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, 2001
--------------
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 (IRS Employer Identification No.)
incorporation or organization)
100 North Main Street, PO Box 7, Mount Clemens, MI 48046-0007
-------------------------------------------------------------
(Address of principal executive offices and zip code)
(810) 783-4500
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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 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 14, 2001
----- ---------------------------
Common Stock, $5 stated value 2,661,922 Shares
Transitional Small Business Disclosure Format:
Yes No X
--- ---
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
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, 2001
and 2000, and December 31, 2000, and Consolidated Statements of Operations,
Comprehensive Income, and Cash Flow for the three month periods ended March 31,
2001 and 2000. 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, 2000.
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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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, December 31, March 31,
2001 2000 2000
--------- ------------ ---------
Assets (in thousands)
Cash and due from banks $4,798 $5,412 $6,051
Federal funds sold 34,200 27,600 19,000
--------- --------- ---------
Cash and Cash Equivalents 38,998 33,012 25,051
--------- --------- ---------
Securities available for sale, at fair value 22,894 18,508 9,389
Investment securities, at amortized cost 2,028 2,134 4,477
Loans
Residential mortgage loans 27,349 28,421 30,376
Commercial loans 118,965 121,953 114,574
Installment loans 5,364 5,889 6,049
--------- --------- ---------
Total Loans 151,678 156,263 150,999
Allowance for credit losses (2,622) (2,654) (2,053)
--------- --------- ---------
Net Loans 149,056 153,609 148,946
--------- --------- ---------
Net property and equipment 1,828 1,873 1,868
Accrued interest receivable 1,127 1,247 952
Other assets 1,055 1,256 808
--------- --------- ---------
Total Assets $216,986 $211,639 $191,491
========= ========= =========
(continued)
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, December 31, March 31,
2001 2000 2000
--------- ------------ ---------
Liabilities (in thousands, except share data)
Deposits
Noninterest bearing demand deposits $17,174 $18,983 $19,627
NOW and money market accounts 15,773 20,488 18,840
Savings deposits 9,556 8,768 9,253
Time deposits 147,731 137,900 122,331
----------- ----------- -----------
Total deposits 190,234 186,139 170,051
----------- ----------- -----------
Short term borrowings 5,011 4,157 1,735
Accrued interest payable 895 990 457
Other liabilities 191 203 343
Capitalized lease obligation 1,008 1,012 1,021
ESOP note payable 408 421 458
----------- ----------- -----------
Total Liabilities 197,747 192,922 174,065
----------- ----------- -----------
Stockholders' Equity
Common stock -- $5 stated value; 9,000,000
shares authorized; 2,661,922 shares issued
and outstanding at 3-31-2001, 2,661,922
shares outstanding at 12-31-2000, and
2,662,026 shares outstanding at 3-31-2000 13,309 13,309 13,310
Additional paid-in capital 5,016 5,016 5,016
Accumulated deficit 1,140 742 (287)
Unearned employee benefit (408) (421) (459)
Accumulated other comprehensive income 182 (71) (154)
----------- ----------- -----------
Total Stockholders' Equity 19,239 18,717 17,426
----------- ----------- -----------
Total Liabilities and Stockholders' Equity $216,986 $211,639 $191,491
=========== =========== ===========
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2001 2000
------- -------
(in thousands, except per share data)
Interest Income
Loans (including fees) $3,456 $3,374
Securities 357 218
Federal funds sold 407 199
--------- ---------
Total Interest Income 4,220 3,791
--------- ---------
Interest Expense
Deposits 2,332 1,869
Short term borrowings 36 20
Capitalized lease obligation 42 44
--------- ---------
Total Interest Expense 2,410 1,933
--------- ---------
Net Interest Income 1,810 1,858
Provision for credit losses 100 135
--------- ---------
Net Interest Income after Provision 1,710 1,723
--------- ---------
Noninterest Income
Deposit service charges 69 65
Net realized security gain 41 ----
Other income 63 62
--------- ---------
Total Noninterest Income 173 127
--------- ---------
Noninterest Expense
Salaries, benefits, and payroll taxes 585 501
Premises and fixed asset expense 189 167
Other operating expense 507 570
--------- ---------
Total Noninterest Expense 1,281 1,238
--------- ---------
Income Before Taxes and Cumulative
Effect of Change in Accounting Principle 602 612
Provision for income taxes 203 217
--------- ---------
Net Income $399 $395
========= =========
(continued)
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Per share data:
Basic earnings before cumulative effect of
change in accounting principle $0.15 $0.15
Basic earnings $0.15 $0.15
Diluted earnings before cumulative effect of
change in accounting principle $0.15 $0.15
Diluted earnings $0.15 $0.15
======== =======
Cash Dividends $---- $----
======== =======
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended March 31,
2001 2000
----------- ---------
(in thousands)
Net Income as Reported $399 $395
Other Comprehensive Income, Net of Tax
Change in unrealized gain on securities
available for sale 111 (10)
-------- -------
Comprehensive Income $510 $385
======== =======
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
Three Months Ended March 31,
2001 2000
---------- ---------
(in thousands)
Operating Activities
Net income $399 $395
Adjustments to reconcile net income to net cash flow
from operating activities:
Net accretion of security discount ---- 1
Net gain on sales and call of securities (41) ----
Provision for credit losses 100 135
Depreciation expense 86 76
Deferred income tax 198 212
ESOP compensation expense 13 12
Decrease (Increase) in accrued interest receivable 120 (109)
(Increase) Decrease in other assets (55) 70
(Decrease) Increase in accrued interest payable (95) 15
Increase (Decrease) in other liabilities 22 (4)
-------- -------
Net Cash Provided by Operating Activities 747 803
Investing Activities
Maturities, calls, sales and prepayments of securities
available for sale 8,553 157
Purchase of securities available for sale (12,730) ----
Maturities, calls, and prepayments of investment securities 106 160
Decrease (Increase) in loans 4,453 (9,696)
Purchases of property and equipment (41) (51)
-------- -------
Net Cash Provided by (Used in) Investing Activities 341 (9,430)
Financing Activities
(Decrease) Increase in demand and savings deposits (5,736) 1,011
Increase in time deposits 9,831 6,194
Increase in short term borrowings 854 130
Repayment of long term debt (38) (37)
Payment of ESOP debt (13) (12)
-------- -------
Net Cash Provided by Financing Activities 4,898 7,286
-------- -------
Increase (Decrease) in Cash and Cash Equivalents 5,986 (1,341)
Cash and Cash Equivalents at the Beginning
of the Year 33,012 26,392
-------- -------
Cash and Cash Equivalents at the End
of the Period $38,998 $25,051
======== =======
Supplemental Disclosure of Cash Flow Information:
Interest Paid $2,505 $1,885
Federal Taxes Paid $275 $125
======== =======
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion compares the financial condition of the Corporation and
its wholly owned subsidiary, Community Central Bank, at March 31, 2001, December
31, 2000, and March 31, 2000 and the results of operations for three months
ended March 31, 2001 and 2000. 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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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
ASSETS
The Corporation's total assets have increased by $25.5 million, to $217.0
million at March 31, 2001, compared with $191.5 million at March 31, 2000.
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, 2001 December 31, 2000 March 31, 2000
------------------- ------------------ ------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
--------- ----- --------- ----- --------- -----
(in thousands)
Securities Available for Sale
United States Government agencies $9,923 $10,158 $14,255 $14,364 $6,380 $6,272
Mortgage backed securities 2,655 2,676 2,829 2,826 3,243 3,116
Collateralized mortgage obligations 8,827 8,841 994 994 ---- 1
Municipal securities 1,212 1,219 321 324 ---- ----
------ ------- ------- ------- ------- -------
Total Securities Available for Sale 22,617 22,894 18,399 18,508 9,623 9,389
------ ------- ------- ------- ------- -------
Investment Securities
United States Government agencies ---- ---- ---- ---- 2,001 1,994
Mortgage backed securities 1,516 1,537 1,579 1,579 1,724 1,680
Collateralized mortgage obligations 66 66 109 109 306 305
Other Securities 446 446 446 446 446 446
------ ------- ------- ------- ------- -------
Total Investment Securities 2,028 2,049 2,134 2,134 4,477 4,425
------ ------- ------- ------- ------- -------
Total Securities $24,645 $24,943 $20,533 $20,642 $14,100 $13,814
======= ======= ======= ======= ======= =======
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
Total loans outstanding remained somewhat flat for the past twelve months,
increasing by $679,000. The flat level reflected a cooling of the economy and a
strategic focus on building the deposit base. Commercial loans grew by $4.4
million, while residential mortgage loans decreased by $3.0 million, reflecting
increased refinancing activity. Loans decreased by $4.6 million in aggregate
during the three-month period ended March 31, 2001, reflecting several large
payoffs and slower growth than in previous quarters.
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 $35.0 million in
outstanding loans at March 31, 2001, 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,
2001 2000
------- -------
(in thousands)
Allowance for credit losses at
beginning of period $2,654 $1,927
Provision charged to expense 100 135
Loans charged off (174) (9)
Loans recovered 42 ----
-------- -------
Allowance for credit losses at end of period $2,622 $2,053
======== =======
Allowance for credit losses as a percentage
of loans at period end 1.73% 1.36%
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, 2001, there was $416,000 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 $416,000 in loans classified
as impaired during the quarter ended March 31, 2001 and $408,000 in loans for
the quarter ended March 31, 2000.
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
A summary of nonperforming assets is as follows:
March 31, March 31,
2001 2000
------- -------
(in thousands)
Impaired loans:
Nonaccrual $416 $408
-------- -------
Total impaired loans $416 $408
Other real estate ---- ----
-------- -------
Total nonperforming assets $416 $408
======== =======
Impaired loans as a percentage of
total loans 0.27% 0.27%
======== =======
A summary of total loans past due 90-days and still accruing interest is as
follows:
March 31, March 31,
2001 2000
------- -------
(in thousands)
Commercial $ ---- $ ----
Residential real estate 128 ----
Installment 27 39
-------- --------
Total loans past due 90 days or more
and still accruing interest $155 $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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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
LIABILITIES
During the three months ended March 31, 2001, total deposits increased by $4.1
million, to $190.2 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,
2001 2000
----------- -----------
(in thousands, except percentages)
Amount outstanding at end of period $5,011 $1,735
Weighted average interest rate on ending balance 3.92% 4.08%
Maximum amount outstanding at any month end
during the period $5,011 $2,149
CAPITAL
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
2001 2000 2000 Requirement
-------- ---------- ---------- -----------
Tier I capital to risk-weighted assets 12.15% 11.74% 11.79% 4%
Total capital to risk-weighted assets 13.41% 12.99% 13.04% 8%
Primary capital to assets 9.87% 9.94% 10.13% 5.5%
Total capital to assets 9.87% 9.94% 10.13% 6%
Tier I capital to quarterly average assets
(leverage) 8.92% 8.93% 9.58% 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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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
The following table shows the changes in stockholders' equity for the three
months ended March 31, 2001:
Additional Unearned Accumulated Other
Common Paid-In Accumulated Employee Comprehensive Total
Stock Capital Deficit Benefits Income Equity
--------- ----------- ----------- ---------- ----------------- ---------
Balance December 31, 2000 $13,309 $5,016 $741 ($421) $71 $18,716
Net income -- -- 399 -- -- 399
Release of ESOP shares -- -- -- 13 -- 13
Other comprehensive income -- -- -- -- 111 111
--------- ----------- -------- ---------- ---------------- ---------
Balance March 31, 2001 $13,309 $5,016 $1,140 ($408) $182 $19,239
========= =========== ======== ========== ================ =========
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, 2001 vs. 2000
-------------------------------------
Increase (Decrease)
Due to Changes In
----------------------------
Total Volume Rate
and Both
---------- ---------- -------
(in thousands)
Earning Assets - Interest Income
Federal funds sold $208 $213 ($5)
Securities 139 138 1
Loans 82 139 (57)
--------- --------- --------
Total 429 490 (61)
--------- --------- --------
Deposits and Borrowed Funds - Interest Expense
NOW and money market accounts (17) (2) (15)
Savings deposits 3 6 (3)
Time deposits 477 395 82
Short term borrowings 15 16 (1)
Lease and ESOP (1) (2) 1
--------- --------- --------
Total 477 413 64
--------- --------- --------
Net Interest Income ($48) $77 ($125)
========= ========= ========
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
For the quarter ended March 31, 2001, net interest income decreased by 2.6%, or
$48,000 over the first quarter of 2000. This was due to a significant decrease
in short term interest rates, as the Corporation had asset sensitivity in
immediate repricing intervals. The net interest margin decreased in the quarter
to 3.5%, compared with 4.21% for the first quarter of 2000. 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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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
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, 2001 and 2000. 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,
----------------------------------- -----------------------------------
2001 2000
--------- --------- --------- --------- --------- ---------
Average Average
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
--------- --------- --------- --------- ---------- ---------
(in thousands)
Assets
Federal funds sold $29,341 $407 5.55% $14,007 $199 5.68%
Securities 22,882 357 6.24 14,019 218 6.22
Loans 154,847 3,456 8.93 148,630 3,374 9.08
---------- ---------- --------- -------- -------- -------
Total Earning Assets/
Total Interest Income 207,070 4,220 8.15% 176,656 3,791 8.58%
---------- ---------- --------- -------- -------- -------
Cash and due from banks 5,063 5,021
All other assets 1,482 1,774
---------- --------
Total Assets $213,615 $183,451
========== ========
Liabilities and Equity
NOW and money market accounts $16,239 87 2.14% $16,640 104 2.50%
Savings deposits 9,809 71 2.90 8,943 68 3.04
Time deposits 143,839 2,174 6.05 117,728 1,697 5.77
Short term borrowings 3,568 36 3.92 1,959 20 4.08
Capitalized lease obligation and
ESOP payable 1,416 42 12.15 1,479 44 11.90
---------- ---------- --------- -------- -------- -------
Total Interest Bearing Liabilities/
Total Interest Expense 174,871 2,410 5.51% 146,749 1,933 5.27%
---------- ---------- --------- -------- -------- -------
Noninterest bearing demand deposits 18,622 18,642
All other liabilities 1,085 753
Stockholders' equity 19,037 17,307
---------- --------
Total Liabilities and Equity $213,615 $183,451
========== ========
Net Interest Income $1,810 $1,858
========== ========
Net Interest Margin (Net Interest
Income/Total Earning Assets) 3.50% 4.21%
========= =======
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
NONINTEREST INCOME
Noninterest income increased by 4%, when ignoring security gains realized in the
first quarter of 2001. Total noninterest income was $173,000 in the first
quarter of 2001. 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 2000 by 3%, to $1.3
million in 2001. 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 expanded its presence through a new loan
production facility located adjacent to the main office location.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting 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 part of a hedge
transaction. SFAS 133 was adopted by the Corporation in 2000, and did not have a
material effect on the consolidated financial position or results of operations.
In November 2000, the FASB issued Statement No. 140 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" (FASB No.
140). This statement revises the standards for accounting for securitizations
and other transfers of financial assets and collateral and requires certain
disclosures. The impact of FASB No. 140 as of December 31, 2000 was not material
to the consolidated financial statements.
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 risk 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 two facilities totaling $5.0
million, unsecured federal funds borrowing facilities, and a $20.0 million
secured line of credit with the FHLB. The Corporation's large deposits which
might fluctuate in response to interest rate changes are closely monitored.
These deposits consist mainly of jumbo time certificates of deposit.
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
Managing rates on earning assets and interest bearing liabilities focuses on
maintaining stability in the net interest margin, 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.
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, 2001, 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 the
cumulative interest rate sensitivity gap ratio. For the purposes of the
following table, an asset or liability is considered rate sensitive within a
period when it matures or could be repriced within such period, generally
according to its contractual terms. Decay assumptions have been factored into
non-maturing deposit products.
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 $34,200 $ -- $ -- $ -- $34,200
Securities 411 7,056 14,101 3,077 24,645
Loans 75,557 4,950 60,051 11,120 151,678
-------- ------- ------- ------- ---------
Total 110,168 12,006 74,152 14,197 $210,523
-------- ------- ------- ------- =========
Interest bearing liabilities:
NOW and money market
accounts 1,699 5,161 8,913 -- $15,773
Savings deposits 764 2,389 6,403 -- 9,556
Jumbo time deposits 58,278 23,368 4,885 -- 86,531
Time deposits less
than $100,000 29,786 14,859 16,555 -- 61,200
Short term borrowings 5,011 -- -- -- 5,011
Capitalized lease
obligation and ESOP
payable 411 16 192 797 1,416
-------- ------- ------- ------- ---------
Total 95,949 45,793 36,948 797 $179,487
-------- ------- ------- ------- =========
Interest rate sensitivity
gap $14,219 ($33,787) $37,204 $13,400
Cumulative interest rate
sensitivity gap ($19,568) $17,636 $31,036
Interest rate sensitivity gap
ratio 1.15 0.26 2.01 17.81
Cumulative interest rate
sensitivity gap ratio 0.86 1.10 1.17
18
19
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
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 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, 2001, the Corporation is considered slightly "liability sensitive"
at a one year repricing time frame according to the preceding table. The static
interest rate sensitivity gap analysis is just one tool the Corporation uses to
monitor interest rate risk. Another tool, which is believed to provide a more
sophisticated means of interest rate risk analysis, is the net interest income
simulation model.
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, 2000, the simulation model projects net interest income would
decrease by 5.6% of the base net interest income, assuming an instantaneous
parallel shift downward in the yield curve by 200 basis points. Conversely, if
the yield curve were to increase by 200 basis points, the model projects net
interest income would increase by 5.2%.
19
20
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
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.
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.
Not applicable.
20
21
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
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
21
22
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
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 14, 2001.
COMMUNITY CENTRAL BANK CORPORATION
By: S/ RAYMOND M. CONTESTI
----------------------
Raymond M. Contesti;
President
By: S/ RAY T. COLONIUS
------------------
Ray T. Colonius;
Treasurer
(Principal Financial and Accounting Officer)
22
23
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
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
23