of five years. Home Savings' liquidity ratio at September 30, 2000, as
computed under North Carolina regulations, was approximately 11.3%. On a
consolidated basis, liquid assets represented 11.6% of total assets. Management
believes that it will have sufficient funds available to meet its anticipated
future loan commitments as well as other liquidity needs.
As a North Carolina-chartered savings bank, Home Savings is subject to the
capital requirements of the Federal Deposit Insurance Corporation ("FDIC") and
the North Carolina Administrator of Savings Institutions ("N. C.
Administrator"). The FDIC requires state-chartered savings banks to have a
minimum leverage ratio of Tier I capital (principally consisting of common
shareholders' equity, noncumulative perpetual preferred stock, and a limited
amount of cumulative perpetual preferred stock, less certain intangible assets)
to total assets of at least 3%; provided, however, that all institutions, other
than those (i) receiving the highest rating during the examination process and
(ii) not anticipating or experiencing any significant growth, are required to
maintain a ratio of 1% or 2% above the state minimum. The FDIC also requires
Home Savings to have a ratio of total capital to risk-weighted assets of at
least 8%, of which at least 4% must be comprised of Tier I capital. The N. C.
Administrator requires a net worth equal to at least 5% of total assets. At
September 30, 2000, Home Savings exceeded the capital requirements of both the
FDIC and the N. C. Administrator.
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(27) Financial data schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Bank during the
quarter ended September 30, 2000.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTURY BANCORP, INC.
Date: November 7, 2000 By: /s/ James G. Hudson, Jr.
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James G. Hudson, Jr.
Chief Executive Officer
Date: November 7, 2000 By: /s/ Drema A. Michael
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Drema A. Michael
Chief Financial Officer
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