1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF
1934 For the quarterly period ended March 31, 2001 .
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from .
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.
Commission file number 0-15752 .
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CENTURY BANCORP, INC.
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(Exact name of registrant as specified in its charter)
COMMONWEALTH OF MASSACHUSETTS 04-2498617
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
400 MYSTIC AVENUE, MEDFORD, MA 02155
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(Address of principal executive offices) (Zip Code)
(781) 391-4000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 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.
X Yes No
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of March 31, 2001:
CLASS A COMMON STOCK, $1.00 PAR VALUE 3,402,300 SHARES
CLASS B COMMON STOCK, $1.00 PAR VALUE 2,138,050 SHARES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 4, 2001 CENTURY BANCORP, INC.
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/s/ Paul V. Cusick, Jr. /s/ Kenneth A. Samuelian
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PAUL V. CUSICK, JR. KENNETH A. SAMUELIAN
VICE PRESIDENT AND TREASURER VICE PRESIDENT
(PRINCIPAL FINANCIAL OFFICER) CENTURY BANK AND TRUST COMPANY
(CHIEF ACCOUNTING OFFICER)
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Century Bancorp, Inc.
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INDEX NUMBER
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PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets:
March 31, 2001 and December 31, 2000 3
Consolidated Statements of Income:
Three months (3) Months Ended March 31, 2001 and
2000. 4
Consolidated Statements of Changes in Stockholders
Equity: Three (3) months ended March 31, 2001 and
2000. 5
Consolidated Statements of Cash Flows:
Three (3) months ended March 31, 2001 and 2000. 6
Notes to Consolidated Financial Statements 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8- 10
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK 11
PART II. OTHER INFORMATION
Item 1 through Item 6 11
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PART I - Item 1
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Century Bancorp, Inc. - Consolidated Balance Sheets (unaudited)
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(000's)
March 31, Dec. 31,
ASSETS 2001 2000
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Cash and due from banks $ 44,445 $ 63,790
Federal funds sold and interest-bearing deposits in other banks 45,502 112,012
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Total cash and cash equivalents 89,947 175,802
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Securities available-for-sale, amortized cost $309,388 and
$274,939, respectively 311,631 273,144
Securities held-to-maturity, market value $159,547 and
$168,462, respectively 158,184 169,186
Loans, net of unearned discount:
Commercial & industrial 82,950 95,957
Construction & land development 29,866 21,840
Commercial real estate 214,085 209,233
Industrial revenue bonds 101 119
Residential real estate 81,003 81,526
Consumer & other 14,235 9,226
Home equity 20,680 21,107
Overdrafts 532 555
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Total loans, net of unearned discount 443,452 439,563
Less: allowance for loan losses 6,124 5,662
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Net loans 437,328 433,901
Bank premises and equipment, net 9,089 8,819
Accrued interest receivable 7,097 7,612
Other assets 14,834 15,366
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Total assets $ 1,028,110 $ 1,083,830
=========== ===========
LIABILITIES
Deposits:
Demand deposits $ 183,481 $ 198,914
Savings and NOW deposits 172,698 175,655
Money market accounts 139,857 131,159
Time deposits 244,568 288,068
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Total deposits 740,604 793,796
Securities sold under agreements to repurchase 67,701 71,450
Federal Home Loan Bank (FHLB) borrowings and other borrowed funds 91,196 97,328
Other liabilities 23,763 21,000
Long term debt 28,750 28,750
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Total liabilities 952,014 1,012,324
STOCKHOLDERS' EQUITY
Class A common stock, $1.00 par value per share; authorized
10,000,000 shares; issued 3,760,900 and 3,754,600, respectively 3,761 3,755
Class B common stock, $1.00 par value per share; authorized
5,000,000 shares; issued 2,185,600 and 2,191,900, respectively 2,186 2,192
Additional paid-in capital 11,093 11,093
Retained earnings 63,059 60,916
Treasury stock, Class A, 358,600 and 348,600 shares, at cost, respectively (5,420) (5,242)
Treasury stock, Class B, 47,550 shares, each period, at cost, respectively (41) (41)
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74,638 72,673
Accumulated other comprehensive (loss) 1,458 (1,167)
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Total stockholders' equity 76,096 71,506
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Total liabilities and stockholders' equity $ 1,028,110 $ 1,083,830
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See accompanying Notes to Consolidated Financial Statements.
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Century Bancorp, Inc. - Consolidated Statements of Income (unaudited)
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(000's except share data)
Three months ended March 31,
2001 2000
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Interest income
Loans $ 9,712 $ 9,427
Securities held-to-maturity 2,576 2,359
Securities available-for-sale 4,428 3,914
Federal funds sold and interest-bearing deposits in other banks 559 112
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Total interest income 17,275 15,812
Interest expense
Savings and NOW deposits 901 980
Money market accounts 797 540
Time deposits 3,650 3,055
Securities sold under agreements to repurchase 657 697
FHLB borrowings, other borrowed funds and long term debt 1,772 2,054
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Total interest expense 7,777 7,326
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Net interest income 9,498 8,486
Provision for loan losses 375 300
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Net interest income after provision
for loan losses 9,123 8,186
Other operating income
Service charges on deposit accounts 709 457
Lockbox fees 830 402
Brokerage commissions 340 440
Other income 202 160
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Total other operating income 2,081 1,459
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Operating expenses
Salaries and employee benefits 4,482 3,828
Occupancy 559 409
Equipment 441 366
Other 1,700 1,384
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Total operating expenses 7,182 5,987
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Income before income taxes 4,022 3,658
Provision for income taxes 1,476 1,307
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Net income $ 2,546 $ 2,351
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Share data:
Weighted average number of shares outstanding, basic 5,547,350 5,672,269
Weighted average number of shares outstanding, diluted 5,547,350 5,674,306
Net income per share, basic $ 0.46 $ 0.41
Net income per share, diluted $ 0.46 $ 0.41
Cash dividends declared:
Class A common stock $ 0.0900 $ 0.0800
Class B common stock $ 0.0450 $ 0.0370
See accompanying Notes to Consolidated Financial Statements.
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Century Bancorp, Inc. - Consolidated Statement of Changes in Stockholders'
Equity (unaudited)
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Accumulated
Class A Class B Additional Treasury Treasury Other Total
Common Common Paid-In Retained Stock Stock Comprehensive Stockholders'
Three months ended March 31, Stock Stock Capital Earnings Class A Class B Income (Loss) Equity
------- ------- ------- -------- -------- -------- -------------- ------------
(000's)
2000
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Balance at December 31, 1999 $ 3,722 $ 2,197 $ 11,017 $ 52,188 ($ 3,122) ($ 41) ($ 5,665) $ 60,296
Net income -- -- -- 2,351 -- -- -- 2,351
Other comprehensive income, net of tax:
Increase in unrealized loss on
securities available-for-sale -- -- -- -- -- -- (572) (572)
--------
Comprehensive income 1,779
Conversion of Class B common stock to
Class A common stock, 5,000 shares 5 (5)
Stock options exercised, 27,750 shares 28 -- 76 -- -- -- -- 104
Treasury stock repurchase, 57,500 shares -- -- -- -- (890) -- -- (890)
Cash dividends, Class A common stock,
$.08 per share -- -- -- (285) -- -- -- (285)
Cash dividends, Class B common stock,
$.037 per share -- -- -- (79) -- -- -- (79)
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Balance at March 31, 2000 $ 3,755 $ 2,191 $ 11,093 $ 54,175 ($ 4,012) ($ 41) ($ 6,237) $ 60,925
======== ======== ======== ======== ======== ======== ======== ========
2001
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Balance at December 31, 2000 $ 3,755 $ 2,192 $ 11,093 $ 60,916 ($ 5,242) ($ 41) ($ 1,167) $ 71,506
Net income -- -- -- 2,546 -- -- -- 2,546
Other comprehensive income, net of tax:
Decrease in unrealized loss on
securities available-for-sale -- -- -- -- -- -- 2,625 2,625
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Comprehensive income 5,171
Conversion of Class B common stock to
Class A common stock, 6,300 shares 6 (6) -- -- -- -- -- --
Treasury stock repurchases, 10,000 shares -- -- -- -- (178) -- -- (178)
Cash dividends, Class A common stock,
$.09 per share -- -- -- (307) -- -- -- (307)
Cash dividends, Class B common stock,
$.045 per share -- -- -- (96) -- -- -- (96)
-------- -------- -------- -------- -------- -------- -------- --------
Balance at March 31, 2001 $ 3,761 $ 2,186 $ 11,093 $ 63,059 ($ 5,420) ($ 41) $ 1,458 $ 76,096
======== ======== ======== ======== ======== ======== ======== ========
See accompanying Notes to Consolidated Financial Statements.
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Century Bancorp, Inc. - Consolidated Statement of Cash Flows (unaudited)
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For the three months ended
March 31,
2001 2000
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(000's)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,546 $ 2,351
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 375 300
Deferred income taxes (232) 1,094
Net depreciation and amortization 459 480
Decrease (increase) in accrued interest receivable 515 (1,116)
Increase in other assets (347) (5)
Proceeds from sales of loans 26 --
Gain on sales of loans -- 4
Gain on sale of securities (27) --
Increase in other liabilities 210 1,485
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Net cash provided by operating activities 3,525 4,593
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available-for-sale 31,518 2,332
Purchase of securities available-for-sale (65,920) (4,000)
Proceeds from maturities of securities held-to-maturity 21,445 3,304
Purchase of securities held-to-maturity (10,453) (1,997)
Increase (decrease) in payable for investments purchased 2,000 (6,000)
Net increase in loans (3,671) (13,892)
Capital expenditures (645) (443)
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Net cash used in investing activities (25,726) (20,696)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in time deposits (43,500) (33,418)
Net (decrease) Increase in demand, savings, money market and NOW deposits (9,692) 8,152
Net proceeds from the issuance of common stock -- 104
Treasury stock repurchases (178) (890)
Cash Dividends (403) (364)
Net (decrease) increase in securities sold under agreements to repurchase (3,749) 9,720
Net decrease in FHLB borrowings and other borrowed funds (6,132) (3,782)
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Net cash used in financing activities (63,654) (20,478)
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Net decrease in cash and cash equivalents (85,855) (36,581)
Cash and cash equivalents at beginning of year 175,802 66,528
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Cash and cash equivalents at end of period $ 89,947 $ 29,947
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest $ 8,587 $ 7,857
Income taxes (992) 309
Change in unrealized losses on securities available-for-sale, net of taxes $ 2,625 ($ 572)
See accompanying Notes to Consolidated Financial Statements.
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Century Bancorp, Inc.
Notes to Consolidated Financial Statements
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
interim consolidated financial statements reflect all
adjustments, consisting of normal recurring adjustments,
which are necessary to present a fair statement of the
results for the interim period presented of Century Bancorp,
Inc. (the "Company") and its wholly owned subsidiary,
Century Bank and Trust Company (the "Bank"). The results of
operations for the interim period ended March 31, 2001, are
not necessarily indicative of results for the entire year.
It is suggested that these statements be read in conjunction
with the consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10K
for year ended December 31, 2000.
The financial statements have been prepared in conformity
with generally accepted accounting principles and to general
practices within the banking industry. In preparing the
financial statements, management is required to make
estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual
results could differ from those estimates.
Material estimates that are susceptible to change in the
near-term relate to the allowance for losses on loans.
Management believes that the allowance for losses on loans
is adequate based on independent appraisals and review of
other factors associated with the assets. While management
uses available information to recognize losses on loans,
future additions to the allowance for loans may be necessary
based on changes in economic conditions. In addition,
regulatory agencies periodically review the Company's
allowance for losses on loans. Such agencies may require the
Company to recognize additions to the allowance for loans
based on their judgements about information available to
them at the time of their examination.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary, the Bank.
The Company provides a full range of banking services to
consumer, business and municipal customers in Massachusetts.
As a bank holding company, the Company is subject to the
regulation and supervision of the Federal Reserve Board. The
Bank, a state chartered financial institution, is subject to
supervision and regulation by applicable state and federal
banking agencies, including the Federal Reserve Board, the
Federal Deposit Insurance Corporation (the "FDIC"), and the
Massachusetts Division of Banks.
The Bank is also subject to various requirements and
restrictions under federal and state law, including
requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may be
granted and the interest that may be charge thereon, and
limitations on the types of investments that may be made and
the types of services that may be offered. Various consumer
laws and regulations also affect the operations of the Bank.
In addition to the impact of regulation, commercial banks
are affected significantly by the actions of the Federal
Reserve Board as it attempts to control the money supply and
credit availability in order to influence the economy. All
aspects of the Company's business are highly competitive.
The Company faces aggressive competition from other lending
institutions and from numerous other providers of financial
services.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW For the quarter ended and year-to-date ended March 31, 2001.
Earnings for the first quarter ended March 31, 2001 were
$2.5 million, an increase of 8.3% when compared with the
first quarter 2000 earnings of $2.4 million. Diluted
earnings per share for the first quarter 2001 were $0.46
versus $0.41 for the first quarter of 2000. The increase was
mainly attributable to balance sheet growth and increases in
fee income.
Total assets were $1,028.1 million at March 31, 2001
compared to $1,083.8 at December 31, 2000. The reduction was
mainly attributable to seasonal municipal deposit levels.
During the third quarter of 2000, the Company announced
plans to continue its stock repurchase plan. Under the
program, the Company is authorized to repurchase up to
300,000 shares, or less than 9% or Century Bancorp Class A
Common Stock. The program expires on July 14, 2001. Through
the end of the first quarter of 2000, the Company has
repurchased 20,000 shares.
FINANCIAL CONDITION
LOANS On March 31, 2001 total loans outstanding , net of unearned
discount, were $443.5 million, an increase of 0.9% from the
total on December 31, 2000. At March 31, 2001 commercial
real estate loans accounted for 48.3% and residential real
estate loans, including home equity credit lines, accounted
for 22.9% of total loans. Construction loans increased to
$29.9 million at March 31, 2001 from $21.8 million on
December 31, 2000.
The increase in loans was mainly attributable to consumer
and other loans. Consumer and other loans are comprised
mainly of personal installment and personal credit loans.
Also, originations of corporate loans reflect the Company's
interest for this type of loan.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses was 1.38% of total loans on
March 31, 2001 compared with 1.29% on December 31, 2000. Net
recoveries for the three month period ended March 31, 2001
were $87 thousand compared with net charge-offs of $3.6
million for the same period in 2000. The decrease in net
charge-offs primarily reflected the deterioration with one
borrower's credit quality whose total relationship amounted
to $4.1 million. Management reported this credit in the
third quarter 1999 10Q, placed it to nonaccrual loans during
the fourth quarter of 1999 and subsequently charged-off $3.5
million during the first quarter of 2000.
Management believes that the allowance for loan losses is
adequate. Management uses available information to provide
for losses but recognizes that changes in economic
conditions may result in additional losses and additional
loss provisions. Also, the allowance is reviewed in
conjunction with regulatory examinations. These reviews may
require the Company to make additional provisions to the
allowance based on judgements made by the regulators.
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Management's Discussion and Analysis of Financial Condition
and Results of Operation (con't.)
MARCH 31, 2001 DECEMBER 31, 2000
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(DOLLARS IN THOUSANDS)
Nonaccruing loans $1,004 $110
Loans past due 90 days
or more $ 0 $ 19
Nonaccruing loans as a
Percentage of total loans .23% .03%
INVESTMENTS Management continually evaluates its investment alternatives
in order to properly manage the overall balance sheet mix.
The timing of purchases, sales and reinvestment, if any,
will be based on various factors including expectation of
movements in market interest rates, deposit flows and loan
demand. Notwithstanding these events, it is the intent of
management to grow the earnings asset base through loan
originations, loan purchases or investment acquisitions
while funding this growth through a mix of retail deposits,
FHLB advances, and retail repurchase agreements.
MARCH 31, 2001 DECEMBER 31, 2000
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(DOLLARS IN THOUSANDS)
SECURITIES AVAILABLE-FOR-SALE
U.S. Government and
Agencies $261,836 $224,198
Other Bonds and Equity Securities 19,372 18,306
Mortgage-backed Securities 30,423 30,640
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Total Securities Available-for-Sale $311,631 $273,144
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SECURITIES HELD-TO-MATURITY
U.S. Government and
Agencies $ 79,444 $ 86,981
Other Bonds and Equity Securities 25 25
Mortgage-backed Securities 78,715 82,180
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Total Securities Held-to-Maturity $158,184 $169,186
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SECURITIES AVAILABLE-FOR-SALE
The securities available-for-sale portfolio totaled $311.6
million at March 31, 2001, an increase of 14.1% from
December 31, 2000. The portfolio is concentrated in United
States Treasury and Agency securities and has an estimated
weighted average maturity of 2.9 years.
SECURITIES HELD-TO-MATURITY
The securities held-to-maturity portfolio totaled 158.2
million on March 31, 2001, a decrease of 6.5% from the total
on December 31, 2000. The portfolio is concentrated in
United States Treasury and Agency securities, including
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Management's Discussion and Analysis of Financial Condition
and Results of Operation (con't.)
Mortgage Backed Securities and has an estimated weighted
average maturity of 3.1 years.
DEPOSITS AND BORROWED FUNDS
On March 31, 2001 deposits totaled $740.6 million,
representing a 6.7% decrease in total deposits from December
31, 2000. Total deposits decreased primarily as a result of
seasonal municipal deposit levels. Borrowed funds totaled
$158.9 million compared to $168.8 million at December 31,
2000.
RESULTS OF OPERATIONS
NET INTEREST INCOME
For the three month period ended March 31, 2001 net interest
income totaled $9.5 million, an increase of 11.9% from the
comparable period in 2000. Interest income was affected
positively by balance sheet growth. The net yield on average
earning assets on a fully taxable equivalent basis increased
to 4.08% in the first three months of 2001 from 3.98% during
the same period in 2000. The increase was mainly
attributable to core deposit growth.
PROVISION FOR LOAN LOSSES
For the three month period ended March 31, 2001 the loan
loss provision totaled $375 thousand compared to $300
thousand for the same period last year.
Loan loss provision increased due to growth in the loan
portfolio. The Company's loan loss allowance as a percentage
of total loans outstanding has increased from 1.02% at March
31, 2000 to 1.38% at March 31, 2001.
NON-INTEREST INCOME AND EXPENSE
Other operating income for the quarter ended March 31, 2001
was $2.1 million compared to $1.5 million for the first
quarter of 2000. The increase was mainly attributable to an
increase of $428 thousand in lockbox fees and a $252
thousand increase in service charges on deposit accounts. A
former provider of lockbox services exited the business
which allowed the Company to increase its business. This
increase was partially offset by a decrease of $100 thousand
from brokerage commissions.
During the first quarter 2001, operating expenses increased
by $1,195 thousand to $7.2 million or 20% from the same
quarter last year. Most of the increase was in increased
staff levels as well as merit increases in salaries and
employee benefits with the remainder in all other expenses.
INCOME TAXES
For the first quarter of 2001, the Company's income taxes
totaled $1.5 million on pretax income of $4.0 million for an
effective tax rate of 36.7%. For last year's corresponding
quarter, the Company's income taxes totaled $1.3 million on
pretax income of $3.7 million for an effective rate of
35.7%.
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ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The response is incorporated herein by reference from the
discussion under the Subcaption "Market Risk and Asset
Liability Management" of the caption "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" on pages 9 and 10 of the Annual Report which
is incorporated herein by reference.
PART II - OTHER INFORMATION
Item 1 Legal proceedings - The Company is not engaged in any legal
proceedings of a material nature at the present time. From
time to time, the Company is party to routine legal
proceedings within the normal course of business. Such
routine legal proceedings, in the aggregate, are believed by
management to be immaterial to the Company's financial
condition and results of operation.
Item 2 Change in securities - Not applicable
Item 3 Defaults upon senior securities - Not applicable
Item 4 Submission of matters to a vote - Not applicable
Item 5 Other information - Not applicable
Item 6 Exhibits and reports on form 8-K - Not applicable
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