1
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 September 30, 1998
------------------
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)
(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 October 29, 1998
----- -------------------------------
Common Stock, $5 stated value 2,196,455 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 September 30,
1998 and 1997, and December 31, 1997, Consolidated Statements of Operations and
Comprehensive Income for the three and nine month periods ended September 30,
1998 and 1997, and Consolidated Statement of Cash Flow for the nine months ended
September 30, 1998 and 1997. 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 contained in the Corporation's Annual
Report on Form 10-KSB for the year ended December 31, 1997.
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.
Certain reclassifications have been made to the 1997 financial statements to
conform with the classifications used in 1998.
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30, December 31, September 30,
Assets 1998 1997 1997
- --------------------------------------------- --------- --------- ---------
(in thousands, except fair value data)
Cash and due from banks $3,318 $2,279 $2,086
Federal funds sold 5,300 1,250 5,000
- --------------------------------------------- --------- --------- ---------
Cash and Cash Equivalents 8,618 3,529 7,086
- --------------------------------------------- --------- --------- ---------
Securities available for sale, at fair value 11,620 5,392 3,880
Investment securities, at amortized cost 10,889 15,115 15,225
(Fair value of $11.0 million at 9-30-1998,
$15.1 million at 12-31-1997, and
$15.2 million at 9-30-1997)
Loans
Residential mortgage loans 35,240 21,314 15,582
Commercial loans 51,532 29,165 21,251
Installment loans 4,257 2,656 2,317
- --------------------------------------------- --------- --------- ---------
Total Loans 91,029 53,135 39,150
Allowance for credit losses (1,150) (800) (590)
- --------------------------------------------- --------- --------- ---------
Net Loans 89,879 52,335 38,560
- --------------------------------------------- --------- --------- ---------
Net property and equipment 1,664 1,814 1,933
Accrued interest receivable 761 499 422
Other assets 210 221 220
- --------------------------------------------- --------- --------- ---------
Total Assets $123,641 $78,905 $67,326
============================================= ========= ========= =========
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30, December 31, September 30,
Liabilities and Stockholders' Equity 1998 1997 1997
- ---------------------------------- --------- --------- ---------
(in thousands, except share data)
Deposits
Noninterest bearing demand deposits $12,771 $7,323 $5,766
NOW and money market accounts 13,481 9,834 7,732
Savings deposits 2,481 2,057 2,018
Time deposits 75,730 49,141 41,525
- --------------------------------------------- --------- --------- ---------
Total deposits 104,463 68,355 57,041
- --------------------------------------------- --------- --------- ---------
Short term borrowings 1,858 1,403 894
Accrued interest payable 235 191 133
Other liabilities 171 84 80
Capitalized lease obligation 1,038 1,035 1,033
- --------------------------------------------- --------- --------- ---------
Total Liabilities 107,765 71,068 59,181
- --------------------------------------------- --------- --------- ---------
Stockholders' Equity
Common stock ($5 stated value; 9,000,000 shares
authorized; 2,196,455 shares issued and
outstanding at 9-30-1998; 1,264,985 shares
outstanding at 12-31-1997 and 9-30-1997) 10,982 6,325 6,325
Additional paid-in capital 7,358 4,195 4,195
Accumulated deficit (2,545) (2,712) (2,380)
Unrealized gain on securities available
for sale, net of tax 81 29 5
- --------------------------------------------- --------- --------- ---------
Total Stockholders' Equity 15,876 7,837 8,145
- --------------------------------------------- --------- --------- ---------
Total Liabilities and Stockholders' Equity $123,641 $78,905 $67,326
============================================= ========= ========= =========
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
- ---------------------------------------- ----- ----- ----- -----
(in thousands, except per share data)
Interest Income
Loans (including fees) $1,917 $822 $5,056 $1,621
Securities 362 205 1,011 366
Federal funds sold 86 129 300 492
- ---------------------------------------- ----- ----- ----- -----
Total Interest Income 2,365 1,156 6,367 2,479
- ---------------------------------------- ----- ----- ----- -----
Interest Expense
Deposits 1,245 621 3,457 1,306
Short term borrowings 28 10 61 13
Capitalized lease obligation 35 35 104 103
- ---------------------------------------- ----- ---- ----- -----
Total Interest Expense 1,308 666 3,622 1,422
- ---------------------------------------- ----- ---- ----- -----
Net Interest Income 1,057 490 2,745 1,057
Provision for credit losses 105 140 350 500
- ---------------------------------------- ----- ---- ----- -----
Net Interest Income after Provision 952 350 2,395 557
- ---------------------------------------- ----- ---- ----- -----
Noninterest Income
Deposit service charges 42 18 113 44
Net realized security gain -- -- 6 --
Mortgage banking income 15 42 79 62
Other income 46 14 113 31
- ---------------------------------------- ----- ---- ----- -----
Total Noninterest Income 103 74 311 137
- ---------------------------------------- ----- ---- ----- -----
Noninterest Expense
Salaries, benefits, and payroll taxes 378 370 1,203 1,031
Premises and fixed asset expense 135 166 406 455
Other operating expense 339 312 930 808
- ---------------------------------------- ----- ---- ----- -----
Total Noninterest Expense 852 848 2,539 2,294
- ---------------------------------------- ----- ---- ----- -----
Income (Loss) Before Taxes 203 (424) 167 (1,600)
Provision for income taxes -- -- -- --
- ---------------------------------------- ----- ---- ----- -----
Net Income (Loss) $203 ($424) $167 ($1,600)
======================================== ===== ===== ===== =====
Per share data:
Basic Net Income (Loss) $0.12 ($0.30) $0.11 ($1.15)
======================================== ===== ===== ===== =====
Diluted Net Income (Loss) $0.12 ($0.30) $0.11 ($1.15)
======================================== ===== ===== ===== =====
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
- ----------------------------------------------- ------ ------ ------ ------
(in thousands)
Net Income (Loss) as Reported $203 ($424) $167 ($1,600)
Other Comprehensive Income
Change in unrealized gain on
securities available for sale, net of tax 59 5 62 5
- ---------------------------------------------- ------ ------ ------ ------
Comprehensive Income (Loss) $262 ($419) $229 ($1,595)
============================================== ====== ====== ====== ======
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited) Nine Months Ended September 30,
1998 1997
- ------------------------------------------------- --------- --------
(in thousands)
Operating Activities
Net income (loss) $167 ($1,600)
Adjustments to reconcile net income (loss) to net cash flow
from operating activities:
Net accretion of security discount (12) (15)
Net realized security gain (6) --
Net gain on sales of mortgage loans (61) (60)
Provision for credit losses 350 500
Net gain on sales of property and equipment (3) --
Depreciation expense 269 343
Increase in accrued interest receivable (262) (405)
Decrease in other assets 11 6
Increase in accrued interest payable 44 101
Increase in other liabilities 150 71
- ------------------------------------------------- ---------- --------
Net Cash Provided by (Used in) Operating Activities 647 (1,059)
Investing Activities
Maturities, calls, and prepayments of securities available for sale 1,500 --
Purchases of securities available for sale (7,136) (3,874)
Maturities, calls, and prepayments of investment securities 4,027 280
Purchases of investment securities (282) (15,491)
Sales of residential mortgage loans 9,232 5,999
Net increase in loans (47,065) (39,511)
Sales of property and equipment 15 --
Purchases of property and equipment (131) (580)
- ------------------------------------------------- ---------- --------
Net Cash Used in Investing Activities (39,840) (53,177)
Financing Activities
Net increase in demand and savings deposits 9,519 10,897
Net increase in time deposits 26,589 33,963
Net increase in short term borrowings 455 894
Repayment of capitalized lease obligation (101) (90)
Public stock offering 7,821 --
Fractional shares paid on stock dividend (1) --
- ------------------------------------------------- ---------- --------
Net Cash Provided by Financing Activities 44,282 45,664
- ------------------------------------------------- ---------- --------
Increase (Decrease) in Cash and Cash Equivalents 5,089 (8,572)
Cash and Cash Equivalents at the Beginning
of the Year 3,529 15,658
- ------------------------------------------------- ---------- --------
Cash and Cash Equivalents at the End
of the Period $8,618 $7,086
================================================= ========== ========
Supplemental Disclosure of Cash Flow Information:
Interest Paid $3,474 $1,218
================================================= ========== ========
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Of FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following analysis of the Corporation's financial condition and operating
results for the periods ended September 30, 1998 and 1997, should be read in
conjunction with the financial statements and statistical data presented
elsewhere. The discussion and analysis contains forward-looking statements that
are based on management's beliefs, assumptions, current expectations, and
projections. Any such statements are not guarantees of future performance, and
involve certain risks and uncertainties. Actual results may materially differ
from what may be expressed herein.
ASSETS
The Corporation's total assets have increased by 57%, or $44.7 million, to
$123.6 million at September 30, 1998, compared with $78.9 million at December
31, 1997. Assets have grown by $56.3 million since September 30, 1997.
During the nine months ended September 30, 1998, total deposits rose by $36.1
million, while total loans increased by $37.9 million. Increased liquidity was
provided by a common stock offering during the third quarter of 1998, some of
the proceeds of which is being held as federal funds sold, and is available to
finance continued loan growth.
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 and accretion of discount. Securities available for sale are shown on
the balance sheet at estimated fair value.
September 30, 1998 December 31, 1997 September 30, 1997
------------------ ----------------- ------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
------- ----- ------- ----- ------- -----
(in thousands)
Securities Available for Sale
United States Government agencies $6,888 $6,990 $3,875 $3,906 $3,875 $3,880
Mortgage backed securities 3,295 3,310 1,085 1,084 -- --
Collateralized mortgage obligations 1,315 1,320 403 402 -- --
------ ------ ------ ------ ------ ------
Total Securities Available for Sale 11,498 11,620 5,363 5,392 3,875 3,880
------ ------ ------ ------ ------ ------
Investment Securities
United States Treasury 499 499 1,990 1,993 4,983 4,989
United States Government agencies 4,868 4,925 6,613 6,632 5,107 5,118
Mortgage backed securities 2,315 2,338 2,839 2,841 1,411 1,410
Collateralized mortgage obligations 2,925 2,956 3,673 3,683 3,724 3,725
Other securities 282 282 -- -- -- --
------ ----- ----- ----- ----- -----
Total Investment Securities 10,889 11,000 15,115 15,149 15,225 15,242
------ ------ ------ ------ ------ ------
Total Securities $22,387 $22,620 $20,478 $20,541 $19,100 $19,122
====== ====== ====== ====== ====== ======
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
Total loans increased by $37.9 million during the nine months ended September
30, 1998, as the Corporation continued building its loan base. Commercial loans
grew by $22.4 million, while residential mortgage loans increased by $13.9
million. During the nine months, the Corporation sold residential mortgage loans
(with a book value of $9.2 million) without recourse to the Federal National
Mortgage Association (FNMA). The net gain from these sales totaled $61,000.
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 $17.7 million in
outstanding loans at September 30, 1998, to commercial borrowers in the real
estate rental and property management industries.
Loans would be placed in nonaccrual status when, in the opinion of management,
uncertainty exists as to the ultimate collection of principal and interest. No
loans have been placed in nonaccrual status since the Corporation's inception.
At September 30, 1998, there were no significant loans where known information
about possible credit problems of borrowers causes management to have serious
doubts as to the ability of the borrower to comply with present loan repayment
terms. Furthermore, management is not aware of any potential problem loans which
could have a material effect on the Corporation's operating results, liquidity,
or capital resources.
The following table shows changes in the allowance for credit losses arising
from additions to the allowance that were charged to expense, and a selected
ratio:
Nine Months Ended September 30,
1998 1997
------- -------
(in thousands)
Allowance for credit losses at
beginning of period $800 $90
Provision charged to expense 350 500
------- -------
Allowance for credit losses at end of period $1,150 $590
======= =======
Allowance for credit losses as a percentage
of loans at period end 1.26% 1.51%
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. The
Corporation has also begun to include an additional "year 2000" risk component
in its allowance analysis. The results of these evaluations are reflected in the
allowance and periodic provision for credit losses. Management believes that the
present allowance is adequate, based on the broad range of considerations listed
above.
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
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 annual 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
significantly differ from those experienced by institutions of similar size.
LIABILITIES
During the nine months ended September 30, 1998, total deposits increased by
53%, or $36.1 million, to $104.5 million.
Short term borrowings at September 30, 1998, represent securities sold with an
agreement to repurchase them the following day. The maximum amount outstanding
at any month end during the first nine months of 1998 was $2.6 million. The
average rate on the ending balance of short term borrowings at September 30,
1998, was 4.75%.
CAPITAL
The Corporation declared a 10% stock dividend on April 7, 1998. The dividend was
paid on May 6, 1998, to stockholders of record on April 21, 1998. As a result,
approximately $632,000 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 and paid a 10%
stock dividend in the second quarter of 1997.
The Corporation completed a secondary stock offering in September, 1998. As a
result, 805,000 new shares were issued at a price of $10.50 per share. The net
proceeds to the Corporation (after deducting offering costs) were approximately
$7.8 million. Some additional accounting and legal costs related to the offering
will be paid by the Corporation in the fourth quarter of 1998. These additional
costs are not expected to be material.
Following are selected capital ratios for the Corporation as of the dates
indicated, along with the minimum regulatory requirement for each item. In many
cases, bank holding companies are expected to operate at capital levels higher
than the minimum requirement.
September 30, December 31, September 30, Minimum
1998 1997 1997 Requirement
-------- ---------- -------- ----------
Tier I capital to risk-weighted assets 18.99% 15.81% 19.74% 4.00%
Total capital to risk-weighted assets 20.24% 17.07% 20.99% 8.00%
Primary capital to assets 13.58% 10.80% 12.85% 5.50%
Total capital to assets 13.58% 10.80% 12.85% 6.00%
Tier I capital to quarterly average assets 13.29% 10.42% 13.13% 4.00%
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
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 Nine Months Ended
September 30, 1998 vs. 1997 September 30, 1998 vs. 1997
------------------------------------ -----------------------------------
Increase (Decrease) Increase (Decrease)
Due to Changes In Due to Changes In
----------------------- ----------------------
Total Volume Rate Total Volume Rate
and Both and Both
--------- ---------- --------- -------- ---------- ---------
(in thousands)
Earning Assets - Interest Income
Federal funds sold ($43) ($39) ($4) ($192) ($199) $7
Securities 157 151 6 645 627 18
Loans 1,095 1,129 (34) 3,435 3,484 (49)
--------- --------- --------- -------- -------- ---------
Total 1,209 1,241 (32) 3,888 3,912 (24)
--------- --------- --------- -------- -------- ---------
Deposits and Borrowed Funds - Interest Expense
NOW and money market accounts 28 40 (12) 102 121 (19)
Savings deposits 9 9 -- 36 34 2
Time deposits 587 593 (6) 2,013 2,007 6
Short term borrowings 18 18 -- 48 49 (1)
Capitalized lease obligation -- -- -- 1 1 --
--------- --------- --------- -------- -------- ---------
Total 642 660 (18) 2,200 2,212 (12)
--------- --------- --------- -------- -------- ---------
Net Interest Income $567 $581 ($14) $1,688 $1,700 ($12)
========= ========= ========= ======== ======== =========
For the quarter ended September 30, 1998, net interest income increased by 116%,
or $567,000 over the third quarter of 1997. Net interest income for the nine
month period increased by $1.7 million, or 160% over the first nine months of
1997. 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 sharply 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 small average balances in the prior
year. This was the result of the Bank's having commenced operations in the
fourth quarter of 1996. The net interest margin improved in the quarter to
3.71%, compared with 3.42% for the third quarter of 1997. For the nine month
period, the net interest margin improved to 3.55%, up from 3.25% in 1997. The
margin improvements were the result of a higher current percentage of interest
bearing assets in loans rather than federal funds, compared with the prior year
periods. Interest rates on individual asset and liability categories were fairly
consistent with the prior year periods.
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
AVERAGE BALANCE SHEET
The following tables show 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 and nine month periods ended September 30, 1998 and 1997.
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 September 30,
-----------------------------------------------------------------------------
1998 1997
------------------------------------- -----------------------------------
Average Average
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
--------- --------- --------- --------- --------- ---------
(in thousands)
Assets
Federal funds sold $6,200 $86 5.55% $9,020 $129 5.72%
Securities 23,188 362 6.24 13,531 205 6.06
Loans 84,663 1,917 9.06 34,782 822 9.45
--------- --------- --------- --------- --------- ---------
Total Earning Assets/
Total Interest Income 114,051 2,365 8.29% 57,333 1,156 8.07%
--------- --------- --------- ---------
Cash and due from banks 3,279 2,610
All other assets 1,547 2,051
---------- ---------
Total Assets $118,877 $61,994
========= =========
Liabilities and Equity
NOW and money market accounts $12,797 106 3.31% $8,027 78 3.89%
Savings deposits 2,678 21 3.14 1,506 12 3.19
Time deposits 76,572 1,118 5.84 35,934 531 5.91
Short term borrowings 2,290 28 4.89 800 10 5.00
Capitalized lease obligation 1,030 35 13.59 1,021 35 13.71
--------- --------- --------- --------- --------- ---------
Total Interest Bearing Liabilities/
Total Interest Expense 95,367 1,308 5.49% 47,288 666 5.63
--------- --------- --------- ---------
Noninterest bearing demand deposits 12,406 6,142
All other liabilities 352 169
Stockholders' equity 10,752 8,395
---------- ---------
Total Liabilities and Equity $118,877 $61,994
========= =========
Net Interest Income $1,057 $490
======= =========
Net Interest Margin (Net Interest
Income/Total Earning Assets) 3.71% 3.42%
========= =========
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
Nine Months Ended September 30,
-----------------------------------------------------------------------------
1998 1997
------------------------------------- -----------------------------------
Average Average
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
--------- --------- --------- --------- --------- ---------
(in thousands)
Assets
Federal funds sold $7,305 $300 5.48% $12,157 $492 5.40%
Securities 21,503 1,011 6.27 8,174 366 5.97
Loans 74,248 5,056 9.08 23,088 1,621 9.36
--------- --------- -------- -------- -------- --------
Total Earning Assets/
Total Interest Income 103,056 6,367 8.24% 43,419 2,479 7.61%
--------- -------- -------- --------
Cash and due from banks 3,115 2,029
All other assets 1,587 2,027
--------- --------
Total Assets $107,758 $47,475
========= ========
Liabilities and Equity
NOW and money market accounts $10,613 267 3.35% $5,802 165 3.79%
Savings deposits 2,368 56 3.15 910 20 2.93
Time deposits 71,600 3,134 5.84 25,758 1,121 5.80
Short term borrowings 1,667 61 4.88 336 13 5.16
Capitalized lease obligation 1,027 104 13.50 1,017 103 13.50
--------- --------- --------- -------- -------- --------
Total Interest Bearing Liabilities/
Total Interest Expense 87,275 3,622 5.53% 33,823 1,422 5.61%
--------- --------- -------- --------
Noninterest bearing demand deposits 11,363 4,601
All other liabilities 331 129
Stockholders' equity 8,789 8,922
--------- --------
Total Liabilities and Equity $107,758 $47,475
========= ========
Net Interest Income $2,745 $1,057
======= ========
Net Interest Margin (Net Interest
Income/Total Earning Assets) 3.55% 3.25%
======== ========
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
NONINTEREST INCOME
Noninterest income increased by 127%, to $311,000 for the first nine months of
1998. 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 nine months of 1997 by 11%, to $2.5
million in 1998. 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 declined in 1998, as depreciation fell in the absence of
significant new purchases.
PROVISION FOR INCOME TAXES
The Corporation currently has no recorded provision for income taxes. Net
operating loss carryforwards totaled $1.7 million through tax years ended
December 31, 1997. The Corporation has not recorded a corresponding asset for
any future benefit of these carryforwards, since it has not yet demonstrated a
prolonged history of earnings.
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 a $2.0 million secured
federal funds 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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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
The following table shows the maturity and repricing distribution of the
Corporation's interest earning assets and interest bearing liabilities as of
September 30, 1998. This table displays the interest rate sensitivity gap (i.e.,
interest rate sensitive assets less interest rate sensitive liabilities),
cumulative interest rate sensitivity gap, the interest rate sensitivity gap
ratio (i.e., interest rate sensitive assets divided by interest rate sensitive
liabilities), and cumulative interest rate sensitivity gap ratio.
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 $5,300 $ --- $ --- $ --- $5,300
Securities 749 4,602 13,610 3,426 22,387
Loans 32,014 3,721 36,164 19,130 91,029
-------- ------- ------- ------ ---------
Total 38,063 8,323 49,774 22,556 $118,716
-------- ------- ------- ------ =========
Interest bearing liabilities:
NOW and money market
accounts 13,481 --- --- --- $13,481
Savings deposits 2,481 --- --- --- 2,481
Jumbo time deposits 17,452 18,909 --- --- 36,361
Time deposits < $100,000 10,957 27,712 700 --- 39,369
Short term borrowings 1,858 --- --- --- 1,858
Capitalized lease obligation 2 8 113 915 1,038
-------- ------- ------- ------ ---------
Total 46,231 46,629 813 915 $94,588
-------- ------- ------- ------ =========
Interest rate sensitivity gap ($8,168) (38,306) 48,961 21,641
Cumulative interest rate
sensitivity gap ($46,474) $2,487 $24,128
Interest rate sensitivity gap
ratio 0.82 0.18 61.22 24.65
Cumulative interest rate
sensitivity gap ratio 0.50 1.03 1.26
The preceding table 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 by
different increments. At September 30, 1998, the Corporation is considered
"liability sensitive" according to the preceding table. In a rising rate
environment, the Corporation might not be able to increase rates on earning
assets faster than the increase in rates on interest bearing liabilities.
The Corporation is also working with a vendor to develop a personal
computer-based model to simulate the effects of possible interest rate changes.
The Corporation intends to limit estimated negative exposure to changing rates
within a one year period. The exposure estimate will be based on a variety of
assumptions built into the model, and assumed interest rate changes of plus or
minus 200 basis points. The results of this analysis will be reported to the
Asset/Liability Committee, to assist in the interest rate risk management
process.
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16
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
OTHER MATTERS
The Company is assessing the impact of the arrival of 2000 on its computerized
information systems and other electronic equipment. The "year 2000 problem" is
the result of abbreviating an applicable year with two digits rather than four.
As a result, computer programs and other devices may interpret a date field of
"00" as 1900 rather than 2000. This or any similar error could lead to system
malfunction or complete failure. The banking industry is highly dependent on
computer systems to process significant transaction volumes, and to perform date
sensitive calculations for interest accruals on financial instruments such as
loans and deposits.
The Company 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 Company was founded during 1996, much of its
equipment and computer technology is new, and in many cases, already year 2000
compliant. The Company's main data processing vendor has represented that it
will be compliant by the end of 1998, and regularly provides updates on its
progress to the Company. The Company has a written plan which is regularly
updated and reported to the Board of Directors. The current phase of the plan is
testing systems and equipment. The testing phase is expected to be complete by
December, 1998. The Company is also gathering information on its significant
borrowers and depositors, to help mitigate any risk posed to the Bank by their
non-compliance. To date, spending on the year 2000 project has not been
material. While it is expected that the remainder of the project will involve
additional costs, the total amount is not currently expected to exceed $50,000.
Such costs are expensed as incurred. If any unusual and unforeseen problems
arise during testing, this amount could be significantly higher. Additionally,
if the Company (or its customers or vendors) are unable to remedy any potential
year 2000 problems in a timely manner, there could be a material adverse effect
on the Company's business. Based on information that is currently available, the
Company does not anticipate that the cost of achieving year 2000 compliance will
have a material effect on its capital resources, results of operations, or
liquidity as presented herein.
EXHIBITS
Exhibits filed in accordance with Part I of this Form 10-QSB are shown in the
Exhibit Index, which immediately precedes such exhibits, and is incorporated by
reference herein.
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17
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 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
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
A list of exhibits included as part of this Form 10-QSB is shown in the
Exhibit Index, which immediately precedes such exhibits, and is
incorporated by reference herein.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
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18
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 October 29, 1998.
COMMUNITY CENTRAL BANK CORPORATION
By: /s/ HAROLD W. ALLMACHER
-----------------------
Harold W. Allmacher;
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
By: /s/ RICHARD J. MILLER
---------------------
Richard J. Miller;
President and Chief Operating Officer
By: /s/ PETER J. PRZYBOCKI
----------------------
Peter J. Przybocki, CPA;
Corporate Treasurer
(Principal Financial and Accounting Officer)
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19
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------
PART I EXHIBITS
11 Computation of Per Share Earnings
27 Financial Data Schedule
PART II EXHIBITS
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
19