-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Id1L1agTrmMpQOq8Ym4yoyXN5pqVy9PLwipIotmeiuDewsq9gaiWsEUaNGEEodVt TjUDtBYXo/C6k4XI8wDj6A== 0000950124-07-004260.txt : 20070814 0000950124-07-004260.hdr.sgml : 20070814 20070814094948 ACCESSION NUMBER: 0000950124-07-004260 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070814 DATE AS OF CHANGE: 20070814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNITY CENTRAL BANK CORP CENTRAL INDEX KEY: 0001014133 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 383291744 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-33373 FILM NUMBER: 071051661 BUSINESS ADDRESS: STREET 1: P O BOX 7 CITY: MOUNT CLEMENS STATE: MI ZIP: 48046-0007 BUSINESS PHONE: 5867834500 MAIL ADDRESS: STREET 1: P O BOX 7 CITY: MOUNT CLEMENS STATE: MI ZIP: 48046-0007 10-Q 1 k17809e10vq.txt QUARTERLY REPORT FOR PERIOD ENDED JUNE 30, 2007 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2007 Commission File No. 000-33373 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 incorporation or organization) Identification No.)
100 North Main Street, PO Box 7, Mount Clemens, MI 48046-0007 (Address of principal executive offices and zip code) (586) 783-4500 (Issuer's telephone number) Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities 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. Yes X No --- --- Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act . (Check One): Large accelerated filer Accelerated filer Non-accelerated filer X --- --- --- Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Class Outstanding at August 10, 2007 - ----- ------------------------------ Common Stock 3,796,293 Shares
1 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) PART I ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2007 2006 (Unaudited) ----------- ------------ (In thousands) Assets Cash and due from banks $ 7,303 $ 11,026 Federal funds sold -- 13,700 -------- -------- Cash and Cash Equivalents 7,303 24,726 Trading securities at fair value option 25,819 -- Securities available for sale, at fair value 70,596 80,916 Securities held to maturity, at amortized cost 992 1,017 FHLB stock 4,540 4,540 Residential mortgage loans held for sale 2,550 3,441 Loans Commercial real estate 247,710 236,399 Commercial and industrial 30,556 28,393 Residential real estate 58,259 72,517 Home equity lines of credit 19,064 17,614 Consumer loans 10,621 11,666 Credit card loans 700 693 -------- -------- Total Loans 366,910 367,282 Allowance for credit losses (3,731) (3,815) -------- -------- Net Loans 363,179 363,467 -------- -------- Net property and equipment 8,913 9,225 Accrued interest receivable 2,594 2,599 Other real estate 48 108 Goodwill 1,381 1,381 Intangible assets, net of amortization 125 145 Cash surrender value of Bank Owned Life insurance 10,376 10,163 Other assets 4,527 3,300 -------- -------- Total Assets $502,943 $505,028 ======== ========
(continued) 2 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2007 2006 (Unaudited) ----------- ------------ (In thousands, except share data) Liabilities Deposits Noninterest bearing demand deposits $ 36,312 $ 33,331 NOW and money market accounts 66,525 59,339 Savings deposits 11,304 10,569 Time deposits 218,478 252,617 -------- -------- Total deposits 332,619 355,856 -------- -------- Repurchase agreements and fed funds purchased 29,672 15,688 Federal Home Loan Bank advances ($12.9 million at fair value option at 6-30-2007) 85,396 83,528 Accrued interest payable 999 1,257 Other liabilities 2,427 1,629 ESOP note payable 66 95 Subordinated debentures (at fair value option at 6-30-2007) 17,767 10,310 -------- -------- Total Liabilities 468,946 468,363 -------- -------- Stockholders' Equity Common stock -- 9,000,000 shares authorized; 3,796,293 shares issued and outstanding at 6-30-2007 and 3,829,758 at 12-31-2006 32,751 33,220 Retained earnings 2,726 4,303 Unearned employee benefit (66) (95) Accumulated other comprehensive (loss) income (1,414) (763) -------- -------- Total Stockholders' Equity 33,997 36,665 -------- -------- Total Liabilities and Stockholders' Equity $502,943 $505,028 ======== ========
3 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Six Months Ended June 30, Ended June 30, ---------------- ------------------ 2007 2006 2007 2006 ------ ------ ------- ------- (In thousands, except per share data) Interest Income Loans (including fees) $6,885 $6,710 $13,737 $12,738 Taxable securities 805 809 1,472 1,580 Tax exempt securities 413 321 747 599 Federal funds sold 131 24 386 61 ------ ------ ------- ------- Total Interest Income 8,234 7,864 16,342 14,978 ------ ------ ------- ------- Interest Expense Deposits 3,434 3,275 7,154 5,975 Repurchase agreements and fed funds purchased 233 95 393 188 Federal Home Loan Bank advances 975 1,029 1,896 1,988 ESOP loan interest expense 2 2 4 5 Subordinated debentures 559 232 953 447 ------ ------ ------- ------- Total Interest Expense 5,203 4,633 10,400 8,603 ------ ------ ------- ------- Net Interest Income 3,031 3,231 5,942 6,375 Provision for credit losses 175 125 225 175 ------ ------ ------- ------- Net Interest Income after Provision 2,856 3,106 5,717 6,200 ------ ------ ------- ------- Noninterest Income Fiduciary income 111 65 198 132 Deposit service charges 92 88 180 170 Realized gains (losses) on available for sale securities (13) -- (13) -- Change in fair value of assets/liabilities carried at fair value under SFAS 159 (72) -- 156 -- Mortgage banking income 594 966 1,348 1,820 Other income 433 183 694 382 ------ ------ ------- ------- Total Noninterest Income 1,145 1,302 2,563 2,504 ------ ------ ------- ------- Noninterest Expense Salaries, benefits, and payroll taxes 1,903 2,066 4,046 4,171 Premises and fixed asset expense 465 447 917 913 Other operating expense 1,038 1,128 1,903 1,973 ------ ------ ------- ------- Total Noninterest Expense 3,406 3,641 6,866 7,057 ------ ------ ------- ------- Income Before Taxes 595 767 1,414 1,647 Provision for income taxes 59 136 220 313 ------ ------ ------- ------- Net Income $ 536 $ 631 $ 1,194 $ 1,334 ====== ====== ======= =======
(continued) 4 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Per share data*: Basic earnings $ 0.14 $ 0.16 $ 0.30 $ 0.33 Diluted earnings $ 0.14 $ 0.15 $ 0.30 $ 0.33 ====== ====== ======= ======= Cash Dividends $ 0.06 $ 0.06 $ 0.12 $ 0.12 ====== ====== ======= =======
* Per share data has been retroactively adjusted for 2007 stock dividend. 5 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three Months Six Months Ended June 30, Ended June 30, ----------------- --------------- 2007 2006 2007 2006 -------- ------ ------ ------ (In thousands) Net Income as Reported $ 536 $ 631 $1,194 $1,334 Other Comprehensive Income, Net of Tax Change in unrealized losses on securities Available for sale (1,003) (777) (695) (905) -------- ------ ------ ------ Comprehensive Income ($ 467) ($146) $ 499 $ 429 ======== ====== ====== ======
6 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
Six Months Ended June 30, ------------------- 2007 2006 -------- -------- (In thousands) Operating Activities Net income $ 1,194 $ 1,334 Adjustments to reconcile net income to net cash flow from operating activities: Net amortization of security premium 96 107 Net gain on sales and call of securities 13 -- Net gain on financial instruments at fair value (156) -- Provision for credit losses 225 175 Depreciation expense 356 338 Deferred income tax expense 44 100 SFAS 123R option expense 14 12 ESOP compensation expense 29 27 (Increase) decrease in accrued interest receivable 5 (242) Increase in other assets (1,128) (58) Increase (decrease) in accrued interest payable (258) 352 Increase in other liabilities 154 70 Decrease in loans held for sale 891 1,121 -------- -------- Net Cash Provided by Operating Activities 1,479 3,336 Investing Activities Maturities, calls, sales and prepayments of securities available for sale 33,906 4,788 Purchase of securities available for sale (25,309) (16,049) Maturities, calls, sales and prepayment of trading securities 909 -- Transfer to trading securities (26,642) -- Maturities, calls, and prepayments of held to maturity securities 25 83 Purchases of held to maturity securities -- (354) Increase in loans 63 (33,618) Purchases of property and equipment (44) (696) Proceeds from sale of property and equipment 60 -- -------- -------- Net Cash Used in Investing Activities (17,032) (45,846) Financing Activities Net (decrease) increase in demand and savings deposits 10,902 (1,980) Net (decrease) increase in time deposits (34,139) 40,187 Net increase (decrease) in borrowings 13,983 (2,394) Issuance of subordinated debentures 18,557 -- Redemption of subordinated debentures (10,310) -- Repayment of FHLB advances 2,000 6,000 Payment of ESOP debt (29) (27) Stock option exercise/award 73 203 Cash dividends paid (473) (454) Repurchase of common stock (2,434) -- -------- -------- Net Cash Provided (Used) by Financing Activities (1,870) 41,535 -------- -------- (Decrease) increase in Cash and Cash Equivalents (17,423) (975) Cash and Cash Equivalents at the Beginning of the Year 24,726 11,000 -------- -------- Cash and Cash Equivalents at the End of the Period $ 7,303 $ 10,025 ======== ======== Supplemental Disclosure of Cash Flow Information: Interest Paid $ 10,657 $ 8,251 Federal Taxes Paid $ 175 $ 185 ======== ========
7 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) COMMUNITY CENTRAL BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The financial statements of Community Central Bank Corporation (the "Corporation") include the consolidation of its direct and indirect subsidiaries: Community Central Bank (the "Bank") and Community Central Mortgage Company, LLC (the "Mortgage Company"). The Corporation's Consolidated Balance Sheets are presented as of June 30, 2007 and December 31, 2006, and Consolidated Statements of Income and Comprehensive Income for the six month periods ended June 30, 2007 and 2006, and Consolidated Statements of Cash Flow for the six months ended June 30, 2007 and 2006. These unaudited financial statements are for interim periods, and do not include all disclosures normally provided with annual financial statements. The interim statements should be read in conjunction with the financial statements and footnotes contained in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2006. 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. 2. The accounting and reporting policies of the Corporation conform to accounting principles generally accepted in the United States of America and general practices within the banking industry. The following describes the critical accounting policies, which are employed in the preparation of financial statements. Allowance for Loan Losses: The allowance for loan losses is maintained at a level considered by management to be adequate to absorb losses inherent in existing loans and loan commitments. The adequacy of the allowance is based on evaluations that take into consideration such factors as prior loss experience, changes in the nature and volume of the portfolio, overall portfolio quality, loan concentrations, specific impaired or problem loans and commitments, current economic conditions that may affect the borrower's ability to pay, and other subjective factors. The determination of the allowance is also based on regulatory guidance. This guidance includes, but is not limited to, generally accepted accounting principles, and guidance issued from other regulatory bodies such as the joint policy statement issued by the Federal Financial Institutions Examination Council. 3. On February 13, 2007, Community Central Capital Trust II (Trust II), a statutory trust formed by the Corporation for the purpose of issuing trust preferred securities, issued $18,000,000 aggregate liquidation amount of cumulative trust preferred securities. The Trust II securities bear a fixed distribution rate of 6.71% per annum through March 6, 2017, and thereafter will bear a floating distribution rate equal to 90-day LIBOR plus 1.65%. The Trust II securities are redeemable at the Corporation's option, in whole or in part, at par beginning March 6, 2017, and if not sooner redeemed, mature on March 6, 2037. The Trust II securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended. The gross proceeds of the offering were used to purchase junior subordinated debentures from the Corporation totaling $18,557,000. On June 29, 2007, the Corporation redeemed $10.0 million of the subordinated debentures issued to Community Central Capital Trust I (and as a result the Trust I preferred securities). The trust preferred securities may constitute up to 25% of tier I capital. Any amount in excess of this limit may be included as tier 2 capital. At June 30, 2007, $11.3 million of the the trust preferred issuance was included in the Corporation's tier 1 capital, with the remaining $6.7 million included in tier 2 capital. 4. In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-based Payment, (SFAS 123R), which requires entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). The cost is recognized as an expense over the period during which the employee is required to provide service in exchange for the award, which is usually the vesting period. As required by SFAS 123R, as with SFAS 123, the Corporation is required to estimate the fair value of all stock 8 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) options on each grant date, using an appropriate valuation approach such as the Black-Scholes option pricing model. The provisions of this statement were effective for the Corporation beginning January 1, 2006. The Corporation did not issue options during the six months ended June 30, 2007 or 2006. The total amount of options outstanding at June 30, 2007 was 322,620 shares at a weighted average exercise price of $8.94 per share. During the six months ended June 30, 2007, 6,744 options were exercised at an exercise price of $6.87 per share. The Corporation recognized compensation expense, using the Black Scholes option-pricing model, of $7,000 and $14,000 for the second quarter and six months ended June 30, 2007, respectively for the options vesting in 2007 based on the fair market value of the grant date. The net income and earnings per share for the second quarter and six months ended June 30, 2006, on a pro forma basis, are disclosed for comparison below.
Three Six Months Ended Months Ended June 30, June 30, ------------- --------------- 2007 2006 2007 2006 ----- ----- ------ ------ (in thousands, except per share data) Net income, as reported $ 536 $ 631 $1,194 $1,334 Add: Stock-based employee compensation expense, net of related tax effects, included in reported net income (7) (6) (14) (12) Deduct: Total stock-based employee and director compensation expense under fair value based methods of awards, net of related tax effects 7 6 14 12 ----- ----- ------ ------ Pro forma net income $ 536 $ 631 $1,194 $1,334 ===== ===== ====== ====== Earnings per share Basic $0.14 $0.16 $ 0.30 $ 0.33 Diluted $0.14 $0.15 $ 0.30 $ 0.33
The fair value of each option grant is estimated on the date of grant using the Black Scholes option pricing model. 5. In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities" (SFAS 159). The statement provides for an entity to adopt early and elect the fair value option for existing eligible items as of the beginning of a fiscal year that begins on or before November 15, 2007. The entity must also adopt all the requirements under SFAS 157, the Fair Value Measurement. As a result of the Corporation's adoptions, certain financial instruments were valued at a fair value classification. The adoption of the fair value standards had a net positive after tax impact of approximately $150,000 on first quarter earnings. The cumulative reduction to opening retained earnings from adopting these standards was approximately $420,000. Partially offsetting the total net charge to retained earnings was the increase in capital from the reversal of other comprehensive income from the transfer of the unrealized losses on available for sale securities which had an affect of an increase in capital of $295,000. Therefore, the total net after tax decrease in stockholder's equity was $125,000 from the early adoption of SFAS 159 and concurrent adoption of SFAS 157 as of January 1, 2007. 6. New Accounting Pronouncements: We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"), on January 1, 2007. The adoption of FIN 48 had no affect on the financial statements. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, or the impact of the new Michigan Business Tax, we will record such accruals in our income tax accounts; no such accruals exist as of June 30, 2007, nor were deemed necessary. 9 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) The following table shows the balance sheet effect of the early adoption of SFAS 159.
Balance Sheet Net Balance Sheet 1/1/07 prior adjustment 1/1/07 after Description to adoption upon adoption after adoption of FVO - ----------- ------------- ------------- --------------------- (in thousands of dollars) Securities 27,024 (447) 26,577 Federal Home Loan Bank Advances (16,000) 247 (15,753) Subordinated Debentures (a) (10,055) (437) (10,492) Pretax cumulative effect of SFAS 159 (637) Increase in deferred tax asset 217 ---- Cumulative effect of adoption of SFAS 159 (charged to retained earnings) 420 ====
(a) The carrying amount includes $255,000 in unamortized deferred issuance costs on the subordinated debenture from the issuance of the Community Central Capital Trust I. As a result of the early adoption of SFAS 159 the difference between the carrying amount and the fair value was removed and included in the cumulative effect adjustment above. Management has elected the fair value option based on the following reasons for each of the eligible items or group of similar eligible items. Investment Securities and FHLB Advances: The election of SFAS 159 and SFAS 157 treatment for existing eligible investment securities was based on multiple factors which included the desire to utilize the Federal Home Loan Bank advance portfolio to offset volatility with the investment portfolio. Approximately $27.0 million of investment securities were selected for early adoption of SFAS 159 based primarily on the relatively short overall duration in the selected instruments. The overall effective duration of the instruments was 1.8 years based on current market interest rates. Many of the instruments have early call provisions, which based on current interest rate expectations have a high degree of probability to be called. Some instruments have been pre-refunded with certainty of maturity expected. The investments selected are primarily comprised of agency debentures and short callable bank qualified tax exempt municipal bonds. The selected securities will be categorized under trading portfolio status. Management believes that it has more options of balance sheet management under the fair value option, including the management of volatility caused by the embedded options within these instruments. The short overall duration of the selected instruments, coupled with the utilization of FHLB advances as an attempt to hedge the risk, should mitigate large swings in fair values that will be recorded in the income statement as part of adoption of SFAS 159 and SFAS 157. Management cannot predict future interest rates and is reliant on forecasts and models to make decisions regarding interest rate and fair value risk. The election of SFAS 159 treatment for the selected FHLB advances was based on management"s choice to provide a natural hedge against the securities selected under SFAS 159. The FHLB advances were selected for the fair value option based on the maturity ranges within the FHLB portfolio of advances. All maturities within 18 months from the early adoption date of January 1, 2007 were selected regardless of the instruments interest rates. The selected FHLB advances had a net unrealized gain position as of January 1, 2007 and March 31, 2007 and were selected solely as a natural balance sheet hedge for the investment portfolio elected under SFAS 159. The decrease in the unrealized loss position of the selected investments and the income recognized under SFAS 159 for the first three months of 2007 was completely offset by a corresponding decrease in unrealized gains within the selected FHLB advances. Management will review the selected instruments and should changes with overall market interest rates, 10 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) the treasury yield curve, or the structure of the investments including the embedded call options change. In May 2007, the Corporation acquired an interest rate swap to better hedge the fair value of the portfolio. The notional value of the interest rate swap was $18 million for a duration of three years, which approximated the overall duration of the trading portfolio under SFAS 159. Under the interest rate swap the bank receives the three month libor rate and pays a fixed rate of 5.275%, which is the average weighted yield of the hedged portfolio at the inception of the interest rate swap. Additionally, should management and the ALCO committee, believe other balance sheet strategies will better position the Bank and Corporation, other transactions could be considered including the sale of investments classified under trading status. Management has no intent to extinguish any FHLB advances as they represent interest rates which are lower than current equivalent market rates. It is the intent of management for the foreseeable future to utilize fair value option on selected investment securities, or like kind dollars on disposal. Subordinated Debentures: Management elected the fair value option for both its subordinated debentures. Management considers the subordinated debentures a critical component for future growth and wishes to utilize interest rate swaps to hedge the risk of this longer term liability and critical form of regulatory capital. Under SFAS 159, hedge accounting has become less complex and therefore available to a community bank with limited resources. The subordinated debenture for $10.3 million that was issued in June 2002 and maturing June 2032, callable June 30, 2007, was an eligible instrument for the early adoption of the fair value option as of January 1, 2007. The pretax accumulated adjustment from the recognition of fair value on this instrument was $447,000. The carrying amount of the instrument included $255,000 in unamortized deferred issuance costs on the subordinated debenture which is included in the aforementioned pretax adjustment. Management has elected the fair value option on the subordinated debenture which was issued on February 13, 2007 for $18.6 million. Additionally, an interest rate swap for a like kind notional value was secured to reduce any volatility associated with the recognition of the fair value option under SFAS 159. Under the interest rate swap the Corporation has agreed to receive a fixed rate of 6.71% and pay Libor plus 170 basis points. The debenture carries an interest rate fixed for 10 years at 6.71%, and was originally based on a ten year treasury interest rate swap of 5.06%, plus 165 basis points and was prior to the settlement of the interest rate swap hedging market fluctuations. Any reductions in overall carrying costs, aside from changes in fair value, occurring on any financial asset or liability measured under SFAS 157 and SFAS 159 during the first six months of 2007 was the result of normal pay downs, maturities and calls of the various financial instruments. No instruments recorded under SFAS 159 were sold during the first and second quarter of 2007. Management has the intent to utilize the fair value option on selected financial assets and liability on a go forward basis. The valuations of the instruments measured under Fair Value Measurement SFAS 157 for the first six months of 2007 were measured under a market approach using matrix pricing investment for investment securities and the income approach using observable data for the liabilities reported under the Fair Value Option SFAS 159. The inputs were observable for the assets and liabilities interest rate on commonly quoted intervals based on similar assets and liabilities. 11 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) The table below contains the fair value measurement at June 30, 2007 using the identified valuations. Additionally, the changes in fair value for the six month period ended June 30, 2007 for items measured at fair value pursuant to election of the fair value option.
Changes in Fair value for six months ended June 30, 2007 measured At fair value pursuant Fair Value Measurement at to Election of the June 30, 2007 fair value Option -------------------------------- ---------------------- Fair Value Significant Other Other Gains or Losses Measurements Observable Inputs in noninterest income Description 06/30/2007 (Level 2) pretax income - ----------- ------------ ----------------- ---------------------- (in thousands of dollars) Trading Securities 25,819 25,819 (86) Interest rate swap hedging securities 92 92 92 Federal Home Loan Bank Advances 12,869 12,869 (131) Subordinated Debentures 17,767 17,797 790 Interest rate swap hedging subordinated debentures (692) (692) (692) Redeemed subordinated debentures -- -- 183 ------- ------ ------ 156 ====
Interest income and interest expense of the respective financial instruments have been recorded in the consolidated statement of income based on the category of financial instrument. The Corporation is not aware of any discernable change in instrument specific credit risk with no change reflected in earnings related to such risk. 12 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion compares the financial condition of the Corporation and its wholly owned subsidiaries at June 30, 2007 and December 31, 2006 and the results of operations for the three and six months ended June 30, 2007 and 2006. This discussion should be read in conjunction with the financial statements and statistical data presented elsewhere in this report. This report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation and the Bank. Words such as anticipates, believes, estimates, expects, forecasts, intends, is likely, plans, projects, variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are intended to be covered by the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Actual results and outcomes may materially differ from what may be expressed or forecasted in the forward-looking statements. The Corporation undertakes no obligation to update, amend, or clarify forward looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise. Future factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: expected cost savings and synergies from our acquisition activities might not be realized within the expected time frames, and costs or difficulties related to integration matters might be greater than expected; expenses associated with the implementation of our trust and wealth management services might be greater than expected, whether due to a possible need to hire more employees than anticipated or other costs incurred in excess of budgeted amounts; the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; competitive pressures among depository institutions; interest rate movements and their impact on customer behavior and net interest margin; the impact of repricing and competitor's pricing initiatives on loan and deposit products; the ability to adapt successfully to technological changes to meet customers' needs and development in the market place; our ability to access cost-effective funding; changes in financial markets; changes in economic conditions in general and particularly as related to the automotive and related industries in the Detroit metropolitan area; new legislation or regulatory changes, including but not limited to changes in federal and/or state tax laws or interpretations thereof by taxing authorities; changes in accounting principles, policies or guidelines; and our future acquisitions of other depository institutions or lines of business. EXECUTIVE SUMMARY Community Central Bank Corporation is the holding company for Community Central Bank (the"Bank") in Mount Clemens, Michigan. The Bank opened for business in October 1996 and serves businesses and consumers across Macomb, Oakland, St. Clair and Wayne counties with a full range of lending, deposit, trust, wealth management, and Internet banking services. The Bank operates three full service facilities, in Mount Clemens, Rochester Hills and Grosse Pointe, Michigan. Community Central Mortgage Company, LLC, a subsidiary of the Corporation and Bank, operates locations servicing the Detroit metropolitan area, northwest Indiana, northern Illinois, and Raleigh, North Carolina. River Place Trust and Community Central Wealth Management are divisions of Community Central Bank. Community Central Insurance Agency, LLC is a wholly owned subsidiary of Community Central Bank. The Corporation's common shares trade on The NASDAQ Global Market under the symbol "CCBD." Our results of operations depend largely on net interest income. Net interest income is the difference in interest income the Corporation earns on interest-earning assets, which comprise primarily commercial and residential real estate loans, and to a lesser extent commercial business and consumer loans, and the interest the Corporation pays on our interest-bearing liabilities, which are primarily deposits and borrowings. Management strives to match the repricing characteristics of the interest earning assets and interest bearing liabilities to protect net interest income from changes in market interest rates and changes in the shape of the yield curve. The results of our operations may also be affected by local and general economic conditions. The largest geographic segment of our customer base is in Macomb County, Michigan. The economic base of the County continues to diversify from the automotive service sector although the impact of the restructuring of the American automobile companies has a direct impact on southeastern Michigan. A slowdown in the local and statewide economy has 13 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) produced increased financial strain on segments of the Bank's customer base. The Bank has experienced increased delinquency levels in its loan portfolio which has been more pronounced in the residential real estate portfolio and home equity loans. Further downturns in the local economy may affect the demand for commercial loans and related small to medium business related products. This could have a significant impact on how the Corporation deploys earning assets. The competitive environment among other financial institutions and financial service providers and the Bank in the Macomb, Oakland, Wayne and St. Clair counties of Michigan may affect the pricing levels of various deposit products. The impact of competitive rates on deposit products may increase the relative cost of funds for the Corporation and thus negatively impact net interest income. The Corporation continues to see competitive deposit rates offered from local financial institutions within the geographic proximity of the Bank which could have the effect of increasing the costs of funds to a level higher than management projects. The Corporation continues to utilize wholesale forms of funding earning assets through the FHLB and brokered certificates of deposit to balance both interest rate risk and the overall cost of funds. Brokered and internet certificates of deposit are based on a nationwide interest rate structure, typically at what is considered to be a premium interest rate. The local competition for certificates of deposit products has intensified and the Bank has found this type of wholesale funding to often effectively compete with the rates offered for similar term retail certificates of deposit products of local community and regional banks. Net income for the second quarter of 2007 was also minimally affected by expansion and operational costs related to the new wealth and trust management divisions. The trust division of the Bank was formed on June 30, 2005, when the Corporation completed its acquisition and merger with River Place Financial Corp. William A. Penner, CEO of River Place, became the President of the Bank's newly created trust division at the time of the acquisition. In early 2006, two executives were recruited to head the trust and newly created wealth management divisions. Mr. Penner retired from the Bank effective December 31, 2006. The Corporation continues to focus on expanding this area of its banking operations and expects the trust and wealth management divisions to provide increased fee income from future operations. In early June of 2006, the Bank opened on full service branch located in Grosse Pointe Farms, Michigan. Grosse Pointe Farms, Michigan is an upscale, suburban community on the shores of Lake St. Clair in southeastern Michigan. The Bank has appointed a regional President for the Grosse Pointe region who is a veteran banker who has ties to the local community. The branch facility is staffed with a branch manager and customer service representatives, as well as a commercial loan officer. The upscale demographics of the surrounding area appear to be well suited for establishing new relationships for trust and wealth management. 14 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) ASSETS At June 30, 2007, the Corporation's total assets were $502.9 million, relatively unchanged from $505.0 million at December 31, 2006. Total loans of $366.9 million, while remaining relatively unchanged in total for the first six months of 2007, changed within loan categories during that period. Increases in commercial loans and home equity loans of $13.5 million and $1.4 million, respectively, were offset by decreases in loans in the residential mortgage portfolio of $14.3 million and the consumer portfolio of $1.0 million. The changes coincide with the Corporation's strategic plan to change the relative loan mix by reducing the portion of lower yielding residential mortgages and increasing the relative mix of higher yielding commercial loans. At June 30, 2007, the largest component of the total loan portfolio was commercial real estate which was $247.7 million, or 67.5% of the total loan portfolio. At June 30, 2007, commercial and industrial loans were $30.6 million, or 8.3% of the total loan portfolio. During the second quarter of 2007, the Corporation securitized $8.2 million of residential mortgage loans with FNMA. The Corporation holds the securitized mortgages in the form of securities which are carried in the available for sale security portfolio. The Corporation recognized mortgage servicing rights connected with the securitization of the portfolio. Most of the residential mortgage portfolio comprises adjustable rate mortgages, which represented $42.9 million, or 73.6%, of the total residential portfolio. Those residential mortgage loans the Corporation considered to be held for investment in the residential portfolio comprise both banking relationships and other attributes deemed to match with the Corporation's interest rate risk profile. Home equity lines of credit ("HELOC") totaled $19.1 million at June 30, 2007, an increase of $1.5 million from December 31, 2006. This portfolio product is tied to the Wall Street Journal prime interest rate. These loans are fully secured by real estate and are generally originated with loan to value ratios (including prior liens) up to 95% of the appraised value of the real estate. The consumer portfolio ended June 30, 2007 at $10.6 million, a decrease of $1.0 million, primarily from pay downs in the portfolio. The largest portion of the installment loan portfolio comprises loans for marine craft. The Corporation's geographic proximity to Lake St. Clair and the lending experience in this area have been contributors to this segment of the portfolio. In 2005, the Corporation offered less competitive interest rates on marine craft loans to reduce exposure in the area. This change contributed to the decline in the overall installment portfolio. At June 30, 2007, loans for marine craft comprised approximately $9.1 million, or 85.6% of the installment portfolio and 2.5% of total loans. Credit card loans totaled $700,000 at June 30, 2007, which increased $7,000 from December 31, 2006. The Corporation continues to book credit card loans as a customer accommodation and does not actively market this product. Additionally, the Corporation had approximately $84.0 million in outstanding loans at June 30, 2007, to borrowers in the real estate rental and properties management industries, representing approximately 33.9% of the total commercial real estate portfolio. At June 30, 2007, this particular concentration of loans had no individual loans classified in nonaccrual status. The major components of the loan portfolio for loans held for sale and loans in the portfolio are as follows:
June 30, Percentage December 31, Percentage Net Net 2007 of total loans 2006 of total loans Change Change % -------- -------------- ------------ -------------- -------- -------- (in thousands, except percentages) Loans held for sale: Residential real estate $ 2,550 $ 3,441 ($891) (25.9)% ======== ======== ======== ======== ======== ===== Loans held in the portfolio: Commercial real estate $247,710 67.5% $236,399 64.4% $ 11,311 4.8% Commercial and industrial 30,556 8.3 28,393 7.7 2,163 7.6 Residential real estate 58,259 15.9 72,517 19.7 (14,258) (19.7) Home equity lines 19,064 5.2 17,614 4.8 1,450 8.2 Consumer loans 10,621 2.9 11,666 3.2 (1,045) (9.0) Credit cards 700 0.2 693 0.2 7 1.0 -------- ----- -------- ----- -------- ----- $366,910 100.0% $367,282 100.0% ($372) (0.1%) ======== ===== ======== ===== ======== =====
15 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) Total securities available for sale decreased $10.3 million from December 31, 2006 to $70.6 million at June 30, 2007. The decrease was partially attributable to the adoption of Financial Accounting Standards Fair Value Option SFAS 159. The Corporation reclassified a total of $27.0 million of available for sale securities as trading securities under SFAS 159 and the classification of trading portfolio which represented $25.8 million as of June 30, 2007. This was partially offset by the securitization of $8.2 million in mortgages comprising 15 year fixed rate loans, held in the form of mortgage backed securities and classified as available for sale. The average effective duration of the trading portfolio as of June 30, 2007 was approximately 1.95 years and an average life of 3.3 years, with a weighted average coupon rate of 5.68%. Management decided to classify the securities under SFAS 159 because of the characteristics of the instruments, which included the optionality and the ability of the Corporation to hedge the instruments utilizing above market value Federal Home Loan Bank advances. Furthermore, in adopting SFAS 159, the Corporation will be able to, in the future, utilize the fair value option on off balance sheet hedges and account for the hedges in a manner which is less complex than was previously available under GAAP. Other reasons influencing management's decision to classify the selected instruments under SFAS 159 include overall ALCO strategies and the shape of the treasury yield curve and management expectations on short term interest rates. The trading portfolio is primarily comprised of $16.1 million of U.S. Agency debentures with an effective duration of 1.7 years. Other segments of the portfolio comprise $4.9 million in callable municipal bonds with an effective duration of 2.7 years, $4.8 million in collateralized mortgage obligations (CMOs) and mortgage backed securities (MBS) with an effective duration of 1.9 years. All of the CMOs held in the trading portfolio pass the FFIEC stress test with relatively short average lives under differing rate scenarios. In May 2007, the Corporation acquired an interest rate swap to better hedge the fair value of the portfolio. The notional value of the interest rate swap was $18 million for a duration of three years, which approximated the overall duration of the trading portfolio under SFAS 159. Under the interest rate swap the bank receives the three month libor rate and pays a fixed rate of 5.275%, which is the average weighted yield of the hedged portfolio at the inception of the interest rate swap. The interes rate swap is accounted for under the Fair Value Option for Finanical Assets and Liabilities (SFAS 159) and therefore no formal hedge accounting under SFAS 133 is applicable. At June 30, 2007, the available for sale portfolio had net unrealized losses of $2.1 million or approximately 2.9% of the aggregate portfolio. At December 31, 2006, the net unrealized losses in the available for sale portfolio was $1.2 million. As of June 30, 2007, the available for sale portfolio comprised $4.0 million in US agency debentures, $32.2 million in bank qualified tax exempt municipal bonds, $32.6 million in US agency mortgage backed securities, $1.3 million in private mortgage backed securities and $478,000 in a CRA fund invested in mortgage backed obligations. The Corporation has the intent and ability to hold the securities classified under available for sale for the foreseeable future and declines in the fair value is primarily due to increased market interest rates. 16 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) A summary of nonperforming assets is as follows:
June 30, December 31, 2007 2006 -------- ------------ (Dollars in thousands) Nonaccrual loans: Commercial real estate $2,463 $2,711 Commercial and industrial 616 646 Residential real estate 1,078 -- Home equity lines 333 -- Consumer loans 86 -- Credit cards -- -- ------ ------ Total nonaccrual loans 4,576 3,357 Accruing loans delinquent more than 90 days: Commercial real estate $ -- $ -- Commercial and industrial -- -- Residential real estate 658 876 Home equity lines 21 336 Consumer loans 4 160 Credit cards -- 1 ------ ------ Total accruing loans delinquent more than 90 days 683 1,373 ------ ------ Total nonperforming loans 5,259 4,730 Other real estate owned Commercial real estate -- -- Residential real estate 48 108 ------ ------ Total other real estate owned 48 108 ------ ------ Total nonperforming assets $5,307 $4,838 ====== ====== Total nonperforming loans as a percentage of total loans 1.43% 1.29% ====== ====== Total nonperforming assets as a percentage of total assets 1.06% 0.96% ====== ======
At June 30, 2007, nonperforming loans, which represents nonaccruing loans and those loans past due 90 days or more and still accruing interest, totaled $5.3 million compared to $4.7 million at December 31, 2006, an increase of $529,000. Nonaccruing loans of $4.6 million increased $1.2 million from December 31, 2006. The increase in nonaccrual loans was partially attributable to the movement of loans previously classified as accruing loans delinquent more than 90 days to nonaccrual loans in the loan categories of residential mortgages comprising $876,000, home equity lines of credit totaling $336,000 and other consumer loans of $160,000. These consumer based loans were placed into nonaccrual status based on regular evaluations of delinquent loans. A determination was made of the collectability of the accrued interest based on the borrower's ability to repay and real estate values, which have been declining in the Bank's geographic lending area as well as other collateral determinations. 17 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) The following table shows an analysis of the allowance for loans losses:
Six Months Ended Year Ended June 30, December 31, 2007 2006 ---------------- ------------ (Dollars in thousands) Balance as beginning of the period $3,815 $3,580 Charge-offs: Commercial real estate 4 -- Commercial and industrial 40 248 Residential real estate -- 21 Home equity lines 44 21 Consumer loans 227 40 Credit cards 11 13 ------ ------ Total charge-offs $ 326 $ 343 ------ ------ Recoveries: Commercial real estate -- -- Commercial and industrial 4 14 Residential real estate -- 8 Home equity lines -- -- Consumer loans 10 5 Credit cards 3 1 ------ ------ Total recoveries $ 17 $ 28 ------ ------ Net charge-offs (recoveries) 309 315 ------ ------ Provision charged to earnings 225 550 ------ ------ Balance at end of the period $3,731 $3,815 ====== ====== Net charge-offs during the period to to average loans outstanding during the period on an annualized basis 0.18% 0.09% Allowance as a percentage of total portfolio loans 1.02% 1.04%
The allowance for loan losses as a percentage of total loans remained relatively unchanged at June 30, 2007, compared to December 31, 2006. The Corporation performs a detailed quarterly review of the allowance for loan losses. The Corporation evaluates those loans classified as substandard, under its internal risk rating system, on an individual basis for impairment under SFAS 114. The level and allocation of the allowance is determined primarily on management's evaluation of collateral value, less the cost of disposal, for loans reviewed in this category. The remainder of the total loan portfolio is segmented into homogeneous loan pools with similar risk characteristics for evaluation under SFAS 5. The primary risk element considered by management regarding each consumer 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 and industrial loans and commercial real estate 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. 18 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) LIABILITIES Total deposits of $332.6 million decreased $23.2 million during the first six months of 2007. The decrease was entirely due to a $34.1 million decrease in time deposits. The decrease in time deposits was due to maturities of higher cost brokered time deposits. Partially offsetting the decrease in time deposits was an increase of $10.9 million from December 31, 2006, in core deposits, representing checking, NOW, money market and savings accounts. Noninterest bearing demand deposits increased $3.0 million for the first six months of 2007 primarily due to increased growth from the Grosse Pointe branch. NOW accounts increased $534,000 during the same time period. Money market savings deposits totaled $51.8 million and increased $6.6 million. The growth in money market accounts was attributable to a new indexed money market product with a competitive interest rate tied to the six month Treasury bill. Total savings accounts increased $735,000 from seasonal fluctuations. Total time deposits under $100,000 decreased $1.7 million. The competitive rate environment amongst local financial institutions has made the Corporation decide in some cases not to raise the interest rate on the deposit product at the same frequency or level to match or exceed interest rates given by local financial institutions. The Corporation continues to see competitive deposit rates offered by local financial institutions within the geographic proximity of the Bank, which could have the affect of increasing the cost of funds to a level higher than management projects. The Corporation continues to utilize wholesale forms of funding earning assets through the Federal Home Loan Bank and brokered CDs to balance both interest rate risk and the overall cost of funds. Brokered and internet CDs are based on nationwide interest rate structure, typically at what is considered to be a premium interest rate. The local competition for CD products has intensified and the Bank has found this type of whole funding to often effectively compete with the rates offered for similar term retail CD products of local community and regional banks. The major components of deposits are as follows:
Percentage Percentage June 30, of total December of total Net Net 2007 deposits 31, 2006 deposits Change Change % -------- ---------- -------- ---------- -------- -------- (Dollars in Thousands) Noninterest bearing demand $ 36,290 10.9% $ 33,331 9.4% $ 2,959 8.9% NOW accounts 14,679 4.4 14,084 4.0 595 4.2 Money market accounts 51,846 15.6 45,255 12.7 6,591 14.6 Savings deposits 11,304 3.4 10,569 3.0 735 7.0 Time deposits under $100,000 43,936 13.2 45,608 12.8 (1,672) (3.7) Time deposits $100,000 and over 174,564 52.5 207,009 58.1 (32,445) (15.7) -------- ------ -------- ----- -------- ----- Total deposits 332,619 100.00% 355,856 100.0% (23,237) (6.5%) ======== ====== ======== ===== ======== =====
19 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) Short term borrowings at June 30, 2007 consisted of short term FHLB advances of $20.9 million and securities sold with an agreement to repurchase them the following day of $10.7 million. Following are details of our short term borrowings for the dates indicated:
June 30, December 2007 31, 2006 -------- -------- (Dollars in thousands) Amount outstanding at end of period Short-term repurchase agreements $10,672 $15,688 Short-term FHLB advances $21,000 $14,000 Weighted average interest rate on ending balance Short-term repurchase agreements 3.15% 3.15% Short-term FHLB advances 4.46% 3.92% Maximum amount outstanding at any month end during the period Short-term repurchase agreements $13,660 $21,832 Short-term FHLB advances $21,000 $26,700
During the first quarter of 2007, the Corporation borrowed $ 19 million in a wholesale structured repurchase agreement with an interest rate tied to the three month Libor rate, less 250 basis points adjusted quarterly, until March 3, 2008 when the borrowing changes to a fixed interest rate of 4.95% until March 2, 2017. The repurchase agreement is callable quarterly after March 2, 2008. In June 2001, the Corporation started to borrow long-term advances from the FHLB to fund fixed rate instruments and to minimize the interest rate risk associated with certain fixed rate mortgage instruments and investment securities. These advances are secured under a blanket security agreement by first mortgage loans and the pledging of certain securities. Long-term advances comprised 29 advances with maturities from July 2008 to June 2016. FHLB advances outstanding at June 30, 2007 were as follows:
Fair Value Face Value Average rate at end of period of obligation at end of period ---------------- ------------- ---------------- (Dollars in thousands) Short-term FHLB advances $20,868 $21,000 4.46% Long-term FHLB advances 64,528 64,528 4.82% ------- ------- ---- $85,396 $85,528 4.73%
The Corporation has elected early adoption of SFAS 159 for all FHLB advances maturing in 18 months from January 1, 2007, which represented $13 million in total. At June 30, 2007, the fair value adjustment of the selected advances was $12.9 million. The overall weighted yield of the FHLB advance was 3.90% at June 30, 2007. Management believes that the selected instruments will serve as a hedge for those securities recorded as trading from the transfer from available for sale under SFAS 159. 20 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) LIQUIDITY AND CAPITAL RESOURCES 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 possible deposit 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. The major sources of liquidity for the Bank 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 $47.6 million in available unsecured federal funds borrowing facilities, and a $150.0 million secured line of credit with the FHLB. 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. We anticipate that we will have sufficient funds available to meet our future commitments. As of June 30, 2007, unused commitments comprised $96.6 million. The Bank has $125.4 million in time deposits coming due within the next twelve months from June 30, 2007, which includes brokered, internet and municipal time deposits. At June 30, 2007, the Bank had $96.9 million in brokered certificates of deposit, of which $47.1 million is due within one year or less. Additionally, at June 30, 2007, municipal time deposits and internet time deposits were $28.6 million and $3.1 million, respectively. Municipal time deposits typically have maturities less than three months. $1.3 million of internet certificates of deposit mature in one year or less. The largest uses and sources of cash and cash equivalents for the Corporation for the six months ended June 30, 2007, as noted in the Consolidated Statement of Cash Flow, were centered primarily on the uses of cash in investing activities. The uses of cash in investing activities of $17.0 million were largely due to the increase in available for sale securities, with the largest portion comprised of securitized mortgage loans. The largest segments of the net change in cash used in investing activities, were comprised of increases in demand and savings accounts of $10.9 million, other borrowing from wholesale repurchase agreements of $14.0 million, and the issuance of subordinated debentures of $18.6 million. Offsetting these increases in financing activities were decreases in time deposits of $34.1 million, and a decrease of $10.3 million from the redemption of the subordinated debenture due June 30, 2007. The net cash provided in operating activities was $1.5 million, which was largely attributable to net income of $1.2 million. An increase in other assets of $1.1 million was offset by a decrease in loans held for sale of $891,000. Total cash and cash equivalents at the end of June 30, 2007 was $7.3 million, which was a decrease of $17.4 million from December 31, 2006. On May 15, 2007, the Corporation's Board of Directors declared the Corporation's twenty-first consecutive quarterly cash dividend of $0.06 per common share, payable July 1, 2007, to shareholders of record June 1, 2007. Following are selected capital ratios for the Corporation and the Bank as of the dates indicated, along with the minimum regulatory capital requirement for each item. Capital requirements for bank holding companies are set by the Federal Reserve Board. In many cases, bank holding companies are expected to operate at capital levels higher than the minimum requirement.
June 30, December 31, Minimum Ratio 2007 2006 for Capital Ratio to --------------- --------------- Adequacy be "Well Capital Ratio Capital Ratio Purposes Capitalized" ------- ----- ------- ----- ------------- ------------ Total capital to risk-weighted assets Consolidated $55,580 13.78% $49,693 12.65% 4% NA Bank only 48,234 11.99% 47,486 12.11% 4% 6% Tier I capital to risk-weighted assets Consolidated $45,132 11.19% $45,878 11.68% 8% NA Bank only 44,503 11.07% 43,677 11.14% 8% 10% Tier I capital to average assets Consolidated $45,132 8.91% $45,878 9.01% 4% NA Bank only 44,503 8.83% 43,671 8.60% 4% 5%
21 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) Management believes that the current capital position as well as net income from operations, loan repayments and other sources of funds will be adequate to meet our short and long term liquidity needs. Management currently has no plans to raise additional capital. The following table shows the changes in stockholders' equity for the three months ended June 30, 2007:
Accumulated Unearned Other Common Retained Employee Comprehensive Total Stock Earnings Benefits Income/(Loss) Equity ------- -------- -------- ------------- ------- Beginning balance, January 1, 2007 $33,220 $ 4,303 ($95) ($763) $36,665 Cumulative effective of adoption of SFAS 159 -- (420) -- -- (420) Cash dividend -- (472) -- -- (472) Stock dividend 1,879 (1,879) -- -- -- Stock option exercise 73 -- -- -- 73 SFAS 123R expensing of options 14 -- -- -- 14 Net income -- 1,194 -- -- 1,194 Release of ESOP shares -- -- 29 -- 29 Repurchase of common stock (2,435) -- -- -- (2,435) Change in unrealized gain/loss -- -- -- (651) (651) ------- ------- ---- ------- ------- Balance June 30, 2007 $32,751 $ 2,726 ($66) ($1,414) $33,997 ======= ======= ==== ======= =======
Stockholder's equity was $34.0 million as of June 30, 2007. This was a decrease of $2.7 million from December 31, 2006. The change in stockholder's equity was primarily attributable to the repurchase of common stock totaling $2.4 million for the six months ended June 30, 2007. Also decreasing retained earnings was a cash dividend of $472,000. Additional decreases in stockholder's equity occurred from the $420,000 charge to retained earnings from the adoption of Financial Accounting Standards "Fair Value Option" SFAS 159. The change in other comprehensive losses of $651,000 was due to the net change in after tax decreases in the available for sale security portfolio. Unrealized losses have not been recoginized into income because the issuers' bonds are high credit quality. The Corporation has the intent and the ability to hold the securities for the foreseeable future and the decline in the fair value during the first six months of 2007 was primarily due to increased market rates. Net income of $1,194,000 for the six months of 2007 partially offset the decrease in retained earnings from the cash and stock dividend. NET INTEREST INCOME Net interest income for the second quarter of 2007 was $3.0 million, a decrease of 6.2% from the second quarter of 2006. Net interest margin for the second quarter of 2007 was 2.72% compared to 2.59% for the first quarter of 2007 and 2.91% for the second quarter of 2006. Net interest margin increased 13 basis points over the first quarter of 2007, from the realignment of earning assets and the de-emphasis of time deposit funding. The increase in interest income for the second quarter of 2007 compared to the second quarter of 2006 was primarily due to the increased interest rates on loans from the repricing of fixed rate commercial mortgage loans up for renewal and secondarily from an increase in volume and rate on the investment portfolio. Increases in various categories of interest expense were primarily driven by increases in interest rates paid on deposits and other borrowings as the specific instrument was set to reprice or mature. The largest contributor to the growth in interest expense during the second quarter was due to the Corporation's issuance of $18 million of subordinated debentures. The Corporation also redeemed $10 million of previously issued subordinated debentures bearing a higher interest rate than the newly issued debentures, which will help reduce the cost of funds moving forward starting in the third quarter of 2007. The increase in interest expense from the second quarter of 2007 compared to the second quarter of 2006 was $159,000, or 27.9% of the total increase in interest expense for the period. The increase in interest expense associated with the subordinated debentures totaled $327,000 and was primarily related to volume. Additionally, this represented 57.3% of the total increase in interest cost. 22 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) Net interest income for the first six months of 2007 was $5.9 million compared to $6.4 million for the first six months of 2006. Net interest margin was 2.66% for the first six months of 2007 compared to 2.96% for the six months ended 2006. The changes in net interest income for the first six months of 2007 was primarily due to the same factors detailed above for the first quarter of 2007. 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 Six Months Ended June 30, 2007 vs. 2006 June 30, 2007 vs. 2006 --------------------------- ---------------------------- Increase (Decrease) Increase (Decrease) Due to Changes In Due to Changes In ------------------- ------------------- Volume Volume Total and Both Rate Total and Both Rate ------ -------- ----- ------ -------- ------ (In thousands) Earning Assets - Interest Income Loans $ 175 ($16) $ 191 $ 999 $ 523 $ 476 Securities 88 43 45 40 (76) 116 Federal funds sold 107 104 3 325 317 8 ------ ---- ------ ------ ----- ------ Total 370 131 239 1,364 764 600 ------ ---- ------ ------ ----- ------ Deposits and Borrowed Funds - Interest Expense NOW and money market accounts 369 233 136 774 451 323 Savings deposits 14 3 11 35 11 24 Time deposits (224) (537) 313 370 (468) 838 FHLB and repo sweeps 84 115 (31) 113 128 (15) ESOP -- -- -- (1) (2) 1 Subordinated debentures 327 356 (29) 506 546 (40) ------ ---- ------ ------ ----- ------ Total 570 170 400 1,797 666 1,131 ------ ---- ------ ------ ----- ------ Net Interest Income ($200) ($39) ($161) ($433) $ 98 ($531) ====== ==== ====== ====== ===== ======
The average yield earned on interest earning assets for the second quarter of 2007 was 6.92% compared to 6.75% for the second quarter of 2006. The average yield earned on the total loan portfolio, which contains both loans held for sale and investment for 2007 was 7.56% compared to 7.35% during the second quarter of 2006. The overall increase in the loan portfolio yield was due in part to the repricing of commercial real estate loans up for renewal. The Corporation typically originates commercial real estate loans for terms of 3 to 5 years with amortizations ranging from 10 to 25 years. The Corporation's security portfolio had an average non-tax adjusted yield of 4.76% during the second quarter of 2007, compared to 4.58% for the second quarter of 2006. The average yield on earning assets for the first six months of 2007 was 6.87% compared to 6.63% for the first six months of 2006. The average yield on the total loan portfolio, which contains both loans held for sale and investment for 2007 was 7.50% compared to 7.23% during the same period of 2006. The overall increase in the loan portfolio yield was due to the repricing of fixed rate commercial real estate loans up for renewal, coupled with an increase from prime sensitive loans, as prime sensitive loans reflected a full year to date effect of a prime rate of 8.25% during 2007 versus a partial year in 2006, when prime was increasing from 7.25% at the beginning of the year. The Corporation's security portfolio had an average non-tax adjusted yield of 4.67% during the first six months of 2007, 23 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) compared to 4.51% for the same period in 2006, as new securities added to the portfolio reflected the increase in market rates over that same relative period, coupled with and secondarily, the increase in the variable rate mortgage backed securities. The average rate paid on interest bearing liabilities for the second quarter of 2007 was 4.80% compared to 4.39% in the second quarter of 2006. The increase in average rate was due to the overall rate paid on interest bearing liabilities, primarily as a result of the increase in overall market interest rates. The rate paid on the total time deposit portfolio increased to 5.10% for the second quarter of 2007, from 4.62% for the same time period in 2006 and was driven by highly competitive interest rates paid among local financial institutions. The increase in the average rate for NOW and money market accounts for 2007 was primarily attributable to the introduction of a premium rate based NOW account, with the average rate moving to 3.78% during the second quarter of 2007 versus 2.37% in the second quarter of 2006. The average rate paid on savings also increased, moving to 2.45% for the second quarter of 2007 from 2.06% in the second quarter of 2006. The rate paid on FHLB advances and repurchase agreements increased to 4.24% in the second quarter of 2007 from 4.36% in the second quarter of 2006. The relative portion of this category contained higher levels of lower yielding repurchase agreements in 2007 compared to 2006. At June 30, 2007, the FHLB portfolio had a weighted average maturity of 4.1 years and an overall weighted average interest rate of 4.73%, which was 52 basis points below the current overnight federal funds rate. The average rate paid on the subordinated debenture decreased in the second quarter of 2007 to 8.13% from 9.33%. The overall rate paid on the subordinated debentures decreased due to the new $18.6 million issuance which bears interest at a rate of 6.71% compared to the rate payable on the the previously issued subordinated debentures which carried until redemption a rate equal to three month Libor plus 365 basis points, or an average rate equal to 9.01% for the second quarter.. The average rate paid interest bearing liabilities for the first six months of 2007 was 4.81% compared to 4.21% in the first six months of 2006. The increase in average rate was due to the overall rate paid on interest bearing liabilities and was due to the increase in overall market interest rates. The overall increase in interest bearing deposits and liabilities for the first six months ended June 30, 2007 over the same time period in 2006 was due to the same factors as mentioned above for the first quarter of 2007. 24 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (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 six month periods ended June 30, 2007 and 2006. Average loans are presented net of unearned income, gross of the allowance for loan losses. Interest on loans includes loan fees.
Three Months Ended June 30, ------------------------------------------------------------- 2007 2006 ----------------------------- ----------------------------- Average Average Interest Rate Interest Rate Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid -------- -------- ------- -------- -------- ------- (In thousands) Assets Loans $365,327 $6,885 7.56% $366,402 $6,710 7.35% Securities 102,308 1,218 4.76 98,756 1,130 4.58 Federal funds sold 9,603 131 5.47 1,982 24 4.86 -------- ------ ---- -------- ------ ---- Total Earning Assets/ Total Interest Income 477,238 8,234 6.92 467,140 7,864 6.75 -------- ------ ---- -------- ------ ---- Cash and due from banks 7,203 6,698 All other assets 23,453 22,587 -------- -------- Total Assets $507,894 $496,425 ======== ======== Liabilities and Equity NOW and money market accounts $63,292 597 3.78 $38,552 228 2.37 Savings deposits 11,785 72 2.45 11,269 58 2.06 Time deposits 217,328 2,765 5.10 259,664 2,989 4.62 FHLB advances and repurchase agreements 114,285 1,208 4.24 103,271 1,123 4.36 ESOP loan 74 2 8.13 129 3 9.33 Subordinated debentures 28,378 559 7.90 10,310 232 9.03 -------- ------ ---- -------- ------ ---- Total Interest Bearing Liabilities/ Total Interest Expense / Interest Rate Spread 435,142 5,203 4.80 423,195 4,633 4.39 -------- ------ ---- -------- ------ ---- Noninterest bearing demand deposits 33,938 35,081 All other liabilities 3,235 2,451 Stockholders' equity 35,579 35,698 -------- -------- Total Liabilities and Stockholder's Equity $507,894 $496,425 ======== ======== Net Interest Income $3,031 $3,231 ====== ====== Net Interest Spread 2.12% 2.36% ==== ==== Net Interest Margin (Net Interest Income/Total Earning Assets) 2.55% 2.77% ==== ==== Net Interest Margin (fully taxable equivalent) 2.72% 2.91% ==== ====
25 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued)
Six Months Ended June 30, ------------------------------------------------------------- 2007 2006 ----------------------------- ----------------------------- Average Average Interest Rate Interest Rate Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid -------- -------- ------- -------- -------- ------- (In thousands) Assets Loans $369,354 $13,737 7.50% $355,497 $12,738 7.23% Securities 94,932 2,219 4.67 96,614 2,179 4.51 Federal funds sold 14,810 386 5.26 2,659 61 4.63 -------- ------- ---- -------- ------- ---- Total Earning Assets/ Total Interest Income 479,096 16,342 6.87 454,770 14,978 6.63 -------- ------- ---- -------- ------- ---- Cash and due from banks 7,226 6,325 All other assets 23,210 22,383 -------- -------- Total Assets $509,532 $483,478 ======== ======== Liabilities and Equity NOW and money market accounts $ 62,331 1,193 3.86 $ 38,784 419 2.18 Savings deposits 12,818 162 2.55 11,929 127 2.15 Time deposits 229,621 5,799 5.09 248,394 5,429 4.41 FHLB advances and repurchase agreements 108,032 2,289 4.27 102,101 2,176 4.30 ESOP loan 82 4 9.84 136 5 7.41 Subordinated debentures 24,129 953 7.96 10,310 447 8.74 -------- ------- ---- -------- ------- ---- Total Interest Bearing Liabilities/ Total Interest Expense/Interest Rate Spread 437,013 10,400 4.80 411,654 8,603 4.21 -------- ------- ---- -------- ------- ---- Noninterest bearing demand deposits 33,474 33,876 All other liabilities 3,011 2,266 Stockholders' equity 36,034 35,682 -------- -------- Total Liabilities and Stockholder's Equity $509,532 $483,478 ======== ======== Net Interest Income $ 5,942 $ 6,375 ======= ======= Net Interest Spread 2.07% 2.42% ==== ==== Net Interest Margin (Net Interest Income/Total Earning Assets) 2.49% 2.82% ==== ==== Net Interest Margin (fully taxable equivalent) 2.66% 2.96% ==== ====
26 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) PROVISION FOR LOAN LOSSES A $175,000 provision for loan losses was taken in the second quarter of 2007. This was an increase of $125,000 from the first quarter of 2007 and a $50,000 increase from the second quarter of 2006. The increased provision was due in part to estimated declines in real estate collateral values and is based upon management's review of the risks inherent in the loan portfolio and the level of our allowance for loan losses. Net loan charge-offs for the first six months of 2007 totaled 18 basis points on an annualized basis. The allowance for loan losses was $3.7 million at June 30, 2007, or 1.02% of total loans versus $3.8 million or 1.04% at December 31, 2006. NONINTEREST INCOME Noninterest income in the second quarter of 2007 was $1.1 million, a decrease of $157,000 or 12.1%, compared to the second quarter of 2006. The decrease was largely due to a decrease in income from gains on the sale of residential mortgages which decreased $372,000, or 38.5%. Fiduciary income from trust services was $111,000 for the second quarter 2007, which was an increase of $46,000, or 70.8% from the second quarter of 2006 due to increases in assets under management of the Trust division of the Bank. Deposit service charge income of $92,000 increased 4.5% from small increases in service charge income over the same respective quarterly period. Net realized securities losses of $13,000 in the second quarter were related to sales of available for sale investments for restructuring purposes. The net change in fair values of those applicable financial instruments under the Fair Value Pronouncement SFAS 159 decreased $72,000 for the second quarter. The change in fair value was primarily attributable to a decrease in current relative market credit spreads versus the Corporation's subordinated debenture issuance in February 2007. The valuations of the instruments measured under fair value measurement SFAS 157 were measured under a market approach using matrix pricing for investment securities and the income approach on observable data for liabilities reported under the fair value option SFAS 159. Noninterest income from Wealth Management services, recorded in the category of other income, was $50,000 for the second quarter of 2007, compared to no fee income for the second quarter of 2006, as the division was being organized during this period. Net servicing fee income recorded from the recognition of mortgage servicing rights, net of amortization and servicing income was $209,000 for the second quarter of 2007 compared to no servicing related fee income as the Corporation started selling mortgages servicing retained in the third and forth quarter of 2006. Noninterest income for the first six months of 2007 was $2.6 million, an increase of $59,000 or 2.4%, compared to the first six months of 2006. Fiduciary income of $198,000 increased $66,000, or 50.0% for the first six months of 2007 compared to the first six months of 2006. The increase in fiduciary income was related to increases in assets under management over the same respective time period. Deposit service charge income of $180,000 increased $10,000, or 5.9% from increased fees assessed to customers. The net change in fair value option for the first six months of 2007 was $156,000, reflecting the total of all net fair value changes of all financial instruments measured including interest rate swaps used as hedges. Mortgage banking income of $1.3 million for the first six months of 2007 decreased $472,000 from the first six months of 2006 due to lower gains on the sale of residential mortgages as a result of lower origination of residential mortgages sold on the secondary market. The slow down in new home purchases contributed to this decline. Other income of $694,000 increased $312,000, or 44.9% primarily from gains recorded on retention of mortgage servicing rights as outlined above. NONINTEREST EXPENSE Noninterest expense was $3.4 million for the second quarter of 2007, a decrease of 6.5% or $235,000 from the first quarter of 2006. Salaries, benefits and payroll taxes of $1.9 million, decreased $163,000, or 7.9%, primarily from a reduction in mortgage company origination commissions and continued emphasis on efficiency in staffing levels. Premises and fixed asset expense of $465,000 for the second quarter of 2007 remained relatively unchanged compared to $447,000 during the second quarter of 2006. While property taxes and other premises related costs increased $87,000 these increases were offset by a $69,000 reduction in mortgage loan production office expenses over the same time period. Other operating expense of $1.0 million decreased $90,000, or 8.0%, primarily attributable to a decrease in promotional, advertising and business development expense. Noninterest expense was $6.9 million for the first six months of 2007, a decrease of 2.7%, or $191,000, largely for the reasons outlined in the second quarter. 27 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) PROVISION FOR INCOME TAXES The provision for federal income taxes of $59,000 for the second quarter of 2006 decreased $77,000 from the federal income tax provision for the second quarter of 2006. The decrease was primarily attributable to a higher level of tax exempt municipal bonds and bank owned life insurance (BOLI) over the same respective time period, coupled with a lower level of pretax income. The increase in cash surrender value of BOLI is exempt from federal income tax. The statutory tax rate of the Corporation is 34%. The provision for federal income taxes of $220,000 for the six months ended June 30, 2006 decreased $93,000 over the first six months of 2006. The effective tax rate for the first six months of 2006 was 19.0% compared to 19.0% for the first six months of 2006. The difference in the effective rates is due to the relative percentage of tax-exempt income to the total pretax income, which would include both taxable and tax exempt income. The tax-exempt income as a percentage of total pretax income was 68.1%, compared to 50.8% for the six month periods ended June 30, 2007 and 2006, respectively. ASSET/LIABILITY MANAGEMENT The Asset Liability Management Committee ("ALCO"), which meets at least quarterly, is responsible for reviewing interest rate sensitivity position and establishing policies to monitor and limit exposure to interest rate risk. Currently two quantitative tools are used to measure and monitor interest rate risk: static gap analysis and net interest income simulation modeling. Each of these interest rate risk measurements has limitations, but management believes when these tools are evaluated together, they provide a balanced view of our exposure to interest rate risk. Static gap analysis measures the difference between the assets and liabilities repricing or maturing within specific time periods. An asset-sensitive position indicates that there are more rate-sensitive assets than rate-sensitive liabilities repricing or maturing within specific time periods, which would generally imply a favorable impact on net interest income in periods of rising interest rates and a negative impact in periods of falling rates. A liability-sensitive position would generally imply a negative impact on net interest income in periods of rising rates and a positive impact in periods of falling rates. Static gap analysis has limitations because it cannot measure precisely the effect of interest rate movements and competitive pressures on the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities. In addition, a significant portion of our adjustable-rate assets have limits on their maximum yield, whereas most of our interest-bearing liabilities are not subject to these limitations. As a result, certain assets and liabilities indicated as repricing within a stated period may in fact reprice at different times and at different volumes, and certain adjustable-rate assets may reach their yield limits and not reprice. 28 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) The following table presents an analysis of our interest-sensitivity static gap position at June 30, 2006. All interest-earning assets and interest-bearing liabilities are shown based on the earlier of their contractual maturity or repricing date adjusted by forecasted repayment and decay rates. Asset prepayment and liability decay rates are selected after considering the current rate environment, industry prepayment and decay rates and our historical experience. At June 30, 2006, we are considered slightly asset sensitive in the time interval of the first three months. We are also considered to be somewhat liability sensitive at the one year accumulated gap position.
After Three After One Within Months But Year But After Three Within One Within Five Months Year Five Years Years Total -------- ----------- ---------- ------- -------- (Dollars in thousands) Interest earning assets: Federal funds sold and interest bearing cash $ 54 $ -- $ -- $ -- $ 54 Securities, including Trading 27,244 9,372 20,720 42,213 99,549 FHLB stock -- 4,540 -- -- 4,540 Portfolio loans and held for resale 131,725 65,659 149,769 22,307 369,460 -------- --------- -------- ------- -------- Total 159,023 79,571 170,489 64,520 $473,603 -------- --------- -------- ------- ======== Interest bearing liabilities: NOW and money market accounts 2,702 6,284 23,901 -- $ 32,887 Indexed money market 33,638 -- -- -- 33,638 Savings deposits 1,130 2,261 7,913 -- 11,304 Jumbo time deposits 46,742 72,191 39,242 16,387 174,562 Time deposits < $100,000 13,771 20,876 8,179 1,090 43,916 Repurchase agreements 29,672 -- -- -- 29,672 FHLB advances 9,999 10,870 31,327 33,200 85,396 ESOP payable 66 -- -- -- 66 Subordinated debentures 17,767 -- -- -- 17,767 -------- --------- -------- ------- -------- Total 155,487 112,482 110,562 50,677 $429,208 -------- --------- -------- ------- ======== Interest rate sensitivity gap $ 3,536 ($32,911) $ 59,927 $13,843 Cumulative interest rate sensitivity gap ($29,375) $ 30,552 $44,395 Interest rate sensitivity gap ratio 1.02 0.71 1.54 1.27 Cumulative interest rate sensitivity gap ratio 0.89 1.08 1.10
The Bank also evaluates interest rate risk using a simulation model. The use of simulation models to assess interest rate risk is an accepted industry practice, and the results of the analysis are useful in assessing the vulnerability of the Bank's net interest income to changes in interest rates. However, the assumptions used in the model are oversimplifications and not necessarily representative of the actual impact of interest rate changes. The simulation model assesses the direction and magnitude of variations in net interest income resulting from potential changes in market interest rates. Key assumptions in the model include prepayment speeds of various loan and investment assets; cash flows and maturities of interest-sensitive assets and liabilities, and changes in market conditions impacting loan and deposit volumes and pricing. These assumptions are inherently uncertain, and subject to fluctuation and revision in a dynamic environment. Therefore, the model cannot precisely estimate future net interest income or exactly predict the impact of higher or lower interest rates. Actual results may differ from simulated results due to, among other factors, the timing, magnitude, and frequency of interest rate changes, changes in market conditions and management's pricing decisions, and customer reactions to those decisions. 29 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) On a quarterly basis, the net interest income simulation model is used to quantify the effects of hypothetical changes in interest rates on the Bank's net interest income over a projected twelve-month period. The model permits management to evaluate the effects of shifts in the Treasury Yield curve, upward and downward, on net interest income expected in a stable interest rate environment. The table below, as of March 31, 2007, based on the most recent available analysis, reflects the impact the various instantaneous parallel shifts in the yield curve would have on net interest income over a twelve month period of time from the base forecast. Interest rate risk is a potential loss of income and/or potential loss of economic value of equity. Rate sensitivity is the measure of the effect of changing interest rates on the Bank's net interest income or the net interest spread. The policy of the Bank shall be to risk no more than 10% of its net interest income in a changing interest rate scenario of +/- 200 basis points over a one-year simulation period. Furthermore, no more than 15% of net interest income can be projected at risk in a scenario of +/- 300 basis points over a one-year simulation period.
Percentage Change Interest Rate Scenario In Net Interest Income - ---------------------- ---------------------- Interest rates up 300 basis points (1.24)% Interest rates up 200 basis points .02% Interest rates up 100 basis points .38% Base case -- Interest rates down 100 basis points .96% Interest rates down 200 basis points 2.41% Interest rates down 300 basis points 4.01%
ITEM 3. CONTROLS AND PROCEDURES An evaluation of the Corporation's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities and Exchange Act of 1934 ("Act")) as of June 30, 2007, was carried out under the supervision and with the participation of the Corporation's Chief Executive Officer, Chief Financial Officer and several other members of the Corporation's senior management. The Corporation's Chief Executive Officer and Chief Financial Officer concluded that the Corporation's disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Corporation in the reports it files or submits under the Act is (i) accumulated and communicated to the Corporation's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended June 30, 2007, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The Corporation intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material non-financial information concerning the Corporation's business. While the Corporation believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Corporation to modify its disclosures and procedures. 30 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) PART II ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 1A. RISK FACTORS Not applicable. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. Stock Repurchases - The following table sets forth information about the Corporation's purchases of its outstanding Common Stock during the quarter ended June 30, 2007.
MAXIMUM NUMBER (OR APPROXIMATE TOTAL NUMBER OF DOLLAR VALUE) OF SHARES (OR UNITS) SHARES (OR UNITS) PURCHASED AS PART THAT MAY YET BE TOTAL NUMBER OF AVERAGE PRICE OF PUBLICLY PURCHASED UNDER SHARES (OR UNITS) PAID PER SHARE ANNOUNCED PLANS OR THE PLANS OR PERIOD PURCHASED (1) (OR UNIT) PROGRAMS(2)&(3) PROGRAMS(2) (3) ------ ----------------- -------------- ------------------ ----------------- April 1, 2007 - April 30, 2007 11,800 11.15 11,800 61,550 May 1, 2007 - May 31, 2007 43,500 10.47 43,500 18,050 June 1, 2007 - June 30, 2007 84,500 9.89 84,500 126,839
(1) All shares reported in the above table were purchased through publicly announced share repurchase programs. (2) On September 20, 2006, the Corporation a share repurchase program to repurchase up to 5% (192,887 shares) of its outstanding common stock in the open market or privately negotiated transactions over the next twelve month period. In June 2007, the Corporation completed this repurchase program. (3) On June 7, 2007, the Corporation announced a new share repurchase program to repurchase up to 5% (193,289 shares) of its outstanding common stock in the open market or privately negotiated transactions over the next twelve month period. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On April 17, 2007, Community Central Bank Corporation held its Annual Meeting of Stockholders ("Meeting"). The following matters were voted on at the Meeting. Election of the following persons as directors of the Corporation for terms to expire in 2010:
NOMINEE VOTES FOR VOTES WITHHELD TOTAL - ------- --------- -------------- --------- Salvatore Cottone 3,107,040 204,475 3,829,758 Dean S. Petitpren 3,110,636 200,879 3,829,758 Ronald R. Reed 3,110,663 200,852 3,829,758
The following are the names of the directors (and remaining term) whose term in office continued after the Meeting: Gebran S. Anton (2008); Joseph Catenacci (2009); Celestina Giles (2009); Joseph F. Jeannette (2008); John W. Stroh, III (2008) and David A. Widlak (2009). 31 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) ITEM 5. OTHER INFORMATION. Cash Dividend - On May 15, 2007, the Corporation's Board of Directors declared the Corporation's twenty-first quarterly cash dividend of $0.06 per common share, payable July 1, 2007, to shareholders of record June 1, 2007. On July 18, 2007, Community Central Bank Corporation announced the departure of Ronald R. Reed, the President and CEO of the Corporation's subsidiary, Community Central Bank, to pursue other opportunities. As part of the full and final release and separation agreement, Mr. Reed will receive a lump sum distribution of $145,000 less applicable withholding taxes. Additionally, Mr. Reed will receive a lump sum distribution for unused vacation benefits of $11,087. The health care coverage in the form of COBRA will be paid for 18 months commencing upon the date of the agreement. Mr. Reed will also receive under a separate agreement $15,000 compensation for the reassignment of ownership of the company paid automobile lease. The total severance package is approximately $190,000 pretax and will be expensed in the third quarter of 2007. Additionally, the full and final release and separation agreement contains a covenant not to compete. The Corporation is in the process of determining the value of this asset, which will be amortized over the 19 month life of covenant. ITEM 6. EXHIBITS. See Exhibit Index attached. 32 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (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 August 14, 2007 COMMUNITY CENTRAL BANK CORPORATION By: /S/ DAVID A. WIDLAK ------------------------------------ David A. Widlak; President and CEO (Principal Executive Officer) By: /S/ RAY T. COLONIUS ----------------------------------- Ray T. Colonius; Treasurer (Principal Financial and Accounting Officer) 33 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 3.1 Articles of Incorporation are incorporated by reference to Exhibit 3.1 of the Corporation's Registration Statement on Form SB-2 (SEC File No. 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 Quarterly Report on Form 10-QSB filed with the SEC for the quarter ended June 30, 2004 (SEC File No. 000-33373) 4.1 Specimen of Stock Certificate of Community Central Bank Corporation is incorporated by reference to Exhibit 4.2 of the Corporation's Registration Statement on Form SB-2 (SEC File No. 333-04113) which became effective on September 23, 1996 10.1 1996 Employee Stock Option Plan is incorporated by reference to Exhibit 10.1 of the Corporation's Registration Statement on Form SB-2 (SEC File No. 333-04113) which became effective September 23, 1996 10.2 1996 Stock Option Plan for Nonemployee Directors is incorporated by reference to Exhibit 10.2 of the Corporation's Registration Statement on Form SB-2 (SEC File No. 333-04113) which became effective September 23, 1996 10.3 1999 Stock Option Plan for Directors in incorporated by reference to Exhibit 10.5 of the Corporation's Annual Report filed with the SEC on Form 10-KSB for the year ended December 31, 1999 (SEC File No. 000-33373) 10.4 2000 Employee Stock Option Plan is incorporated by reference to Exhibit 10.6 of the Corporation's Annual Report filed with the SEC on Form 10-KSB for the year ended December 31, 2000 (SEC File No. 000-33373) 10.5 2002 Incentive Plan is incorporated by reference to Exhibit 10.7 of the Corporation's Annual Report filed with the SEC on Form 10-KSB for the year ended December 31, 2001 (SEC File No. 000-33373) 10.6 Community Central Bank Supplemental Executive Retirement Plan is incorporated by reference to Exhibit 10.6 of the Corporation's Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2006 (SEC File No. 000-33373) 10.7 Community Central Bank Death Benefit Plan is incorporated by reference to Exhibit 10.7 of the Corporation's Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2006 (SEC File No. 000-33373) 10.8 Form of Incentive Stock Option Agreement incorporated by reference to Exhibit 99.1 of the Corporation's Current Report on Form 8-K filed with the SEC on March 25, 2005. (SEC File No. 000-33373) 10.9 Form of Non-qualified Stock Option Agreement is incorporated by reference to the Corporation's Current Report on Form 8-K filed on January 17, 2006. (SEC File No. 000-33373) 10.10 Summary of Current Director Fee Arrangements is incorporated by reference to Exhibit 10.10 of the Corporation's Annual Report filed with the SEC on Form 10-KSB for the year ended December 31, 2004. (SEC File No. 000-33373)
34 COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) 10.11 The foregoing description of the Separation Agreement is qualified in its entirety by reference to the complete terms and conditions of the Separation Agreement, which is attached as Exhibit 10.11 to this Quarterly Report on Form 10-Q and is incorporated herein by reference 11 Computation of Per Share Earnings 31.1 Rule 13a - 14(a) Certification (Chief Executive Officer) 31.2 Rule 13a - 14(a) Certification (Chief Financial Officer) 32 Rule 1350 Certifications
35 EX-10.11 2 k17809exv10w11.txt DESCRIPTION OF SEPARATION AGREEMENT Exhibit 10.11 FULL AND FINAL RELEASE AND SEPARATION AGREEMENT RONALD R. REED ("REED") and COMMUNITY CENTRAL BANK, a Michigan banking corporation ("BANK"), enter into the following FULL AND FINAL RELEASE AND SEPARATION AGREEMENT ("AGREEMENT") for an orderly separation of REED'S employment with BANK and for the complete resolution of any claims or disputes arising out of REED'S employment with or separation from BANK. REED and BANK agree as follows: 1. REED'S last day of employment with BANK will be JULY 17, 2007, and REED agrees that he will cease to accrue benefits under BANK'S Retirement Plan and will cease to be entitled to have any contribution made on his behalf to BANK'S 401(k) Plan as of that date or to receive any other benefit unless specifically set out in this AGREEMENT. REED will submit a letter of resignation effective JULY 17, 2007, which BANK will accept. 2. BANK will pay REED all salary earned and all unused vacation benefits, if any, to which REED is entitled, minus applicable withholding taxes, through JULY 17, 2007. REED agrees that he is not entitled to any other compensation or benefits of any kind from BANK except for any benefits to which he may be entitled under the BANK Retirement Plan or the BANK 401(k) Plan that accrued prior to JULY 17, 2007. 3. BANK will pay REED One Hundred Forty-Five Thousand Dollars, ($145,000.00) (minus applicable withholding taxes), subject to the provisions of Paragraph 7, below. Payment will be made within ten (10) business days following the later of the complete execution of this AGREEMENT or the expiration of the revocation period set out in Paragraph 7, below, so long as this AGREEMENT is signed by REED and not timely revoked by him. REED agrees that he has no right to such payment except pursuant to this Release. 4. REED is entitled to maintain his group health plan coverage for up to eighteen (18) months pursuant to COBRA. Subject to the provisions of Paragraph 7, below, the BANK will pay the premiums, necessary to continue REED'S COBRA coverage for that eighteen (18) month period commencing with the first payment due following the date on which this AGREEMENT becomes effective and ending with the eighteenth such payment, or when REED finds other employment which provides comparable coverage, which ever occurs first. REED'S eligibility for benefits and the extent of REED'S coverage will continue to be governed by the terms of the group health plan. 5. For and in consideration of the payments and agreements set forth in paragraphs 3 and 4, above, REED does hereby release, acquit and forever discharge BANK, its owners, stockholders, agents, employees, shareholders, directors, officers, fiduciaries, administrators, representatives, subsidiaries, attorneys, divisions, affiliated entities, partnerships, joint ventures, successors or assigns (hereinafter collectively referred to as "BANK ET AL") from any and all issues, charges, claims, demands, actions, causes of action and claims for damages whatsoever including all claims for compensatory and liquidated damages, whether known or unknown, suspected or unsuspected, and whether founded in fact or in law, and any and all claims for injuries whatsoever, as well as all claims for costs and attorney fees of every kind, nature or description which REED has, may have, may have had or hereafter may have upon or by reason of any matter, cause or thing whatsoever arising from REED'S employment with and/or circumstances leading to his separation of employment from BANK, which has, had or may have occurred up to and including the date of this AGREEMENT, including but not limited to any and all civil rights claims and/or any claims arising under the Age Discrimination in Employment Act of 1967, the Elliott-Larsen Civil Rights Act, the Michigan Persons with Disabilities Civil Rights Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Older Workers Benefit Protection Act, the Employee Retirement Income Security Act, the Fair Labor Standards Act, the Whistleblowers' Protection Act and Title VII of the Civil Rights Act of 1964, as amended. 6. REED agrees that if he files a lawsuit or claim of any type in any forum against BANK that has been waived in connection with this AGREEMENT, except for an action pursuant to the Age Discrimination in Employment Act, he will return to BANK all of the money received, including the value of all of the premiums paid and benefits received from BANK, as a result of this AGREEMENT before proceeding in any way with the lawsuit or claim. REED further agrees that he will pay all the costs, expenses and attorney fees incurred by BANK in defending against such a lawsuit or claim. 7. THE PAYMENT AND THE BENEFIT COVERAGE SET FORTH IN PARAGRAPHS 3 AND 4 ABOVE WILL NOT COMMENCE UNTIL REED EXECUTES THIS AGREEMENT AND THE REVOCATION PERIOD SET OUT IN PARAGRAPH 15, BELOW, HAS EXPIRED WITHOUT THIS AGREEMENT HAVING BEEN REVOKED. THE BANK WILL HAVE NO FURTHER OBLIGATIONS TO REED UNDER THOSE TWO PARAGRAPHS IF REED FAILS TO EXECUTE THIS AGREEMENT OR EXECUTES BUT TIMELY REVOKES THIS AGREEMENT. 8. REED understands and agrees that he has an obligation to inform BANK in the event that he obtains other employment which provides group health care coverage comparable to that which he is receiving pursuant to this AGREEMENT and that upon obtaining such coverage, the benefit coverage set forth in paragraph 4 above will be discontinued and BANK will have no further obligations to REED under that paragraph. 9. REED accepts the terms of this AGREEMENT, agrees that the AGREEMENT provides him with payments and benefits to which he is not otherwise entitled, and agrees that the AGREEMENT is not an admission of any liability to REED by BANK. 10. REED understands and agrees that the terms of this AGREEMENT, including the payments made to REED, shall be confidential and shall not be divulged to any third party other than his spouse, attorney, financial advisor or as otherwise required by law, without the prior written consent of BANK. 11. REED understands and agrees that he has had access to confidential, proprietary business information of BANK as a result of employment, and REED hereby agrees not to use such information personally or for the benefit of others. REED also agrees not to disclose to any third party any confidential and/or proprietary business information of BANK at any time in the future so long as such information remains confidential. 12. REED understands and agrees that he will return any and all property in his possession belonging to BANK, including but not limited to any computer hardware, computer software, personnel files, financial records, documents, agreements and keys. 2 13. REED agrees that, while he may be employed by another bank or banking corporation, during the nineteen (19) month period from July 17, 2007 until February 17, 2009, unless expressly authorized by BANK, REED will not, directly or indirectly, either on his own behalf or on behalf of any other person or entity, solicit to provide banking services to any BANK CUSTOMER or solicit any BANK employee to leave BANK or to seek employment elsewhere. For the purposes of this provision, "CUSTOMER" means any person or entity that is or has been a customer of BANK'S within one year prior to the date of this AGREEMENT or who becomes a customer of BANK'S between now and February 17, 2009. REED further acknowledges that any failure to comply with the terms of this provision shall irreparably harm BANK and that BANK shall not have an adequate remedy at law in the event of such non-compliance. REED acknowledges and agrees that BANK shall be entitled to obtain a court order in any court of competent jurisdiction preventing REED from committing, threatening, or continuing any acts of material non-compliance with this provision, in addition to any or all other remedies available in law or equity, REED agrees that BANK shall be entitled to recover from REED all attorney fees, costs and expenses incurred by or on behalf of BANK in enforcing this provision or any of BANK'S rights hereunder. REED further agrees that if it is judicially determined that he has violated any of his obligations under this Paragraph 13, then the period applicable to each obligation that he has been determined to have violated will automatically be extended by a period of time equal in length to the period during which such violation(s) occurred. 14. REED acknowledges that he was advised and had full opportunity to consult with an attorney of his own choosing prior to executing this AGREEMENT . 15. REED further acknowledges that he was given a period of twenty-one (21) days within which to consider this AGREEMENT. REED also understand that, during the seven-day period following his signature on this AGREEMENT, he may revoke this AGREEMENT and this AGREEMENT will not become effective or enforceable until the seven-day revocation period has expired without his exercise of his right to revoke. 16. This AGREEMENT shall be construed under the laws of the State of Michigan. 17. It is further understood and acknowledged that the terms of this AGREEMENT are contractual and not a mere recital and that there are no agreements, understandings or representations made by BANK, its agents or representatives, except as expressly stated. 18. Whenever possible, each provision of this AGREEMENT will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this AGREEMENT is held to be prohibited by or invalid under applicable law, such provisions will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this AGREEMENT. 19. REED acknowledges that before signing this AGREEMENT consisting of four (4) pages in total, he has read it, that he fully understands its terms, content and effect, that he has 3 had the opportunity to seek the advice of an attorney of his own choosing, that he has had sufficient time to consider whether to enter into this AGREEMENT, and that he has relied fully and completely on his own judgment in executing this AGREEMENT. IN WITNESS WHEREOF, RONALD R. REED has executed this FULL AND FINAL RELEASE AND SEPARATION AGREEMNT and has acknowledged that he executed it as his own free act and deed. DATED: - ------------------------------------- --------------------------------- RONALD R. REED ACKNOWLEDGMENT - The preceding document was acknowledged before me in _____________________ County, Michigan on this ____ day of _______________, 2007 by Ronald R. Reed. ---------------------------------------- , Notary Public County, Michigan ----------------------- My commission expires: ----------------- COMMUNITY CENTRAL BANK BY: --------------------------------- ITS: -------------------------------- DATED: ------------------------------ 4 Automobile Agreement Community Central Bank ("Bank") agrees to pay Ronald R. Reed ("Reed") fifteen thousand dollars ($15,000.00) and to transfer to him the 2007 Cadillac that has been provided to him by the Bank. Reed elects to keep and further agrees to assume the lease on said vehicle. Payment will be made within ten (10) business days of completion of the paperwork necessary to transfer the lease into Reed's name. Community Central Bank By: --------------------------------- Its: -------------------------------- Dated: ------------------------------ - ------------------------------------- Ronald R. Reed Dated: ------------------------------ EX-11 3 k17809exv11.txt COMPUTATION OF PER SHARE EARNINGS . . . COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2007 2006 2007 2006 ------ ------ ------ ------ (in thousands, except per share data) BASIC Net Income $ 536 $ 631 $1,194 $1,334 / Weighted Average Shares 3,868 4,020 3,925 4,012 ------ ------ ------ ------ Basic Earnings Per Share $ 0.14 $ 0.16 $ 0.30 $ 0.33 ====== ====== ====== ====== DILUTED Net Income $ 536 $ 631 $1,194 $1,334 / Weighted Average Shares 3,919 4,089 3,981 4,081 ------ ------ ------ ------ Diluted Earnings Per Share $ 0.14 $ 0.15 $ 0.30 $ 0.33 ====== ====== ====== ======
Notes: - - Weighted average shares outstanding have been adjusted to reflect the 5% stock dividend in June of 2007. 36 EX-31.1 4 k17809exv31w1.txt RULE 13A-14(A) CERTIFICATION OF CHIEF EXECUTIVE OFFICER COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) EXHIBIT 31.1 RULE 13a-14(a) CERTIFICATION I, David A. Widlak, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Community Central Bank Corporation. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on our evaluation; and c. disclosed in this report any changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 14, 2007 By: /S/ DAVID A. WIDLAK ------------------------------------ David A. Widlak President and CEO (Principal Executive Officer) 37 EX-31.2 5 k17809exv31w2.txt RULE 13A-14(A) CERTIFICATION OF CHIEF FINANCIAL OFFICER COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) EXHIBIT 31.2 RULE 13a-14(a) CERTIFICATION I, Ray T. Colonius, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Community Central Bank Corporation. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on our evaluation; and c. disclosed in this report any changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 14, 2007 By: /S/ RAY T. COLONIUS ------------------------------------ Ray T. Colonius Treasurer (Principal Financial and Accounting Officer) 38 EX-32 6 k17809exv32.txt RULE 1350 CERTIFICATIONS COMMUNITY CENTRAL BANK CORPORATION FORM 10-Q (continued) EXHIBIT 32 Rule 1350 CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned hereby certifies in his capacity as an officer of Community Central Bank Corporation (the "Corporation") that the Quarterly Report of the Corporation on Form 10-Q for the quarterly period ended June 30, 2007 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Corporation as of the dates and for the periods presented in the financial statements included in such report. Dated: August 14, 2007 By: /S/ DAVID A. WIDLAK ------------------------------------ David A. Widlak; President and CEO (Principal Executive Officer) Dated: August 14, 2007 By: /S/ RAY T. COLONIUS ------------------------------------ Ray T. Colonius; Treasurer (Principal Financial and Accounting Officer) 39 -----END PRIVACY-ENHANCED MESSAGE-----