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 March 31, 2001
[ ] Transition Report Under Section 13
or 15(d) of the Exchange Act
For the transition period ended _________________________
Commission File Number 000-21881
---------------------
CENTURY BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
North Carolina 56-1981518
- -------------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
22 WINSTON STREET, THOMASVILLE, NC 27360
- --------------------------------------------------------------------------------
(Address of principal executive office)
(336) 475-4663
- --------------------------------------------------------------------------------
(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 May 1, 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.
Page No.
--------
Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
March 31, 2001 and June 30, 2000..................................................... 3
Consolidated Statements of Operations
Three Months and Nine Months Ended
March 31, 2001 and 2000.............................................................. 4
Consolidated Statements of Cash Flows
Three Months and Nine Months Ended
March 31, 2001 and 2000.............................................................. 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 6. Exhibits and Reports on Form 8-K............................................ 10
-2-
Part I. Financial Information
Item 1 - Financial Statements
- -----------------------------
Century Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
- --------------------------------------------------------------------------------
March 31,
2001 June 30,
ASSETS (Unaudited) 2000 *
------------ ------------
(In Thousands)
Cash on hand and in banks $ 1,742 $ 1,105
Interest-bearing balances in other banks 4,416 889
Investment securities available for sale, at fair value 4,804 4,737
Investment securities held to maturity, at amortized cost 3,499 4,433
Loans receivable, net 89,811 87,254
Accrued interest receivable 517 504
Premises and equipment, net 620 621
Stock in the Federal Home Loan Bank, at cost 844 734
Other assets 373 265
------------- -------------
TOTAL ASSETS $ 106,626 $ 100,542
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts $ 73,380 $ 73,846
Advances from Federal Home Loan Bank 13,500 8,000
Accrued interest payable 267 142
Advance payments by borrowers for property taxes and insurance 199 233
Accrued expenses and other liabilities 623 453
------------- -------------
TOTAL LIABILITIES 87,969 82,674
------------- -------------
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 8,150 8,099
ESOP loan and unearned compensation (1,939) (2,285)
Retained earnings, substantially restricted 11,825 11,734
Accumulated other comprehensive income 621 320
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 18,657 17,868
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 106,626 $ 100,542
============= =============
* Derived from audited financial statements
See accompanying notes
-3-
Century Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------------- ------------------------------
2001 2000 2001 2000
------------ ------------ ------------- -------------
(In Thousands Except Per Share Data)
INTEREST INCOME
Loans $ 1,747 $ 1,538 $ 5,172 $ 4,554
Investments and deposits in other banks 146 183 479 576
------------ ------------ ------------- -------------
TOTAL INTEREST INCOME 1,893 1,721 5,651 5,130
------------ ------------ ------------- -------------
INTEREST EXPENSE
Deposit accounts 944 863 2,926 2,637
Borrowings 192 49 517 107
------------ ------------ ------------- -------------
TOTAL INTEREST EXPENSE 1,136 912 3,443 2,744
------------ ------------ ------------- -------------
NET INTEREST INCOME 757 809 2,208 2,386
PROVISION FOR LOAN LOSSES 4 5 13 14
------------ ------------ ------------- -------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 753 804 2,195 2,372
------------ ------------ ------------- -------------
OTHER INCOME
14 12 31 32
------------ ------------ ------------- -------------
GENERAL AND ADMINISTRATIVE EXPENSES
Compensation and benefits 299 310 867 868
Occupancy 23 26 64 68
Data processing expenses 33 34 92 94
Federal deposit insurance premiums 4 4 11 25
Other expenses 57 85 248 258
------------ ------------ ------------- -------------
TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES 416 459 1,282 1,313
------------ ------------ ------------- -------------
INCOME BEFORE
INCOME TAXES 351 357 944 1,091
PROVISION FOR INCOME TAXES 142 131 352 397
------------ ------------ ------------- -------------
NET INCOME $ 209 $ 226 $ 592 $ 694
============ ============ ============= =============
NET INCOME PER COMMON SHARE
Basic and diluted $ .21 $ .24 $ .60 $ .72
============ ============ ============= =============
Weighted average shares outstanding 997,284 958,724 985,742 961,685
============ ============ ============= =============
DIVIDENDS DECLARED
PER COMMON SHARE $ .17 $ .17 $ .51 $ .51
============ ============ ============= =============
See accompanying notes.
-4-
Century Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
- --------------------------------------------------------------------------------
Nine Months Ended
March 31,
------------------------------
2001 2000
------------- -------------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 592 $ 694
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 33 29
Deferred compensation 16 17
Amortization of discounts and premiums on securities (2) 2
Provision for loan losses 13 14
Amortization of unearned stock compensation 418 429
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable (13) 31
Increase in accrued interest payable 125 28
Other (90) 9
------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,092 1,253
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale investment securities - (1,000)
Proceeds from sales, maturities and calls of:
Available for sale investment securities 424 2,161
Held to maturity investment securities 940 1,117
Net increase in loans (2,570) (7,310)
Purchases of property and equipment (32) (7)
Purchase of Federal Home Loan Bank stock (110) (60)
------------- -------------
NET CASH USED BY
INVESTING ACTIVITIES (1,348) (5,099)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits 6 (58)
Net decrease in certificate accounts (472) (897)
Increase in advances form FHLB 5,500 4,000
Decrease in advances from borrowers (34) (25)
Repurchase of common stock - (389)
Costs incurred in connection with pending merger (79) -
Cash dividends paid (501) (496)
------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 4,420 2,135
------------- -------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 4,164 (1,711)
CASH AND CASH EQUIVALENTS, BEGINNING 1,994 3,537
------------- -------------
CASH AND CASH EQUIVALENTS, ENDING $ 6,158 $ 1,826
============= =============
-5-
Century Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
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
nine months ended March 31, 2001 and 2000, 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
nine months ended March 31, 2001 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, employee stock
ownership plan shares are only considered outstanding for earnings per share
calculations when they are earned or committed to be released. Outstanding
options had no dilutive effect for the three and nine months ended March 31,
2001 and 2000.
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.
All regulatory approvals have been received, and this transaction is expected to
close in the second calendar quarter of 2001.
-6-
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
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 March 31, 2001 and June 30, 2000
Consolidated total assets increased by $6.1 million during the nine months ended
March 31, 2001, from $100.5 million at June 30, 2000 to $106.6 million at March
31, 2001. This growth reflects an increase of $2.5 million in loans receivable,
which increased from $87.3 million at June 30, 2000 to $89.8 million at March
31, 2001, as well as an increase of $3.5 million in interest-earning deposits in
other banks. During the nine-month period proceeds of $5.5 million from Federal
Home Loan Bank advances provided the principal source of funding for asset
growth.
Total stockholders' equity was $18.7 million at March 31, 2001, as compared with
$17.9 million at June 30, 2000, an increase of $789,000. Stockholders' equity
was increased during the nine months as a result of net income of $592,000,
amortization of unearned compensation of $418,000 and an increase in the value
of investment securities available for sale, net of taxes, of $301,000. These
increases were offset by regular quarterly dividends aggregating $501,000 or
$.51 per share. At March 31, 2001, 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 March 31, 2001
and 2000
Net Income. Net income for the quarter ended March 31, 2001 was $209,000 or $.21
per share, as compared with net income of $226,000, or $.24 per share, for the
three months ended March 31, 2000. Net income decreased by $17,000 principally
as a result of a decrease of $52,000 in net interest income, a decrease of
$43,000 in general and administrative expenses, and an increase of $11,000 in
income tax expense.
Net Interest Income. Net interest income was $757,000 for the quarter ended
March 31, 2001 as compared with $809,000 for the corresponding quarter of the
previous fiscal year, a decrease of $52,000. This decrease resulted principally
from lingering effects of the increasing trend in interest rates during calendar
2000 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 55 basis points higher during the current
quarter, while the average yield on interest-earning assets was essentially
unchanged.
-7-
Provision for Loan Losses. The provision for loan losses was $4,000 and $5,000,
respectively, for the quarters ended March 31, 2001 and 2000. There were no loan
charge-offs during either period. Nonaccrual loans aggregated $432,000 at March
31, 2001, while the allowance for loan losses totaled $600,000 at that date.
General and Administrative Expenses. General and administrative expenses
decreased by $43,000 or 9% to $416,000 for the quarter ended March 31, 2001 as
compared with $459,000 for the quarter ended March 31, 2000, reflecting
decreases of $11,000 and $28,000, respectively, compensation and benefits and in
other general and administrative expenses.
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 40.5% and 36.7% for the three months ended March
31, 2001 and 2000, respectively.
Comparison of Results of Operations for the Nine months Ended March 31, 2001 and
2000
Net Income. Net income for the nine months ended March 31, 2001 was $592,000 or
$.60 per share, as compared with net income of $694,000, or $.72 per share, for
the nine months ended March 31, 2000. Net income decreased by $102,000
principally as a result of a decrease of $178,000 in net interest income.
Net Interest Income. Net interest income was $2.2 million for the nine months
ended March 31, 2001 as compared with $2.4 million, for the corresponding nine
months of the previous fiscal year, a decrease of $178,000. This decrease
resulted principally from the increasing trend in interest rates over calendar
year 2000 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 69 basis points higher during the current nine
months, while the average yield on interest-earning assets rose by only 10 basis
points.
Provision for Loan Losses. The provision for loan losses was $13,000 and
$14,000, respectively, for the nine months ended March 31, 2001 and 2000. There
were no loan charge-offs during either period. Nonaccrual loans aggregated
$432,000 at March 31, 2001, while the allowance for loan losses totaled $595,000
at that date.
General and Administrative Expenses. General and administrative expenses
decreased by $31,000, or approximately 2%, to $1,282,000 for the nine months
ended March 31, 2001 as compared with $1,313,000 for the nine months ended March
31, 2000, as the Company experienced small declines in all categories of general
and administrative expenses.
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 37.3% and 36.4% for the nine months ended March
31, 2001 and 2000, respectively.
-8-
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 March 31, 2001, as
computed under North Carolina regulations, was approximately 12.3%. On a
consolidated basis, liquid assets represented 13.6% 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
March 31, 2001, Home Savings exceeded the capital requirements of both the FDIC
and the N. C. Administrator.
-9-
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K.
None.
-10-
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: May 3, 2001 By: /s/ James G. Hudson, Jr.
---------------------------------------
James G. Hudson, Jr.
Chief Executive Officer
Date: May 3, 2001 By: /s/ Drema A. Michael
---------------------------------------
Drema A. Michael
Chief Financial Officer
-11-