1
CONFORMED
---------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 2000
--------------
Commission File No. 333-04113
COMMUNITY CENTRAL BANK CORPORATION
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Michigan 38-3291744
-------- ----------
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
100 North Main Street, PO Box 7, Mount Clemens, MI 48046-0007
-------------------------------------------------------------
(Address of principal executive offices)
(810) 783-4500
--------------
(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 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
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at May 12, 2000
----- ---------------------------
Common Stock, $5 stated value 2,661,932 Shares
Transitional Small Business Disclosure Format:
Yes No X
----- -----
2
PART I
ITEM 1. FINANCIAL STATEMENTS
The financial statements of Community Central Bank Corporation (the
"Corporation") include the consolidation of its subsidiary; Community Central
Bank (the "Bank").
Following are the Corporation's Consolidated Balance Sheet as of March 31, 2000
and 1999, and December 31, 1999, and Consolidated Statements of Operations,
Comprehensive Income, and Cash Flow for the three month periods ended March 31,
2000 and 1999. These unaudited financial statements are for interim periods, and
do not include all disclosures normally provided with annual financial
statements. The interim statements should be read in conjunction with the
financial statements and footnotes contained in the Corporation's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1999.
In the opinion of management, the interim statements referred to above contain
all adjustments (consisting of normal, recurring items) necessary for a fair
presentation of the financial statements. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year.
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CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, December 31, March 31,
2000 1999 1999
--------- --------- ---------
Assets (in thousands, except fair value data)
Cash and due from banks $6,051 $5,692 $4,575
Federal funds sold 19,000 20,700 16,350
--------- --------- ---------
Cash and Cash Equivalents 25,051 26,392 20,925
--------- --------- ---------
Securities available for sale, at fair value 9,389 9,546 10,711
Investment securities, at amortized cost 4,477 4,638 6,670
(Fair value of $4.4 million at 3-31-2000,
$4.6 million at 12-31-1999, and
$6.7 million at 3-31-1999)
Loans
Residential mortgage loans 30,376 29,920 32,397
Commercial loans 114,574 105,574 71,643
Installment loans 6,049 5,818 4,519
--------- --------- ---------
Total Loans 150,999 141,312 108,559
Allowance for credit losses (2,053) (1,927) (1,393)
--------- --------- ---------
Net Loans 148,946 139,385 107,166
--------- --------- ---------
Net property and equipment 1,868 1,893 1,700
Accrued interest receivable 952 843 734
Other assets 808 1,027 753
--------- --------- ---------
Total Assets $191,491 $183,724 $148,659
========= ========= =========
(continued)
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CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, December 31, March 31,
2000 1999 1999
--------- ------------ ---------
Liabilities (in thousands, except share data)
Deposits
Noninterest bearing demand deposits $19,627 $16,540 $13,828
NOW and money market accounts 18,840 21,366 16,979
Savings deposits 9,253 8,803 5,324
Time deposits 122,331 116,137 91,995
--------- --------- ---------
Total deposits 170,051 162,846 128,126
--------- --------- ---------
Short term borrowings 1,735 1,605 2,072
Accrued interest payable 457 442 345
Other liabilities 343 306 163
Capitalized lease obligation 1,021 1,025 1,034
ESOP note payable 458 471 ----
--------- --------- ---------
Total Liabilities 174,065 166,695 131,740
--------- --------- ---------
Stockholders' Equity
Common stock -- $5 stated value; 9,000,000 shares
authorized; 2,662,026 shares issued and
outstanding at 3-31-2000, 2,420,024 shares
outstanding at 12-31-1999, and 2,416,100 shares
outstanding at 3-31-1999 13,310 12,100 12,080
Additional paid-in capital 5,016 6,226 6,214
Accumulated deficit (287) (682) (1,403)
Unearned employee benefit (459) (471) ----
Accumulated other comprehensive income (154) (144) 28
--------- --------- ---------
Total Stockholders' Equity 17,426 17,029 16,919
--------- --------- ---------
Total Liabilities and Stockholders' Equity $191,491 $183,724 $148,659
========= ========= =========
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CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2000 1999
------- -------
(in thousands, except per share data)
Interest Income
Loans (including fees) $3,374 $2,261
Securities 218 266
Federal funds sold 199 207
------- -------
Total Interest Income 3,791 2,734
------- -------
Interest Expense
Deposits 1,869 1,354
Short term borrowings 20 22
Capitalized lease obligation 44 35
------- -------
Total Interest Expense 1,933 1,411
------- -------
Net Interest Income 1,858 1,323
Provision for credit losses 135 70
------- -------
Net Interest Income after Provision 1,723 1,253
------- -------
Noninterest Income
Deposit service charges 65 57
Net realized security gain ---- 11
Other income 62 58
------- -------
Total Noninterest Income 127 126
------- -------
Noninterest Expense
Salaries, benefits, and payroll taxes 501 435
Premises and fixed asset expense 167 129
Other operating expense 570 411
------- -------
Total Noninterest Expense 1,238 975
------- -------
Income Before Taxes and Cumulative
Effect of Change in Accounting Principle 612 404
Provision for income taxes 217 142
------- -------
Income Before Cumulative Effect of Change
in Accounting Principle 395 262
Cumulative effect of change in accounting
principle ---- (57)
------- -------
Net Income $395 $205
======= =======
(continued)
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CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Per share data:
Basic earnings before cumulative effect of
change in accounting principle $0.15 $0.10
Basic earnings $0.15 $0.08
Diluted earnings before cumulative effect of
change in accounting principle $0.15 $0.10
Diluted earnings $0.15 $0.08
======= =======
Cash Dividends $ ---- $ ----
======= =======
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended March 31,
2000 1999
---------- ---------
(in thousands)
Net Income as Reported $395 $205
Other Comprehensive Income, Net of Tax
Change in unrealized gain on securities
available for sale (10) (28)
Reclassification of previously reported gain
included in current year income ---- (7)
---------- ---------
Comprehensive Income $385 $170
========== =========
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8
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
Three Months Ended March 31,
2000 1999
---------- ---------
(in thousands)
Operating Activities
Net income $395 $205
Adjustments to reconcile net income to net cash flow
from operating activities:
Net accretion of security discount 1 7
Net gain on calls of securities ---- (11)
Provision for credit losses 135 70
Depreciation expense 76 76
Deferred income tax 212 113
ESOP compensation expense 12 ----
Increase in accrued interest receivable (109) (79)
Decrease in other assets 70 97
Increase in accrued interest payable 15 65
Decrease in other liabilities (4) (11)
---------- ---------
Net Cash Provided by Operating Activities 803 532
Investing Activities
Purchases of securities available for sale ---- (1,992)
Maturities, calls, and prepayments of securities available for sale 157 985
Maturities, calls, and prepayments of investment securities 160 2,619
Increase in loans (9,696) (6,162)
Purchases of property and equipment (51) (37)
---------- ---------
Net Cash Used in Investing Activities (9,430) (4,587)
Financing Activities
Increase in demand and savings deposits 1,011 1,392
Increase (Decrease) in time deposits 6,194 (418)
Increase in short term borrowings 130 (1,419)
Repayment of capitalized lease obligation (37) (37)
Payment of ESOP debt (12) ----
---------- ---------
Net Cash Provided by (Used In) Financing Activities 7,286 (482)
---------- ---------
Decrease in Cash and Cash Equivalents (1,341) (4,537)
Cash and Cash Equivalents at the Beginning
of the Year 26,392 25,462
---------- ---------
Cash and Cash Equivalents at the End
of the Period $25,051 $20,925
========== =========
Supplemental Disclosure of Cash Flow Information:
Interest Paid $1,885 $1,311
Federal Taxes Paid $125 $
========== =========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion compares the financial condition of the Corporation and
its wholly owned subsidiary, Community Central Bank, at March 31, 2000, December
31, 1999, and March 31, 1999 and the results of operations for three months
ended March 31, 2000 and 1999. This discussion should be read in conjunction
with the financial statements and statistical data presented elsewhere in this
report. This report contains forward-looking statements that are based on
management's beliefs, assumptions, current expectations, estimates and
projections about the financial services industry, the economy, and about the
Corporation and the Bank. Words such as "anticipates," "believes," "estimates,"
"expects," "forecasts," "intends," "is likely," "plans," "projects," variations
of such words and similar expressions are intended to identify such
forward-looking statements. These forward-looking statements are intended to be
covered by the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements are not guarantees of future performance
and involve certain risks, uncertainties and assumptions ("Future Factors") that
are difficult to predict with regard to timing, extent, likelihood and degree of
occurrence. Actual results and outcomes may materially differ from what may be
expressed or forecasted in the forward-looking statements. The Corporation
undertakes no obligation to update, amend, or clarify forward looking
statements, whether as a result of new information, future events (whether
anticipated or unanticipated), or otherwise.
Future Factors include changes in interest rate and interest rate relationships;
demand for products and services; the degree of competition by traditional and
non-traditional competitors; changes in banking regulation; changes in tax laws;
changes in prices, levies, and assessments; the impact of technological
advances; governmental and regulatory policy changes; the outcomes of
contingencies; trends in customer behavior as well as their ability to repay
loans; changes in the national and local economy; and other factors, including
risk factors, referred to from time to time in filings made by the Corporation
with the Securities and Exchange Commission. These are representative of the
Future Factors that could cause a difference between an ultimate actual outcome
and a preceding forward-looking statement.
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10
ASSETS
The Corporation's total assets have increased by $7.8 million, to $191.5 million
at March 31, 2000, compared with $183.7 million at December 31, 1999.
The following table shows the amortized cost and estimated fair value of the
Corporation's security portfolio as of the dates indicated. On the balance
sheet, investment securities (i.e., those which the Corporation has the ability
and intent to hold to maturity) are stated at cost, adjusted for amortization of
premium or accretion of discount. Securities available for sale are shown on the
balance sheet at estimated fair value.
March 31, 2000 December 31, 1999 March 31, 1999
---------------- ----------------- -----------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
------- ----- ------- ----- ------- -----
(in thousands)
Securities Available for Sale
United States Government agencies $6,380 $6,272 $6,381 $6,280 $5,895 $5,935
Mortgage backed securities 3,243 3,116 3,383 3,265 3,935 3,938
Collateralized mortgage obligations ---- 1 1 1 839 838
----- ----- ----- ----- ----- -----
Total Securities Available for Sale 9,623 9,389 9,765 9,546 10,669 10,711
----- ----- ----- ----- ----- -----
Investment Securities
United States Treasury ---- ---- ---- ---- ---- ----
United States Government agencies 2,001 1,994 2,001 1,992 2,878 2,901
Mortgage backed securities 1,724 1,680 1,758 1,721 2,078 2,098
Collateralized mortgage obligations 306 305 433 431 1,432 1,443
Other Securities 446 446 446 446 282 282
----- ----- ----- ----- ----- -----
Total Investment Securities 4,477 4,425 4,638 4,590 6,670 6,724
----- ----- ----- ----- ----- -----
Total Securities $14,100 $13,814 $14,403 $14,136 $17,339 $17,435
====== ====== ====== ====== ====== ======
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Total loans increased by $9.7 million during the three months ended March 31,
2000, as the Corporation continued building its loan base. Commercial loans grew
by $9.0 million, while residential mortgage loans increased by $456,000.
The Corporation makes loans to customers primarily in Macomb County, Michigan.
Although the Corporation has a diversified loan portfolio, a substantial portion
of the local economy has traditionally been dependent on the automotive
industry. Additionally, the Corporation had approximately $34.6 million in
outstanding loans at March 31, 2000, to commercial borrowers in the real estate
rental and property management industries.
The following table shows an analysis of the allowance for credit losses:
Three Months Ended March 31,
2000 1999
------- -------
(in thousands)
Allowance for credit losses at
beginning of period $1,927 $1,330
Provision charged to expense 135 70
Loans charged off (9) (7)
------- -------
Allowance for credit losses at end of period $2,053 $1,393
======= =======
Allowance for credit losses as a percentage
of loans at period end 1.36% 1.28%
Loans are placed in nonaccrual status when, in the opinion of management,
uncertainty exists as to the ultimate collection of principal and interest. At
March 31, 2000, there was $408,000 of loans placed in nonaccrual status.
Commercial loans and lease financing receivables are to be reported as being in
nonaccrual status if: (a) they are maintained on a cash basis because of
deterioration in the financial position of the borrower, (b) payment in full of
interest or principal is not expected, or (c) principal or interest has been in
default for a period of 90 days or more. If it can be documented that the loan
obligation is both well secured and in the process of collection, the loan may
stay on accrual status. However, if the loan is not brought current before 120
days past due, the loan should be reported as nonaccrual. Any exceptions to
automatic nonaccrual status at 90 days must be approved in writing by the Loan
Committee, Credit Administration Officer, and the Chief Financial Officer. A
nonaccrual asset may be restored to an accrual status when none of its principal
or interest is due and unpaid, when it otherwise becomes well secured, and in
the process of collection.
The Corporation considers a loan impaired when it is probable that all interest
and principal will not be collected in accordance with the contractual terms of
the loan agreement. Consistent with this definition, all nonaccrual and
reduced-rate loans (with the exception of residential mortgages and consumer
loans) are considered impaired. The Corporation had $408,000 in loans classified
as impaired during the quarter ended March 31, 2000 and no loans for the quarter
ended March 31, 1999.
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A summary of nonperforming assets is as follows:
March 31, March 31,
2000 1999
------- -------
(in thousands)
Impaired loans:
Nonaccrual $408 $ ----
------- -------
Total impaired loans $408 ----
Other real estate ---- ----
------- -------
Total nonperforming assets $408 $ ----
======= =======
Impaired loans as a percentage of
total loans 0.27% 0.00%
======= =======
A summary of total loans past due 90-days and still accruing interest is as
follows:
March 31, March 31,
2000 1999
------- -------
(in thousands)
Commercial $ ---- $ ----
Residential real estate ---- ----
Installment 39 ----
------- -------
Total loans past due 90 days or more
and still accruing interest $39 $ ----
======= =======
In each accounting period, management evaluates the problems and potential
losses in the loan portfolio. Consideration is also given to off-balance sheet
items that may involve credit risk, such as commitments to extend credit and
financial guarantees. Management's evaluation of the allowance is further based
on consideration of actual loss experience, the present and prospective
financial condition of borrowers, adequacy of collateral, industry
concentrations within the portfolio, and general economic conditions. Management
believes that the present allowance is adequate, based on the broad range of
considerations listed above.
The primary risk element considered by management regarding each installment and
residential real estate loan is lack of timely payment. Management has a
reporting system that monitors past due loans and has adopted policies to pursue
its creditor's rights in order to preserve the Bank's position. The primary risk
elements concerning commercial loans are the financial condition of the
borrower, the sufficiency of collateral, and lack of timely payment. Management
has a policy of requesting and reviewing financial statements from its
commercial loan customers, and periodically reviews existence of collateral and
its value.
Although management believes that the allowance for credit losses is adequate to
absorb losses as they arise, there can be no assurance that the Bank will not
sustain losses in any given period that could be substantial in relation to the
size of the allowance for credit losses. Management is not aware of any factors
that would cause future net loan charge-offs, in total or by loan category, to
differ significantly from those experienced by institutions of similar size.
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LIABILITIES
During the three months ended March 31, 2000, total deposits increased by $7.2
million, to $170.0 million.
Short term borrowings at March 31 consist of securities sold with an agreement
to repurchase them the following day. Following are details of short term
borrowings for the dates indicated:
March 31, March 31,
2000 1999
----------- -----------
(in thousands, except percentages)
Amount outstanding at end of period $1,735 $2,072
Weighted average interest rate on ending balance 4.08% 4.50%
Maximum amount outstanding at any month end
during the period $2,149 $2,072
CAPITAL
The Corporation declared a 10% stock dividend on March 7, 2000. The dividend was
paid on April 21, 2000, to stockholders of record on April 6, 2000. As a result,
approximately $1.2 million was transferred from additional paid-in capital to
common stock. The effects of the stock dividend have been retroactively applied
to applicable figures in this report. The Corporation also declared a 10% stock
dividend in the first quarter of 1999.
Following are selected capital ratios for the Corporation as of the dates
indicated, along with the minimum regulatory requirement for each item. Capital
requirements for bank holding companies are set by the Federal Reserve Board. In
many cases, bank holding companies are expected to operate at capital levels
higher than the minimum requirement.
March 31, December 31, March 31, Minimum
2000 1999 1999 Requirement
-------- ---------- -------- ----------
Tier I capital to risk-weighted assets 11.79% 12.30% 16.18% 4%
Total capital to risk-weighted assets 13.04% 13.55% 17.43% 8%
Primary capital to assets 10.13% 10.10% 12.19% 5.5%
Total capital to assets 10.13% 10.10% 12.19% 6%
Tier I capital to quarterly average assets (leverage) 9.58% 9.46% 11.50% 4%
During the second quarter of 1999, the Corporation established an employee stock
ownership plan ("ESOP"). The ESOP subsequently borrowed $500,000 from an
unrelated bank to finance the purchase of the Corporation's stock. The ESOP loan
has been recorded as if it was long term debt of the Corporation, with a
corresponding reduction in equity. Repayment of the loan will be made solely
from contributions by the Corporation, which has guaranteed the loan.
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The following table shows the changes in stockholders' equity for the three
months ended March 31, 2000:
Additional Unearned Accumulated Other
Common Paid-In Accumulated Employee Comprehensive Total
Stock Capital Deficit Benefits Income (Loss) Equity
--------- ----------- -------- ---------- ---------------- ---------
Balance December 31, 1999 $12,100 $6,226 ($682) ($471) ($144) $17,029
Stock dividend 1,210 (1,210) ---- ---- ---- ----
Stock options exercised ---- ---- ---- ---- ---- ----
Net income ---- ---- 395 ---- ---- 395
Release of ESOP shares ---- ---- ---- 12 ---- 12
Other comprehensive income ---- ---- ---- ---- (10) (10)
--------- ---------- ------- --------- -------------- --------
Balance March 31, 2000 $13,310 $5,016 ($287) ($459) ($154) $17,426
========= ========== ======= ========= ============== ========
NET INTEREST INCOME
The following table shows the dollar amount of changes in net interest income
for each major category of interest earning asset and interest bearing
liability, and the amount of change attributable to changes in average balances
(volume) or average rates for the periods shown. Variances that are jointly
attributable to BOTH volume and rate changes have been allocated to the volume
component.
Three Months Ended
March 31, 2000 vs. 1999
-------------------------------------
Increase (Decrease)
Due to Changes In
-----------------------
Total Volume Rate
and Both
---------- ---------- ----------
(in thousands)
Earning Assets - Interest Income
Federal funds sold ($8) ($53) $45
Securities (48) (56) 8
Loans 1,113 975 138
------- ------- -------
Total 1,057 866 191
------- ------- -------
Deposits and Borrowed Funds - Interest Expense
NOW and money market accounts (50) (15) (35)
Savings deposits 34 36 (2)
Time deposits 531 427 104
Short term borrowings (2) ---- (2)
Lease and ESOP 9 14 (5)
------- ------- -------
Total 522 462 60
------- ------- -------
Net Interest Income $535 $404 $131
======= ======= =======
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For the quarter ended March 31, 2000, net interest income increased by 40%, or
$535,000 over the first quarter of 1999. This was due to a significant rise in
the volume of interest earning assets, especially in loans. On the liability
side, interest bearing liability volumes increased as the Corporation continued
to build a deposit base. The large percentage increase in both interest earning
assets and interest bearing liabilities was a function of the Corporation's
significant growth during 2000. The net interest margin improved in the quarter
to 4.21%, compared with 3.75% for the first quarter of 1999. Interest rates on
individual asset and liability categories were somewhat lower than in the prior
year quarter; however, volume increases in most categories more than offset the
effects of reduced rates.
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AVERAGE BALANCE SHEET
The following table shows the Corporation's consolidated average balances of
assets, liabilities, and stockholders' equity; the amount of interest income or
interest expense and the average yield or rate for each major category of
interest earning asset and interest bearing liability, and the net interest
margin, for the three month periods ended March 31, 2000 and 1999. Average loans
are presented net of unearned income, gross of the allowance for credit losses.
Interest on loans includes loan fees. Average securities are based on amortized
cost.
Three Months Ended March 31,
----------------------------------- -----------------------------------
2000 1999
--------- --------- --------- --------- --------- ---------
Average Average
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
--------- --------- --------- --------- --------- ---------
(in thousands)
Assets
Federal funds sold $14,007 $199 5.68% $17,765 $207 4.66%
Securities 14,019 218 6.22 17,629 266 6.04
Loans 148,630 3,374 9.08 105,683 2,261 8.56
--------- --------- --------- --------- --------- ---------
Total Earning Assets/
Total Interest Income 176,656 3,791 8.58% 141,077 2,734 7.75%
--------- --------- --------- ---------
Cash and due from banks 5,021 3,876
All other assets 1,774 1,971
---------- ---------
Total Assets $183,451 $146,924
========== =========
Liabilities and Equity
NOW and money market accounts $16,640 104 2.50% $19,062 154 3.23%
Savings deposits 8,943 68 3.04 4,255 34 3.20
Time deposits 117,728 1,697 5.77 88,096 1,166 5.29
Short term borrowings 1,959 20 4.08 1,984 22 4.44
Capitalized lease obligation 1,479 44 11.90 1,025 35 13.66
--------- --------- --------- --------- --------- ---------
Total Interest Bearing Liabilities/
Total Interest Expense 146,749 1,933 5.27% 114,422 1,411 4.93%
--------- --------- --------- ---------
Noninterest bearing demand deposits 18,642 15,130
All other liabilities 753 468
Stockholders' equity 17,307 16,904
---------- ---------
Total Liabilities and Equity $183,451 $146,924
========== =========
Net Interest Income $1,858 $1,323
======= =========
Net Interest Margin (Net Interest
Income/Total Earning Assets) 4.21% 3.75%
======= =========
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NONINTEREST INCOME
Noninterest income increased by 10%, when ignoring security gains realized in
the first quarter of 1999. Total noninterest income was $127,000 in the first
quarter of 2000. The largest components of the increase were overdraft income
and fees from processing merchant credit card deposits.
NONINTEREST EXPENSE
Noninterest expense increased over the first quarter of 1999 by 27%, to $1.2
million in 2000. This was primarily the result of growth of the Corporation, and
the accompanying rise in payroll and other operating expense. Premises and fixed
asset expense increased as the Bank implemented a check imaging operations
center.
PROVISION FOR INCOME TAXES
The Corporation and the Bank file a consolidated federal income tax return.
Before 1998, no net deferred tax asset had been provided for the future benefit
of the net operating loss carryforward generated since inception, because the
Corporation did not have a history of earnings. A total tax benefit of $774,000
was recognized in 1998 when it became more likely than not that the carryforward
would be realized in the future. Beginning in 1999, the Corporation is
recognizing a federal tax provision based on "book taxable" income. Starting in
the third quarter of 1999, the Corporation paid estimated federal income taxes
having utilized the net operating loss carryforward available to the Corporation
as the result of ongoing earnings.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998 Statement of Financial Account Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133") was issued. SFAS 133
requires all derivative instruments to be recorded on the balance sheet at
estimated fair value. Changes in the fair value of derivative instruments are to
be recorded each period either in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, on the type of hedge transaction. SFAS 133 is
effective for the year 2000. The Company is currently evaluating the impact of
SFAS 133. At present, the Company does not believe it will have a material
effect on the consolidated financial position or results of operations.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The liquidity of a bank allows it to provide funds to meet loan requests, to
accommodate possible outflows in deposits, and to take advantage of other
investment opportunities. Funding of loan requests, providing for liability
outflows, and managing interest rate margins require continuous analysis to
match the maturities of specific categories of loans and investments with
specific types of deposits and borrowings. Bank liquidity depends upon the mix
of the banking institution's potential sources and uses of funds. For the
Corporation, the major sources of liquidity have been deposit growth, federal
funds sold, loans and securities which mature within one year, and sales of
residential mortgage loans. Additional liquidity is provided by a $2.0 million
unsecured federal funds borrowing facility, and a $10.0 million secured line of
credit with the Federal Home Loan Bank of Indianapolis (FHLB). The Corporation's
large deposit balances which might fluctuate in response to interest rate
changes are closely monitored. These deposits consist mainly of jumbo time
certificates of deposit.
Managing rates on earning assets and interest bearing liabilities focuses on
maintaining stability in the net interest margin, which is an important factor
in earnings growth and stability. Emphasis is placed on maintaining a controlled
rate sensitivity position, to avoid wide swings in margins and to manage risk
due to changes in interest rates.
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The Corporation's Asset Liability Management Committee ("ALCO"), which meets
monthly, is responsible for reviewing the interest rate sensitivity position of
the Corporation and establishing policies to monitor and limit exposure to
interest rate risk.
The Corporation currently utilizes two quantitative tools to measure and monitor
interest rate risk: static gap analysis and net interest income simulation
modeling. Each of these interest rate risk measurements has limitations, but
management believes when these tools are evaluated together, they provide a
balanced view of the exposure the Corporation has to interest rate risk.
The following table shows the maturity and repricing distribution of the
Corporation's interest earning assets and interest bearing liabilities as of
March 31, 2000. This table displays the interest rate sensitivity gap (interest
rate sensitive assets less interest rate sensitive liabilities), cumulative
interest rate sensitivity gap, the interest rate sensitivity gap ratio (interest
rate sensitive assets divided by interest rate sensitive liabilities), and
cumulative interest rate sensitivity gap ratio. Loans are presented net of
unearned income, gross of the allowance, while securities are shown at amortized
cost.
After Three After One
Within Months But Year But After
Three Within One Within Five
Months Year Five Years Years Total
--------- ------------ ------------ ---------- ---------
(in thousands)
Interest earning assets:
Federal funds sold $19,000 $ ---- $ ---- $ ---- $19,000
Securities 556 4,636 6,850 2,058 14,100
Loans 77,041 1,659 58,671 13,628 150,999
-------- ------- ------- ------- ---------
Total 96,597 6,295 65,521 15,686 $184,099
-------- ------- ------- ------- =========
Interest bearing liabilities:
NOW and money market
accounts 18,840 ---- ---- ---- $18,840
Savings deposits 9,253 ---- ---- ---- 9,253
Jumbo time deposits 52,674 5,574 5,625 ---- 63,873
Time deposits < $100,000 38,070 3,572 16,816 ---- 58,458
Short term borrowings 1,735 ---- ---- ---- 1,735
Capitalized lease obligation
and ESOP payable 461 10 164 844 1,479
-------- ------- ------- ------- ---------
Total 121,033 9,156 22,605 844 $153,638
-------- ------- ------- ------- ========
Interest rate sensitivity gap ($24,436) (2,861) 42,916 14,842
Cumulative interest rate
sensitivity gap ($27,297) $15,619 $30,461
Interest rate sensitivity gap
ratio 0.80 0.69 2.90 18.59
Cumulative interest rate
sensitivity gap ratio 0.79 1.10 1.20
The table above indicates the time periods in which interest earning assets and
interest bearing liabilities will mature or may be repriced, generally according
to their contractual terms. However, this table does not necessarily indicate
the impact that general interest rate movements would have on the Corporation's
net interest margin, because the repricing of various categories of assets and
liabilities is discretionary, and is subject to competitive and other
18
19
pressures. As a result, various assets and liabilities indicated as repricing
within the same period may, in fact, reprice at different times and at different
rate levels. At March 31, 2000, the Corporation is considered "liability
sensitive" according to the preceding table. In a rising rate environment, the
Corporation might not be able to increase prices on interest earning assets
faster than the increase in rates on interest bearing liabilities.
On a quarterly basis, the net interest income simulation model is used to
quantify the effects of hypothetical changes in interest rates on the
Corporation's net interest income over a projected twelve-month period. The
model permits management to evaluate the effects of shifts in the Treasury Yield
curve, upward and downward, on net interest income expected in a stable interest
rate environment.
As of December 31, 1999, the most recent and available analysis, the simulation
model projects net interest income would decrease by 2.18% of the base net
interest income, assuming an instantaneous parallel shift upward in the yield
curve by 200 basis points. Conversely, if the yield curve were to decrease by
200 basis points, the model projects net interest income would increase by
1.87%, of the base net interest income.
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YEAR 2000 READINESS DISCLOSURE
No material events occurred as the result of the "year 2000 problem." The
banking industry is highly dependent on computer systems due to significant
transaction volumes, and date sensitive calculations for interest accruals on
financial statements such as loans and deposits.
The Corporation began to prepare for the year 2000 project in 1997. The plan
began with an internal evaluation of equipment, software applications, and
vendor supplied products. Because the Corporation was founded during 1996, much
of its equipment and computer technology is recent; and, in many cases, were
2000 ready from the outset. A total of $55,000 was spent on the year 2000
project.
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PART II
ITEM 1. LEGAL PROCEEDINGS
As a depository of funds, the Bank is occasionally named as a defendant in
lawsuits (such as garnishment proceedings) involving claims to the ownership of
funds in particular accounts. Such litigation is incidental to the Bank's
business. Management is not aware of any threatened or pending litigation in
which the Corporation or the Bank is likely to experience loss or exposure which
would materially affect the Corporation's capital resources, results of
operations, or liquidity as presented herein.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
The Board of Directors elected Harold W. Allmacher as President and Chief
Operating Officer of the Corporation and the Bank, effective April 18, 2000. The
Corporation expects Mr. Allmacher to continue in this position for a number of
months while the Corporation identifies a suitable successor to elect as
President and Chief Executive Officer. While Mr. Allmacher intends to retire
from his daily management responsibilities later this year, he will remain on
the Board and Board Committees and expects to continue to make important
contributions to the growth, performance, and strategic planning of the
Corporation and Bank.
The Board of Directors elected David A. Widlak as Chairman of the Board and
Acting Chief Executive Officer of the Corporation and the Bank, effective April
18, 2000. Mr. Widlak is currently Director of Acquisitions, Vice President and
Corporate Secretary for Margate Industries, Inc., a holding company involved in
primary metals. Mr. Widlak previously served as President and Chief Executive
Officer of Central Holding Company and its subsidiary Colonial Central Savings
Bank. Central Holding Company was sold to Standard Federal Bank in 1992.
The Board also elected Raymond M. Contesti, a member of the Board since its
inception in 1996, as Vice Chairman of the Board of Directors. Dr. Contesti is
the Superintendent of Clintondale Community Schools.
Andrew Tassopoulos, formerly President of the Bank, has resigned effective April
18, 2000. The Board of Directors has appointed a search committee to facilitate
the hiring of a new President and Chief Executive Officer for the Corporation
and the Bank.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
3.1 Articles of Incorporation are incorporated by reference to
exhibit 3.1 of the Corporation's Registration Statement on
Form SB-2 (Commission File Number 333-04113) which became
effective on September 23, 1996
3.2 Bylaws of the Corporation are incorporated by reference to
exhibit 3.2 of the Corporation's Registration Statement on
Form SB-2 (Commission File Number 333-04113) which became
effective on September 23, 1996
11 Computation of Per Share Earnings
27 Financial Data Schedule
22
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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, on May 12, 2000.
COMMUNITY CENTRAL BANK CORPORATION
By: S/ DAVID A. WIDLAK
----------------------------------
David A. Widlak;
Chairman of the Board and Acting
Chief Executive Officer
(Principal Executive Officer)
By: S/ HAROLD W. ALLMACHER
----------------------------------
Harold W. Allmacher;
President and Chief Operating Officer
By: S/ RAY T. COLONIUS
----------------------------------
Ray T. Colonius;
Treasurer
(Principal Financial and Accounting
Officer)
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------
3.1 Articles of Incorporation are incorporated by reference to
exhibit 3.1 of the Corporation's Registration Statement on
Form SB-2 (Commission File Number 333-04113) which became
effective on September 23, 1996
3.2 Bylaws of the Corporation are incorporated by reference to
exhibit 3.2 of the Corporation's Registration Statement on
Form SB-2 (Commission File Number 333-04113) which became
effective on September 23, 1996
11 Computation of Per Share Earnings
27 Financial Data Schedule
24