-----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, KiZyY09/t/jHzb/HmMJsYnSM0ZT2vF7r/fJxr1GlD7sMeSik73Fx32OjXfo33brq e4eyPzYzrB1evvBXCfKU8A== 0000950135-97-002189.txt : 19970507 0000950135-97-002189.hdr.sgml : 19970507 ACCESSION NUMBER: 0000950135-97-002189 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970506 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY BANCORP INC CENTRAL INDEX KEY: 0000812348 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 042498617 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15752 FILM NUMBER: 97596785 BUSINESS ADDRESS: STREET 1: 400 MYSTIC AVENUE CITY: MEDFORD STATE: MA ZIP: 01887 BUSINESS PHONE: 6173934606 MAIL ADDRESS: STREET 1: 400 MYSTIC AVE CITY: MEDFORD STATE: MA ZIP: 01887 10-Q 1 CENTURY BANK & TRUST COMPANY FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 1997 ------------------------------------------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------------------------------------ Commission file number. 0-15752 -------------------------------------------------------- CENTURY BANCORP, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) COMMONWEALTH OF MASSACHUSETTS 04-2498617 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 400 MYSTIC AVENUE, MEDFORD, MA 02155 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (617)391-4000 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No ----- ----- Indicate the number of shares outstanding of each of the registrant's classes of common stock as of March 31, 1997: CLASS A COMMON STOCK, $1.00 PAR VALUE 3,472,997 SHARES CLASS B COMMON STOCK, $1.00 PAR VALUE 2,292,470 SHARES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: MAY 5, 1997 CENTURY BANCORP, INC. -------------------------- ------------------------------------- (Registrant) /s/ Paul V. Cusick, Jr. /s/ Kenneth A. Samuelian - -------------------------------- ------------------------------------- PAUL V. CUSICK, JR. KENNETH A. SAMUELIAN VICE PRESIDENT AND TREASURER VICE PRESIDENT AND CONTROLLER, (PRINCIPAL FINANCIAL OFFICER) CENTURY BANK & TRUST COMPANY (CHIEF ACCOUNTING OFFICER) 1 of 15 2 Century Bancorp, Inc. Page Index Number ----- ------ Part I. Financial Information - ------- --------------------- Item 1. Financial Statements -------------------- Consolidated Balance Sheets: March 31, 1997 and 1996; December 31, 1996. 3 Consolidated Statements of Income: Three (3) Months Ended March 31, 1997 and 1996. 4 Consolidated Statements of Cash Flows: Three (3) Months Ended March 31, 1997 and 1996. 5 Consolidated Changes in Stockholders Equity: December 31, 1995 through March 31, 1997. 6 Notes to Consolidated Financial Statements 7-11 Item 2. Management's Discussion and Analysis of --------------------------------------- Financial Condition and Results of ---------------------------------- Operations 12-14 ---------- Part II. Other Information - -------- ----------------- Item 1 through Item 6 15 2 of 15 3 PART I - Item 1 - ------
Century Bancorp, Inc. - Consolidated Balance Sheets (unaudited) - ---------------------------------------------------------------------------------------------------------------------- (000's) Mar 31, Dec 31, Mar 31, Assets 1997 1996 1996 - ------ -------- -------- -------- Cash and due from banks $ 38,371 $ 46,681 $ 33,210 Federal funds sold 0 21,000 12,000 Interest-bearing deposits in other banks 0 0 77 -------- -------- -------- Total cash and cash equivalents 38,371 67,681 45,287 -------- -------- -------- Securities available-for-sale, amortized cost $83,230; $81,140; $91,153, respectively 82,544 81,015 90,925 Securities held-to-maturity, market value $111,483; $107,331; $84,920, respectively 113,168 107,715 85,693 Loans, net of unearned discount: Commercial & industrial 44,857 41,006 38,582 Construction & land development 6,025 3,576 1,388 Commercial real estate 132,909 133,757 130,535 Industrial revenue bonds 2,948 3,030 3,293 Residential real estate 77,335 76,081 78,039 Residential real estate held-for-sale 309 557 1,906 Consumer 15,642 12,749 8,661 Home equity 16,703 17,330 18,550 Overdrafts 305 194 318 -------- -------- -------- Total loans, net of unearned discount 297,033 288,280 281,272 Less allowance for loan losses (4,348) (4,179) (4,163) -------- -------- -------- Net loans 292,685 284,101 277,109 Bank premises and equipment, net 8,528 8,265 8,602 Accrued interest receivable 4,874 4,283 4,507 Other real estate owned 134 182 474 Other assets 8,171 7,615 10,639 -------- -------- -------- Total assets $548,475 $560,857 $523,236 ======== ======== ======== Liabilities - ----------- Deposits: Demand deposits $ 95,631 $111,704 $ 87,906 Savings and NOW deposits 132,554 129,792 134,020 Money market accounts 70,570 69,772 73,578 Time deposits 152,448 164,867 152,937 -------- -------- -------- Total deposits 451,203 476,135 448,441 Securities sold under agreements to repurchase 19,980 17,790 17,480 Federal Home Loan Bank (FHLB) borrowings and other borrowed funds 21,474 12,353 1,049 Other liabilities 7,444 7,090 12,749 -------- -------- -------- Total liabilities 500,101 513,368 479,719 Stockholders' equity - -------------------- Class A common stock, $1.00 par value per share; 3,503 3,488 3,415 authorized 10,000,000 shares; issued 3,502,997 Class B common stock, $1.00 par value per share; 2,340 2,348 2,393 authorized 5,000,000 shares; issued 2,340,020 Additional paid-in capital 10,806 10,786 10,704 Retained earnings 32,304 31,117 27,314 Treasury stock, 77,550 shares (177) (177) (177) -------- -------- -------- Realized stockholders' equity 48,776 47,562 43,649 Unrealized (losses) gains on securities available-for-sale, net of taxes (402) (73) (132) -------- -------- -------- Total stockholders' equity 48,374 47,489 43,517 -------- -------- -------- Total liabilities and stockholders' equity $548,475 $560,857 $523,236 ======== ======== ========
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Century Bancorp, Inc. - Consolidated Statements of Income (unaudited) - ---------------------------------------------------------------------------------- (000's except share data) Three months ended March 31, 1997 1996 ---------- ---------- Interest income Loans $ 6,665 $ 6,537 Securities held-to-maturity 1,813 1,139 Securities available-for-sale 1,243 1,463 Interest-bearing deposits in other banks 0 0 Federal funds sold 175 256 ---------- ---------- Total interest income 9,896 9,395 Interest expense Savings and NOW deposits 945 941 Money market accounts 484 531 Time deposits 2,130 2,217 Securities sold under agreements to repurchase 201 201 FHLB borrowings and other borrowed funds 85 13 ---------- ---------- Total interest expense 3,845 3,903 ---------- ---------- Net interest income 6,051 5,492 Provision for loan losses 255 255 ---------- ---------- Net interest income after provision for loan losses 5,796 5,237 Other operating income Service charges on deposit accounts 411 388 Lockbox fees 309 370 Brokerage commissions 294 339 Gain on sales of loans 21 88 Other income 109 103 ---------- ---------- Total other operating income 1,144 1,288 ---------- ---------- Operating expenses Salaries and employee benefits 3,013 2,994 Occupancy 319 392 Equipment 273 297 Other real estate owned 14 22 Other 1,011 913 ---------- ---------- Total operating expenses 4,630 4,618 ---------- ---------- Income before income taxes 2,310 1,907 Provision for income taxes 934 723 ---------- ---------- Net income $ 1,376 $ 1,184 ========== ========== - ---------------------------------------------------------------------------------- Share data: Weighted average number of shares outstanding 5,761,278 5,726,227 Net income per share $ 0.24 $ 0.21 Cash dividends declared: Class A common stock $ 0.0500 $ 0.0400 Class B common stock $ 0.0070 $ 0.0056
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Century Bancorp, Inc. - Consolidated Statements of Cash Flows (unaudited) 1997 1996 - ------------------------------------------------------------------------------------------------------------ For the three months ended March 31, (000's) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,376 $ 1,184 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 255 255 Deferred income taxes (110) (155) Net depreciation and amortization 147 197 Increase in accrued interest receivable (591) (215) Increase in other assets (265) (3,215) Loans originated for sale (1,006) (6,456) Proceeds from sales of loans 1,410 5,898 Gain on sales of loans (21) (88) Loss (gain) on sales of real estate owned 4 (13) Increase in other liabilities 354 5,848 -------- -------- Net cash provided by operating activities 1,553 3,240 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of securities available-for-sale 9,250 18,165 Purchase of securities available-for-sale (11,299) (9,119) Proceeds from maturities of securities held-to-maturity 1,500 19,250 Purchase of securities held-to-maturity (6,925) (26,979) Net (increase) decrease in loans (9,254) 4,503 Proceeds from sales of real estate owned 180 514 Capital expenditures (532) (154) -------- -------- Net cash (used in) provided by investing activities (17,080) 6,180 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net decrease in time deposits (12,419) (2,081) Net decrease in demand, savings,money market and NOW deposits (12,513) (8,093) Net proceeds from the issuance of common stock 27 23 Cash Dividends (189) (148) Net increase (decrease) in securities sold under agreements to repurchase 2,190 (4,100) Net increase (decrease) in FHLB borrowings and other borrowed funds 9,121 (848) -------- -------- Net cash used in financing activities (13,783) (15,247) -------- -------- Net decrease in cash and cash equivalents (29,310) (5,827) Cash and cash equivalents at beginning of year 67,681 51,114 -------- -------- Cash and cash equivalents at end of period $ 38,371 $ 45,287 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 3,708 $ 3,764 Income taxes 602 738 Noncash transactions: Property acquired through foreclosure $ 136 $ 130 Change in unrealized losses on securities available-for-sale, net of taxes $ (561) $ (477)
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Century Bancorp, Inc. - Consolidated Statement of Changes in Stockholders' Equity (unaudited) - ---------------------------------------------------------------------------------------------------------------------------------- December 31, 1995 through March 31, 1997 (000's) Unrealized Treasury Treasury Gains(losses) Stock Stock on Securities Class A Class B Additional Class A, Class B, available- Total Common Common Paid-In Retained 30,000 47,550 for-sale Stockholders' Stock Stock Capital Earnings Shares Shares net of taxes, Equity - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1995 $3,406 $2,396 $10,687 $26,278 ($136) ($41) $345 $42,935 Conversion of Class B common stock to Class A common stock, 3,000 shares 3 (3) -- -- -- -- -- -- Stock options exercised, 6,000 shares 6 -- 17 -- -- -- -- 23 Net income, 1st quarter 1996 -- -- -- 1,184 -- -- -- 1,184 Cash dividends, Class A common stock $.040 per share -- -- -- (135) -- -- -- (135) Cash dividends, Class B common stock $.0056 per share -- -- -- (13) -- -- -- (13) Net change in unrealized gains(losses) on securities available-for-sale, net of taxes -- -- -- -- -- -- (477) (477) -------------------------------------------------------------------------------------- BALANCE, MARCH 31, 1996 $3,415 $2,393 $10,704 $27,314 ($136) ($41) ($132) $43,517 Conversion of Class B common stock to Class A common stock, 45,200 shares 45 (45) -- -- -- -- -- -- Stock options exercised, 28,350 shares 28 -- 82 -- -- -- -- 110 Net income, 2nd quarter 1996 -- -- -- 1,298 -- -- -- 1,298 Net income, 3rd quarter 1996 -- -- -- 1,404 -- -- -- 1,404 Net income, 4th quarter 1996 -- -- -- 1,548 -- -- -- 1,548 Cash dividends, Class A common stock $.040 per share, per quarter -- -- -- (408) -- -- -- (408) Cash dividends, Class B common stock $.0056 per share, per quarter -- -- -- (39) -- -- -- (39) Net change in unrealized gains(losses) on securities available-for-sale, net of taxes -- -- -- -- -- -- 59 59 -------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1996 $3,488 $2,348 $10,786 $31,117 ($136) ($41) ($73) $47,489 Conversion of Class B common stock to Class A common stock, 7,700 shares 8 (8) -- -- -- -- -- -- Stock options exercised, 7,000 shares 7 -- 20 -- -- -- -- 27 Net income, 1st quarter 1997 -- -- -- 1,376 -- -- -- 1,376 Cash dividends, Class A common stock $.050 per share -- -- -- (173) -- -- -- (173) Cash dividends, Class B common stock $.0070 per share -- -- -- (16) -- -- -- (16) Net change in unrealized gains(losses) on securities available-for-sale, net of taxes -- -- -- -- -- -- (329) (329) -------------------------------------------------------------------------------------- BALANCE, MARCH 31, 1997 $3,503 $2,340 $10,806 $32,304 ($136) ($41) ($402) $48,374 ======================================================================================
6 of 15 7 Century Bancorp Inc. Notes to Consolidated Financial Statements BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited - --------------------- interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which are necessary to present a fair statement of the results for the interim period presented of Century Bancorp, Inc. (the "Company"). The results of operations for the interim period ended March 31, 1997, are not necessarily indicative of results for the entire year. It is suggested that these statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report. As of January 1, 1997, the Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities." This statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishment of liabilities based on consistent application of a financial-components approach that focuses on control. It distinguishes transfers of financial assets that are sales from transfers that are secured borrowings. Under the financial-components approach, after a transfer of financial assets, an entity recognizes all financial and servicing assets it controls and liabilities it has incurred and derecognizes financial assets it no longer controls and liabilities that have been extinguished. The financial-components approach focuses on assets and liabilities that exist after the transfer. Many of these assets and liabilities are components of financial assets that existed prior to the transfer. If a transfer does not meet the criteria for a sale, the transfer is accounted for as a secured borrowing with pledge of collateral. SFAS No. 127, "Deferral of the effective Date of Certain Provisions of SFAS No. 125," requires the deferral of implementation as it relates to repurchase agreements, dollar-rolls, securities lending and similar transactions until after December 31, 1997. Earlier or retroactive applications of this statement is not permitted. The Company has determined that the adoption of this statement will not have a material impact on its consolidated financial statements. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ------------------------------------------ The consolidated financial statements include the accounts of Century Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Century Bank and Trust Company (the "Bank"). The Company provides a full range of banking services to individual, business and municipal customers in Massachusetts. As a bank holding company, the Company is subject to the regulation and supervision of the Federal Reserve Board. The Bank, a state chartered financial institution, is subject to supervision and regulation by applicable state and federal banking agencies, including the Federal Reserve Board, the Office of the Comptroller of the Currency (the "Comptroller") and the Federal Deposit Insurance Corporation (the "FDIC"). 7 of 15 8 The Bank is also subject to various requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of the Bank. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. All aspects of the Company's business are highly competitive. The Company faces aggressive competition from other lending institutions and from numerous other providers of financial services. BASIS OF FINANCIAL STATEMENT PRESENTATION - ----------------------------------------- The financial statements have been prepared in conformity with generally accepted accounting principles and to general practices within the banking industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates. Material estimates that are susceptible to change in the near-term relate to the allowance for losses on loans. Management believes that the allowance for losses on loans is adequate based on independent appraisals and review of other factors associated with the assets. While management uses available information to recognize losses on loans, future additions to the allowance for loans may be necessary based on changes in economic conditions. In addition, regulatory agencies periodically review the Company's allowance for losses on loans. Such agencies may require the Company to recognize additions to the allowance for loans based on their judgements about information available to them at the time of their examination. INVESTMENT SECURITIES - --------------------- Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity and reported at amortized cost; debt and equity securities that are bought and held principally for the purpose of selling are classified as trading and reported at fair value, with unrealized gains and losses included in earnings; and debt and equity securities not classified as either held-to-maturity or trading are classified as available-for-sale and reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity, net of estimated related income taxes. The Company has no securities held for trading. Premiums and discounts on investment securities are amortized or accreted into income by use of the level-yield method. If a decline in fair value below the amortized cost basis of an investment is judged to be other than temporary, the cost basis of the investment is written down to fair value. The amount of the writedown is included as a charge to earnings. Gains and losses on the sale of investment securities are recognized at the time of sale on a specific identification basis. 8 of 15 9 LOANS - ----- Interest on loans is recognized based on the daily principal amount outstanding. Accrual of interest is discontinued when loans become 90 days delinquent unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection. Loans, including impaired loans, on which the accrual of interest has been discontinued are designated non-accrual loans. When a loan is placed on non-accrual, all income which has been accrued but remains unpaid is reversed against current period income and all amortization of deferred loan fees is discontinued. Non-accrual loans may be returned to an accrual status when principal and interest payments are not delinquent and the risk characteristics of the loan have improved to the extent that there no longer exists a concern as to the collectibility of principal and income. Income received on non-accrual loans is either recorded in income or applied to the principal balance of the loan depending on management's evaluation as to the collectibility of principal. Loans held for sale are carried at the lower of aggregate cost or market value. Gain or loss on sales of loans is recognized at the time of sale when the sales proceeds exceed or are less than the Bank's investment in the loans. Additionally, gains and losses are recognized when the average interest rate on the loans sold, adjusted for normal servicing fee, differs from the agreed yield to the buyer. The resulting excess service fee receivables, if any, are amortized using the interest method over the estimated life of the loans, adjusted for estimated prepayments. Discounts and premiums on loans purchased from failed financial institutions that represent market yield adjustments are accreted or amortized to interest income over the estimated lives of the loans using the level-yield method. Loan origination fees and related direct incremental loan origination costs are offset and the resulting net amount is deferred and amortized over the life of the related loans using the level-yield method. The Bank accounts for impaired loans, except those loans that are accounted for at fair value or at lower of cost or fair value, at he present value of the expected future cash flows discounted at the loan's effective interest rate. This method applies to all loans, uncollateralized as well as collateralized, except large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment, loans that are measured at fair value and leases and debt securities. Management considers the payment status, net worth and earnings potential of the borrower, and the value and cash flow of the collateral as factors to determine if a loan will be paid in accordance with its contractual terms. Management does not set any minimum delay of payments as a factor in reviewing for impaired classification. Impaired loans are charged-off when management believes that the collectibility of the loan's principal is remote. In addition, criteria for classification of a loan as in-substance foreclosure has been modified so that such classification need be made only when a lender is in possession of the collateral. The Bank measures the impairment of troubled debt restructurings using the pre-modification rate of interest. 9 of 15 10 ALLOWANCE FOR LOAN LOSSES - ------------------------- The allowance for loan losses is based on management's evaluation of the quality of the loan portfolio and is used to absorb losses resulting from loans which ultimately prove uncollectible. In determining the level of the allowance, periodic evaluations are made of the loan portfolio which take into account such factors as the character of the loans, loan status, financial posture of the borrowers, value of collateral securing the loans and other relevant information sufficient to reach an informed judgement. The allowance is increased by provisions charged to income and reduced by loan charge-offs, net of recoveries. While management uses available information in establishing the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations. Loans are charged off in whole or in part when, in management's opinion, collectibility is not probable. Management believes that the allowance for loan losses is adequate. In addition, various regulatory agencies, as part of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgements about information available to them at the time of their examination. OTHER REAL ESTATE OWNED - ----------------------- Other real estate owned ("OREO") includes real estate acquired by foreclosure and real estate substantively repossessed. Real estate acquired by foreclosure is comprised of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Real estate substantively repossessed includes only those loans for which the Company has taken possession of the collateral, but has not completed legal foreclosure proceedings. Both in-substance foreclosures and real estate formally acquired in settlement of loans are recorded at the lower of the carrying value of the loan or the fair value of the property constructively or actually received. Loan losses from the acquisition of such properties are charged against the allowance for loan losses. After foreclosure, if the fair value of an asset minus its estimated cost to sell is less than the carrying value of the asset, such amount is recognized as a valuation allowance. If the fair value of an asset less its estimated cost to sell subsequently increases so that the resulting amount is more than the asset's current carrying value, the valuation allowance is reversed by the amount of the increase. Increases or decreases in the valuation allowance are charged or credited to income. Gains upon disposition of OREO are reflected in the statement of income as realized. Realized losses are charged to the valuation allowance. 10 of 15 11 BANK PREMISES AND EQUIPMENT - --------------------------- Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the terms of leases, if shorter. It is general practice to charge the cost of maintenance and repairs to operations when incurred; major expenditures for improvements are capitalized and depreciated. INCOME TAXES - ------------ The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. ------------------------------------------------------------ 11 of 15 12 Item 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview For the quarter ended and year-to-date ended March 31, 1997. - -------- Earnings for the first quarter ended March 31, 1997 were $1,376 thousand, an increase of 16.2% when compared with the first quarter 1996 earnings of $1,184 thousand. Earnings per share for the first quarter 1997 were $.24 versus $.21 for the first quarter of 1996. FINANCIAL CONDITION - ------------------- Loans On March 31, 1997 loans outstanding, net of unearned discount, - ----- were $297.0 million an increase of 5.6% from the total on March 31, 1996. At March 31, 1997 Commercial Real Estate loans accounted for 44.7% and Residential Real Estate loans accounted for 26.1% of total loans. Construction loans increased to $6.0 million. Allowance for Loan Losses - ------------------------- The allowance for loan losses was 1.46% of total loans on March 31, 1997 compared with 1.48% on March 31, 1996. Net charge-offs for the three month period ended March 31, 1997, were $86 thousand, compared with $285 thousand for the same period in 1996. The allowance for loan losses is based on management's overview of the quality of the loan portfolio, previous loan loss experience and current economic conditions. As of March 31, 1997, loans on non-accrual status totaled $1.8 million or .61% of loans; loans past due 90 days or more totaled $249 thousand; restructured performing loans totaled $2.7 million. Securities Held-to-Maturity - --------------------------- The securities held-to-maturity portfolio totaled $113.2 million on March 31, 1997, an increase of 32.1% from the total on March 31, 1996. The portfolio is concentrated in United States Treasury and Agency securities and had a weighted average maturity of 3.8 years. Securities Available-for-Sale - ----------------------------- The securities available-for-sale portfolio totaled $82.5 million at March 31, 1997, a decrease of 9.2 % from March 31, 1996. The portfolio is concentrated in United States Treasury and Agency securities and had a weighted average maturity of 2.1 years. 12 of 15 13 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (CON'T.) Other Assets - ------------ On March 31, 1997 other real estate owned ("OREO") totaled $134 thousand, a decrease of $340 thousand from March 31, 1996. During the third quarter $136 thousand was added to OREO and $180 thousand of OREO was sold. Deposits and Borrowed Funds - --------------------------- On March 31, 1997 deposits totaled $451.2 million, which is .6% above total deposits on March 31, 1996. Borrowed funds totaled $41.5 million compared to $18.5 million last year. The majority of the increase was a borrowing from the Federal Home Loan Bank of $20.4 million. RESULTS OF OPERATIONS - --------------------- Net Interest Income - ------------------- For the three month period ended March 31, 1997 net interest income totaled $6.1 million, an increase of 10.2% from the comparable period in 1996. Provision for Loan Losses - ------------------------- Loan loss provision for the three months ended March 31, 1997 was $255 thousand compared with $255 thousand for the same period in 1996. Non-Interest Income and Expense - ------------------------------- Fee income for the quarter ended March 31, 1997 was $1.1 million, a 11.2% decrease from the first quarter of 1996. Income from the gain on sales of loans decreased because of a decrease in mortgage loan originations. Brokerage commissions decreased because of decreased activity in that line of business. The lockbox fee decrease was due to a decrease in lockbox related volume. During the third quarter 1996, operating expenses, exclusive of OREO expenses, increased by .4% from the same quarter last year. Expenses associated with OREO decreased by $8 thousand for the same period. 13 of 15 14 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (CON'T.) Income Taxes - ------------ For the first quarter of 1997, the Company's income taxes totaled $934 thousand on pretax income of $2,310 thousand for an effective tax rate of 40.4%. For last year's corresponding quarter, the Company's income taxes totalled $723 thousand on pretax income of $1,907 thousand for an effective rate of 37.9%. The major contribution to the increase in the effective tax rate for the first quarter 1997 compared with the first quarter 1996 was a reduction of the deferred tax asset valuation allowance during 1996. The reduction of this allowance for the first quarter of 1996 was $75 thousand. 14 of 15 15 Part II - Other Information Item 1 Legal proceedings - Not applicable Item 2 Change in securities - Not applicable Item 3 Defaults upon senior securities - Not applicable Item 4 Submission of matters to a vote - Not applicable Item 5 Other information - Not applicable Item 6 Exhibits and reports on form 8-K - Not applicable 15 of 15 EX-27 2 FINANCIAL DATA SCHEDULE
9 0000812348 CENTURY BANCORP, INC. 1,000 U.S. DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 38,371 0 0 0 82,544 113,168 111,483 297,033 4,348 548,475 451,203 41,454 7,444 0 0 0 5,843 42,531 548,475 6,665 3,056 175 9,896 3,559 3,845 6,051 255 0 1,011 2,310 2,310 0 0 1,376 .24 .24 4.90 1,812 249 2,695 4,756 4,179 159 73 4,348 4,348 0 0
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