U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended December 31, 2000
[ ] Transition Report Under Section 13
or 15(d) of the Exchange Act
For the transition period ended ______________________________________
Commission File Number 000-21881
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CENTURY BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
North Carolina 56-1981518
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
22 WINSTON STREET, THOMASVILLE, NC 27360
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(Address of principal executive office)
(336) 475-4663
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No__
---
As of January 19, 2001, 1,105,019 shares of the issuer's common stock, no par
value, were outstanding. The registrant has no other classes of securities
outstanding.
This report contains 11 pages.
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Page No.
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Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
December 31, 2000 and June 30, 2000.................................................. 3
Consolidated Statements of Operations
Three Months and Six Months Ended
December 31, 2000 and 1999........................................................... 4
Consolidated Statements of Cash Flows
Three Months and Six Months Ended
December 31, 2000 and 1999........................................................... 5
Notes to Consolidated Financial Statements........................................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................. 7
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders......................... 10
Item 6. Exhibits and Reports on Form 8-K............................................ 10
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Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
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Century Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
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December 31,
2000 June 30,
ASSETS (Unaudited) 2000 *
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(In Thousands)
Cash on hand and in banks $ 1,610 $ 1,105
Interest-bearing balances in other banks 994 889
Investment securities available for sale, at fair value 4,908 4,737
Investment securities held to maturity, at amortized cost 4,336 4,433
Loans receivable, net 90,750 87,254
Accrued interest receivable 563 504
Premises and equipment, net 631 621
Stock in the Federal Home Loan Bank, at cost 734 734
Other assets 376 265
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TOTAL ASSETS $104,902 $100,542
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts $ 72,937 $ 73,846
Advances from Federal Home Loan Bank 12,500 8,000
Accrued interest payable 216 142
Advance payments by borrowers for property taxes and insurance 146 233
Accrued expenses and other liabilities 607 453
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TOTAL LIABILITIES 86,406 82,674
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STOCKHOLDERS' EQUITY
Preferred stock, no par value, 5,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, 20,000,000 shares authorized;
1,105,019 shares issued and outstanding 8,113 8,099
ESOP loan and unearned compensation (2,035) (2,285)
Retained earnings, substantially restricted 11,783 11,734
Accumulated other comprehensive income 635 320
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TOTAL STOCKHOLDERS' EQUITY 18,496 17,868
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $104,902 $100,542
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* Derived from audited financial statements
See accompanying notes.
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Century Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
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Three Months Ended Six Months Ended
December 31, December 31,
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2000 1999 2000 1999
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(In Thousands Except Per Share Data)
INTEREST INCOME
Loans $ 1,735 $ 1,515 $ 3,425 $ 3,016
Investments and deposits in other banks 173 196 333 393
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TOTAL INTEREST INCOME 1,908 1,711 3,758 3,409
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INTEREST EXPENSE
Deposit accounts 985 894 1,982 1,774
Borrowings 178 41 325 58
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TOTAL INTEREST EXPENSE 1,163 935 2,307 1,832
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NET INTEREST INCOME 745 776 1,451 1,577
PROVISION FOR LOAN LOSSES 4 5 9 9
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 741 771 1,442 1,568
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OTHER INCOME
8 12 17 20
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GENERAL AND ADMINISTRATIVE EXPENSES
Compensation and benefits 291 284 568 558
Occupancy 21 21 41 42
Data processing expenses 29 30 59 60
Federal deposit insurance premiums 3 11 7 21
Other expenses 99 84 191 173
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TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES 443 430 866 854
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INCOME BEFORE
INCOME TAXES 306 353 593 734
PROVISION FOR INCOME TAXES 106 127 210 266
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NET INCOME $ 200 $ 226 $ 383 $ 468
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NET INCOME PER COMMON SHARE
Basic and diluted $ .20 $ .24 $ .39 $ .48
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Weighted average shares outstanding 982,221 937,877 979,971 965,305
======== ======== ======== ========
DIVIDENDS DECLARED
PER COMMON SHARE $ 0.17 $ 0.17 $ .34 $ .34
======== ======== ======== ========
See accompanying notes.
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Century Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
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Six Months Ended
December 31,
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2000 1999
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(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 383 $ 468
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 22 20
Deferred compensation 11 11
Amortization of discounts and premiums on securities (1) 3
Provision for loan losses 9 9
Amortization of unearned stock compensation 285 282
Change in assets and liabilities:
Decrease (increase) in accrued interest receivable (59) 11
Increase in accrued interest payable 74 15
Other (130) 18
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 594 837
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale investment securities - (500)
Proceeds from sales, maturities and calls of:
Available for sale investment securities 344 1,466
Held to maturity investment securities 101 1,085
Net increase in loans (3,505) (3,877)
Purchases of property and equipment (32) (2)
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NET CASH USED BY
INVESTING ACTIVITIES (3,092) (1,828)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in demand deposits (9) (843)
Net decrease in certificate accounts (900) (557)
Increase in advances form FHLB 4,500 2,000
Decrease in advances from borrowers (87) (88)
Repurchase of common stock - (363)
Costs incurred in connection with pending merger (62) -
Cash dividends paid (334) (328)
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NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 3,108 (179)
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NET INCREASE (DECREASE) IN 610 (1,170)
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING 1,994 3,537
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CASH AND CASH EQUIVALENTS, ENDING $ 2,604 $ 2,367
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See accompanying notes.
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Century Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
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NOTE A - BASIS OF PRESENTATION
In management's opinion, the financial information, which is unaudited, reflects
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial information as of and for the three and
six months ended December 31, 2000 and 1999, in conformity with generally
accepted accounting principles. The financial statements include the accounts of
Century Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Home
Savings, Inc., SSB ("Home Savings" or the "Bank"). Operating results for the
three and six months ended December 31, 2000 are not necessarily indicative of
the results that may be expected for the fiscal year ending June 30, 2001.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the consolidated
financial statements filed as part of the Company's annual report on Form 10-
KSB. This quarterly report should be read in conjunction with such annual
report.
NOTE B - NET INCOME PER SHARE
Net income per share has been computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. In
accordance with generally accepted accounting principles, management recognition
plan shares and employee stock ownership plan shares are only considered
outstanding for the basic earnings per share calculations when they are earned
or committed to be released. Outstanding options and unearned shares in the
management recognition plan had no dilutive effect for the three months and six
ended December 31, 2000 and 1999.
NOTE C - PENDING ACQUISITION OF THE COMPANY
On October 20, 2000, the Company's Board of Directors announced the execution of
a definitive merger agreement (the "agreement") regarding a merger of Century
Bancorp, Inc. ("Century") with and into First Bancorp, the holding company for
First Bank of Troy, North Carolina. The terms of this agreement provide that
the shareholders of Century will have the option to receive either $20.00 in
cash or 1.333 shares of First Bancorp common stock for each share of Century
common stock that they own. This election is subject to the requirement that,
subject to certain possible adjustments that may be necessary to achieve the
intended tax treatment, 60% of Century's shares outstanding will be exchanged
for cash and 40% of Century's shares outstanding will be exchanged for shares of
First Bancorp stock. To the extent that Century shareholders elect to receive
more than the aggregate stock or cash consideration permitted by the agreement,
pro rata allocations will be made.
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Item 2 - Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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This Quarterly Report on Form 10-QSB may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products and services.
Comparison of Financial Condition at December 31, 2000 and June 30, 2000
Consolidated total assets increased by $4.4 million during the six months ended
December 31, 2000, from $100.5 million at June 30, 2000 to $104.9 million at
December 31, 2000. This growth resulted from growth of $3.5 million in loans
receivable, which increased from $87.3 million at June 30, 2000 to $90.8 million
at December 31, 2000. During the six-month period proceeds of $4.5 million from
Federal Home Loan Bank advances provided the principal source of funding for the
growth in loans and for a reduction of $909,000 in deposits.
Total stockholders' equity was $18.5 million at December 31, 2000, as compared
with $17.9 million at June 30, 2000, an increase of $628,000. Stockholders'
equity was increased during the six months as a result of net income of
$383,000, amortization of unearned compensation of $285,000 and an increase in
the value of investment securities available for sale, net of taxes, of
$315,000. These increases were offset by regular quarterly dividends
aggregating $334,000 or $.34 per share. At December 31, 2000, both the Holding
Company and the Bank continued to significantly exceed all applicable regulatory
capital requirements.
Comparison of Results of Operations for the Three Months Ended December 31, 2000
and 1999
Net Income. Net income for the quarter ended December 31, 2000 was $200,000 or
$.20 per share, as compared with net income of $226,000, or $.24 per share, for
the three months ended December 31, 1999. Net income decreased by $26,000
principally as a result of a decrease of $31,000 in net interest income and an
increase of $13,000 general and administrative expenses. In addition, the lower
net income per share for the three months ended December 31, 2000 was also
impacted by the release of employee stock option plan shares and the vesting of
the management recognition plan shares. These factors caused an increase in the
weighted average shares outstanding during the three months ended December 31,
2000 as compared with the three months ended December 31, 1999.
Net Interest Income. Net interest income was $745,000 for the quarter ended
December 31, 2000 as compared with $776,000 for the corresponding quarter of the
previous fiscal year, a decrease of $31,000. This decrease resulted principally
from the increasing trend in interest rates over the last year that caused a
decline in the Company's net interest margin. Because the Company's interest-
bearing liabilities generally respond more quickly to interest rate changes than
do its interest-earning assets, the average cost of interest bearing liabilities
was 67 basis points higher during the current quarter, while its average yield
on interest-earning assets rose by only 19 basis points.
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Provision for Loan Losses. The provision for loan losses was $4,000 and $5,000,
respectively, for the quarters ended December 31, 2000 and 1999. There were no
loan charge-offs during either period. Nonaccrual loans aggregated $243,000 at
December 31, 2000, while the allowance for loan losses totaled $595,000 at that
date.
General and Administrative Expenses. General and administrative expenses
increased by $13,000 or 3% to $443,000 for the quarter ended December 31, 2000
as compared with $430,000 for the quarter ended December 31, 1999. This overall
increase is considered to be principally inflationary in nature.
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 34.6% and 35.9% for the three months ended
December 31, 2000 and 1999, respectively.
Comparison of Results of Operations for the Six months Ended December 31, 2000
and 1999
Net Income. Net income for the six months ended December 31, 2000 was $383,000
or $.39 per share, as compared with net income of $468,000, or $.48 per share,
for the six months ended December 31, 1999. Net income decreased by $85,000
principally as a result of a decrease of $126,000 in net interest income. In
addition, the lower net income per share for the six months ended December 31,
2000 was also impacted by the release of employee stock option plan shares and
the vesting of the management recognition plan shares. These factors caused an
increase in the weighted average shares outstanding during the six months ended
December 31, 2000 as compared with the six months ended December 31, 1999.
Net Interest Income. Net interest income was $1.5 million for the six months
ended December 31, 2000 as compared with $1.6 million, for the corresponding six
months of the previous fiscal year, a decrease of $126,000. This decrease
resulted principally from the increasing trend in interest rates over the last
year that caused a decline in the Company's net interest margin. Because the
Company's interest-bearing liabilities generally respond more quickly to
interest rate changes than do its interest-earning assets, the average cost of
interest bearing liabilities was 77 basis points higher during the current six
months, while its average yield on interest-earning assets rose by only 13 basis
points.
Provision for Loan Losses. The provision for loan losses was $9,000 for each of
the six month periods ended December 31, 2000 and 1999. There were no loan
charge-offs during either period. Nonaccrual loans aggregated $243,000 at
December 31, 2000, while the allowance for loan losses totaled $595,000 at that
date.
General and Administrative Expenses. General and administrative expenses
increased by $12,000, or less than 2%, to $866,000 for the six months ended
December 31, 2000 as compared with $854,000 for the six months ended December
31, 1999. This overall increase is considered to be principally inflationary in
nature.
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 35.4% and 36.2% for the six months ended
December 31, 2000 and 1999, respectively.
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Liquidity and Capital Resources
The objective of the Company's liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on opportunities for expansion. Liquidity management addresses Home
Savings' ability to meet deposit withdrawals on demand or at contractual
maturity, to repay borrowings as they mature, and to fund new loans and
investments as opportunities arise.
Home Savings' primary sources of internally generated funds are principal and
interest payments on loans receivable, cash flows generated from operations, and
repayments of mortgage-backed securities. External sources of funds include
increases in deposits and advances from the FHLB of Atlanta.
As a North Carolina-chartered savings bank, Home Savings must maintain liquid
assets equal to at least 10% of assets. The computation of liquidity under North
Carolina regulations allows the inclusion of mortgage-backed securities and
investments with readily marketable value, including investments with maturities
in excess of five years. Home Savings' liquidity ratio at December 31, 2000, as
computed under North Carolina regulations, was approximately 10.8%. On a
consolidated basis, liquid assets represented 11.3% of total assets. Management
believes that it will have sufficient funds available to meet its anticipated
future loan commitments as well as other liquidity needs.
As a North Carolina-chartered savings bank, Home Savings is subject to the
capital requirements of the Federal Deposit Insurance Corporation ("FDIC") and
the North Carolina Administrator of Savings Institutions ("N. C.
Administrator"). The FDIC requires state-chartered savings banks to have a
minimum leverage ratio of Tier I capital (principally consisting of common
shareholders' equity, noncumulative perpetual preferred stock, and a limited
amount of cumulative perpetual preferred stock, less certain intangible assets)
to total assets of at least 3%; provided, however, that all institutions, other
than those (i) receiving the highest rating during the examination process and
(ii) not anticipating or experiencing any significant growth, are required to
maintain a ratio of 1% or 2% above the state minimum. The FDIC also requires
Home Savings to have a ratio of total capital to risk-weighted assets of at
least 8%, of which at least 4% must be comprised of Tier I capital. The N. C.
Administrator requires a net worth equal to at least 5% of total assets. At
December 31, 2000, Home Savings exceeded the capital requirements of both the
FDIC and the N. C. Administrator.
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Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Stockholders was held on November 21, 2000. Of
1,105,019 shares entitled to vote at the meeting, 972,696 shares voted. The
following matters were voted on at the meeting:
Number of Votes
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For Against Withheld Abstain
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1. Election of directors:
Henry H. Darr 965,496 - 7,200 -
James G. Hudson, Jr. 965,496 - 7,200 -
John R. Hunnicutt 965,496 - 7,200 -
F. Stewart Kennedy 964,896 - 7,800 -
Milton T. Riley, Jr. 965,496 - 7,200 -
2. Ratification of Dixon Odom
PLLC to serve as independent
auditor for the year ending
June 30, 2001 964,446 1,200 - 7,050
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K.
One report on Form 8-K was filed by the Company during the
quarter ended December 31, 2000 to disclose the Company's pending
acquisition as discussed in Note C to the accompanying financial
statements.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTURY BANCORP, INC.
Date: January 30, 2001 By: /s/ James G. Hudson, Jr.
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James G. Hudson, Jr.
Chief Executive Officer
Date: January 30, 2001 By: /s/ Drema A. Michael
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Drema A. Michael
Chief Financial Officer
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