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Section 1: 8-K (8-K)

8-K

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report: January 15, 2019

 

 

Century Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Massachusetts   0-15752   04-2498617

(State or other jurisdiction

of incorporation)

 

(Commission

File No.)

 

(IRS Employer

Identification No.)

 

400 Mystic Avenue

Medford, MA

  02155
(Address of principal executive offices)   (Zip Code)

(781) 391-4000

(Registrant’s telephone number, including area code)

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02

Results of Operations and Financial Condition

The following information is furnished under Item 2.02—“Results of Operations and Financial Condition” and such information, including the exhibits attached hereto, shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

On January 15, 2019, Century Bancorp, Inc. issued a press release, a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference, announcing its earnings for the fourth quarter ended December 31, 2018 and the declaration of a regular quarterly dividend on Century Bancorp Inc.’s Class A and Class B common stock.

 

Item 9.01

Financial Statements and Exhibits

 

  (d)

Exhibits

 

99.1    Century Bancorp, Inc. press release dated January 15, 2019.


SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

CENTURY BANCORP, INC.
/s/ William P. Hornby
William P. Hornby, CPA
Chief Financial Officer and Treasurer

Dated: January 16, 2019

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Section 2: EX-99.1 (EX-99.1)

EX-99.1

Exhibit 99.1

 

LOGO                 

NEWS RELEASE

 

 

FOR IMMEDIATE RELEASE

 

Contact:   William P. Hornby, CPA   
  [email protected]   
Phone:   781-393-4630   
Fax:   781-393-4071   

CENTURY BANCORP, INC. ANNOUNCES RECORD EARNINGS OF $36.2 MM FOR 2018, CORE

EARNINGS UP 17.8%; ASSET GROWTH TO RECORD $5.2 BB; REGULAR DIVIDEND DECLARED

Medford, MA, January 15, 2019 — Century Bancorp, Inc. (NASDAQ:CNBKA) (www.centurybank.com) (“the Company”) today announced net income of $36.2 million for the year ended December 31, 2018, or $6.50 per Class A share diluted, an increase of 62.4% compared to net income of $22.3 million, or $4.01 per Class A share diluted, for the same period a year ago. The Company’s core earnings(1) increased by $5.5 million or 17.8% from $30.7 million in 2017 to a record $36.2 million in 2018.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted, which lowered the Company’s federal tax rate from 34% to 21%. As a result of the rate reduction, the Company recorded a reduction in the value of its net deferred tax asset resulting in a charge of $8.4 million to 2017 income tax expense. This $8.4 million charge is excluded from core earnings.

Total assets increased 7.9% from $4.79 billion at December 31, 2017 to $5.16 billion at December 31, 2018. For the quarter ended December 31, 2018, net income totaled $9.9 million or $1.78 per Class A share diluted, compared to $25,000, or $0.00 per Class A share diluted, for the same period a year ago.

Net interest income totaled $92.6 million for the year ended December 31, 2018 compared to $85.6 million for the same period in 2017. The 8.1% increase in net interest income for the period is primarily due to an increase in average earning assets. The net interest margin decreased from 2.25% on a fully taxable equivalent basis in 2017 to 2.18% for the same period in 2018. This was primarily the result of a decrease in the federal corporate tax rate from 34% to 21% as well as lower prepayment penalties collected during 2018. The decrease in the tax rate results in a lower tax equivalent yield on tax-exempt assets. The average balances of earning assets increased by 5.1% combined with an average yield increase of 0.26%, resulting in an increase in interest income of $23.6 million. The average balance of interest bearing liabilities increased 3.7% combined with an average yield increase of 0.41%, resulting in an increase in interest expense of $16.7 million.

 

-more-


The provision for loan losses decreased by $440,000 from $1,790,000 for the year ended December 31, 2017 to $1,350,000 for the same period in 2018, primarily as a result of net recoveries of $938,000 offset by changes in qualitative factors.

The Company’s effective tax rate decreased from 32.9% for 2017 to 4.2% for the same period in 2018. This was primarily as a result of a reduction in the value of its net deferred tax asset resulting in a charge of $8.4 million to 2017 income tax expense as a result of the Tax Act as previously discussed. Also, the federal tax rate decreased from 34% to 21% as a result of the Tax Act, offset somewhat by an increase in taxable income.

At December 31, 2018, total equity was $300.4 million compared to $260.3 million at December 31, 2017. The Company’s equity increased primarily as a result of earnings, offset somewhat by dividends paid.

The Company’s leverage ratio stood at 6.91% at December 31, 2018, compared to 6.78% at December 31, 2017. The increase in the leverage ratio was due to an increase in stockholders’ equity, offset somewhat by an increase in quarterly average assets. Book value as of December 31, 2018 was $53.96 per share compared to $46.75 at December 31, 2017.

The Company’s allowance for loan losses was $28.5 million or 1.25% of loans outstanding at December 31, 2018, compared to $26.3 million or 1.21% of loans outstanding at December 31, 2017. The ratio of the allowance for loan losses to loans outstanding has increased, primarily as a result of changes in qualitative factors related to general economic factors pertaining to certain industries. Non-performing assets totaled $3.5 million at December 31, 2018, compared to $1.7 million at December 31, 2017. Nonperforming assets increased mainly as a result of one residential real estate property classified as other real estate owned.

The Company’s Board of Directors voted a regular quarterly dividend of 12.00 cents ($0.12) per share on the Company’s Class A common stock, and 6.00 cents ($0.06) per share on the Company’s Class B common stock. The dividends were declared payable February 15, 2019 to stockholders of record on February 1, 2019.

The Company, through its subsidiary bank, Century Bank and Trust Company, a state chartered full service commercial bank, operating twenty-seven full-service branches in the Greater Boston area, offers a full range of Business, Personal and Institutional Services.

Century Bank and Trust Company is a member of the FDIC and is an Equal Housing Lender.

This press release contains certain “forward-looking statements” with respect to the financial condition, results of operations and business of the Company. Actual results may differ from those contemplated by these statements. The Company wishes to caution readers not to place undue reliance on any forward-looking statements. The Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether in response to new information, future events or otherwise.


Century Bancorp, Inc. and Subsidiaries

Consolidated Comparative Statements of Condition (unaudited)

(in thousands)

 

Assets

    

December 31,

2018

 

 

    

December 31,

2017

 

 

Cash and Due From Banks

   $ 89,540      $ 77,199  

Federal Funds Sold and Interest-bearing Deposits In Other Banks

     252,963        279,231  

Securities Available-for-Sale (AFS)

     338,327        397,475  

Securities Held-to-Maturity

     2,046,647        1,701,233  

Federal Home Loan Bank of Boston stock, at cost

     17,974        21,779  

Loans:

     

Commercial & Industrial

     761,775        763,807  

Municipal

     97,140        106,599  

Construction & Land Development

     13,628        18,931  

Commercial Real Estate

     750,362        732,491  

Residential Real Estate

     348,250        287,731  

Consumer and Other

     22,083        19,040  

Home Equity

     292,340        247,345  
  

 

 

    

 

 

 

Total Loans

     2,285,578        2,175,944  

Less: Allowance for Loan Losses

     28,543        26,255  
  

 

 

    

 

 

 

Net Loans

     2,257,035        2,149,689  

Bank Premises and Equipment, net

     23,921        23,527  

Accrued Interest Receivable

     14,406        11,179  

Goodwill

     2,714        2,714  

Other Assets

     120,408        121,546  
  

 

 

    

 

 

 

Total Assets

   $ 5,163,935      $ 4,785,572  
  

 

 

    

 

 

 

Liabilities

     

Demand Deposits

   $ 813,478      $ 736,020  

Interest Bearing Deposits:

     

Savings and NOW Deposits

     1,707,019        1,367,358  

Money Market Accounts

     1,325,888        1,188,228  

Time Deposits

     560,579        625,361  
  

 

 

    

 

 

 

Total Interest Bearing Deposits

     3,593,486        3,180,947  
  

 

 

    

 

 

 

Total Deposits

     4,406,964        3,916,967  

Borrowed Funds:

     

Securities Sold Under Agreements to Repurchase

     154,240        158,990  

Other Borrowed Funds

     202,378        347,778  
  

 

 

    

 

 

 

Total Borrowed Funds

     356,618        506,768  

Other Liabilities

     63,831        65,457  

Subordinated Debentures

     36,083        36,083  
  

 

 

    

 

 

 

Total Liabilities

     4,863,496        4,525,275  

Total Stockholders' Equity

     300,439        260,297  
  

 

 

    

 

 

 

Total Liabilities & Stockholders' Equity

   $ 5,163,935      $ 4,785,572  
  

 

 

    

 

 

 


Century Bancorp, Inc. and Subsidiaries

Consolidated Comparative Statements of Income (unaudited)

For the quarter and year ended December 31, 2018 and 2017

(in thousands)

 

     Quarter ended December 31,      Year ended December 31,  
     2018      2017      2018      2017  

Interest Income:

           

Loans

   $ 20,938      $ 17,345      $ 78,551      $ 66,013  

Securities Held-to-Maturity

     12,626        9,542        45,556        38,348  

Securities Available-for-Sale

     2,630        1,835        9,451        6,978  

Federal Funds Sold and Interest-bearing Deposits In Other Banks

     1,259        748        3,498        2,097  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Interest Income

     37,453        29,470        137,056        113,436  

Interest Expense:

           

Savings and NOW Deposits

     3,979        1,842        11,757        6,296  

Money Market Accounts

     4,883        1,723        13,922        5,626  

Time Deposits

     2,743        2,271        10,208        7,919  

Securities Sold Under Agreements to Repurchase

     319        144        976        496  

Other Borrowed Funds and Subordinated Debentures

     1,824        1,788        7,617        7,483  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Interest Expense

     13,748        7,768        44,480        27,820  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Interest Income

     23,705        21,702        92,576        85,616  

Provision For Loan Losses

     450        450        1,350        1,790  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Interest Income After Provision for Loan Losses

     23,255        21,252        91,226        83,826  

Other Operating Income

           

Service Charges on Deposit Accounts

     2,292        2,407        8,560        8,586  

Lockbox Fees

     970        923        3,274        3,290  

Net Gain on Sales of Loans

     —          —          —          370  

Net Gain on Sales of Securities

     —          —          302        47  

Other Income

     902        1,080        4,112        4,259  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Other Operating Income

     4,164        4,410        16,248        16,552  

Operating Expenses

           

Salaries and Employee Benefits

     10,379        9,420        42,710        40,517  

Occupancy

     1,513        1,477        6,092        6,140  

Equipment

     777        647        3,132        2,892  

FDIC Assessment

     361        363        1,471        1,581  

Other

     4,155        4,085        16,288        15,989  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Operating Expenses

     17,185        15,992        69,693        67,119  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income Before Income Taxes

     10,234        9,670        37,781        33,259  

Income Tax Expense

     309        9,645        1,568        10,958  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

   $ 9,925      $ 25      $ 36,213      $ 22,301  
  

 

 

    

 

 

    

 

 

    

 

 

 


Century Bancorp, Inc. and Subsidiaries

Consolidated Year-to-Date Average Comparative Statements of Condition (unaudited)

(in thousands)

 

Assets

    

December 31,

2018

 

 

    

December 31,

2017

 

 

Cash and Due From Banks

   $ 71,943      $ 72,455  

Federal Funds Sold and Interest-Bearing Deposits in Other Banks

     183,903        189,193  

Securities Available-For-Sale (AFS)

     400,098        461,635  

Securities Held-to-Maturity (HTM)

     1,854,328        1,725,280  

Total Loans

     2,222,946        2,059,797  

Less: Allowance for Loan Losses

     27,531        25,329  
  

 

 

    

 

 

 

Net Loans

     2,195,415        2,034,468  

Unrealized (Loss)Gain on Securities AFS and HTM Transfers

     (4,017      (6,394

Bank Premises and Equipment

     23,642        23,504  

Accrued Interest Receivable

     12,014        10,300  

Goodwill

     2,714        2,714  

Other Assets

     122,948        119,049  
  

 

 

    

 

 

 

Total Assets

   $ 4,862,988      $ 4,632,204  
  

 

 

    

 

 

 

Liabilities

     

Demand Deposits

   $ 753,604      $ 687,853  

Interest Bearing Deposits:

     

Savings and NOW Deposits

     1,514,259        1,457,872  

Money Market Accounts

     1,230,010        1,105,071  

Time Deposits

     577,975        566,941  
  

 

 

    

 

 

 

Total Interest Bearing Deposits

     3,322,244        3,129,884  
  

 

 

    

 

 

 

Total Deposits

     4,075,848        3,817,737  

Borrowed Funds:

     

Securities Sold Under Agreements to Repurchase

     147,944        189,684  

Other Borrowed Funds

     255,591        273,019  
  

 

 

    

 

 

 

Total Borrowed Funds

     403,535        462,703  

Other Liabilities

     70,020        60,925  

Subordinated Debentures

     36,083        36,083  
  

 

 

    

 

 

 

Total Liabilities

     4,585,486        4,377,448  

Total Stockholders' Equity

     277,502        254,756  
  

 

 

    

 

 

 

Total Liabilities & Stockholders' Equity

   $ 4,862,988      $ 4,632,204  
  

 

 

    

 

 

 

Total Average Earning Assets—QTD

   $ 4,840,923      $ 4,441,053  
  

 

 

    

 

 

 

Total Average Earning Assets—YTD

   $ 4,661,275      $ 4,435,905  
  

 

 

    

 

 

 


Century Bancorp, Inc. and Subsidiaries

Consolidated Selected Key Financial Information (unaudited)

(in thousands, except share data)

 

     December 31,
2018
     December 31,
2017
 

Performance Measures:

     

Earnings per average Class A share, diluted, quarter

   $ 1.78      $ 0.00  

Earnings per average Class A share, diluted, year

   $ 6.50      $ 4.01  

Return on average assets, year

     0.74%        0.48%  

Return on average stockholders' equity, year

     13.05%        8.75%  

Net interest margin (taxable equivalent), quarter

     2.13%        2.26%  

Net interest margin (taxable equivalent), year

     2.18%        2.25%  

Efficiency ratio, year — Non-GAAP (1)

     59.2%        57.8%  

Book value per share

   $ 53.96      $ 46.75  

Tangible book value per share — Non-GAAP (1)

   $ 53.47      $ 46.26  

Capital / assets

     5.82%        5.44%  

Tangible capital / tangible assets — Non-GAAP (1)

     5.77%        5.39%  

Common Share Data:

     

Average Class A shares outstanding, diluted, quarter and year

     5,567,909        5,567,909  

Shares outstanding Class A

     3,608,329        3,605,829  

Shares outstanding Class B

     1,959,580        1,962,080  
  

 

 

    

 

 

 

Total shares outstanding at period end

     5,567,909        5,567,909  
  

 

 

    

 

 

 

Asset Quality and Other Data:

     

Allowance for loan losses / loans

     1.25%        1.21%  

Nonaccrual loans

   $ 1,313      $ 1,684  

Nonperforming assets

   $ 3,538      $ 1,684  

Loans 90 days past due and still accruing

   $ —        $ —    

Accruing troubled debt restructures

   $ 2,559      $ 2,749  

Net charge-offs (recoveries), year

   $ (938    $ (59

Leverage ratio

     6.91%        6.78%  

Common equity tier 1 risk weighted capital ratio

     11.32%        10.71%  

Tier 1 risk weighted capital ratio

     12.59%        12.05%  

Total risk weighted capital ratio

     13.62%        13.05%  

Total risk weighted assets

   $ 2,771,129      $ 2,613,116  

(1) Non-GAAP Financial Measures are reconciled in the following tables:

     

 

 

Calculation of Efficiency ratio:

     

Total operating expenses (numerator)

   $ 69,693      $ 67,119  
  

 

 

    

 

 

 

Net interest income

   $ 92,576      $ 85,616  

Total other operating income

     16,248        16,552  

Tax equivalent adjustment

     8,853        13,979  
  

 

 

    

 

 

 

Total income (denominator)

   $ 117,677      $ 116,147  
  

 

 

    

 

 

 

Efficiency ratio, year — Non-GAAP

     59.2%        57.8%  

 

 

Calculation of tangible book value per share:

     

Total stockholders' equity

   $ 300,439      $ 260,297  

Less: goodwill

     2,714        2,714  
  

 

 

    

 

 

 

Tangible stockholders' equity (numerator)

   $ 297,725      $ 257,583  
  

 

 

    

 

 

 

Total shares outstanding at period end (denominator)

     5,567,909        5,567,909  

Tangible book value per share — Non-GAAP

   $ 53.47      $ 46.26  

 

 

Book value per share — GAAP

   $ 53.96      $ 46.75  

 

 

Calculation of tangible capital / tangible assets:

     

Total stockholders' equity

   $ 300,439      $ 260,297  

Less: goodwill

     2,714        2,714  
  

 

 

    

 

 

 

Tangible stockholders' equity (numerator)

   $ 297,725      $ 257,583  
  

 

 

    

 

 

 

Total assets

   $ 5,163,935      $ 4,785,572  

Less: goodwill

     2,714        2,714  
  

 

 

    

 

 

 

Tangible assets (denominator)

   $ 5,161,221      $ 4,782,858  
  

 

 

    

 

 

 

Tangible capital / tangible assets — Non-GAAP

     5.77%        5.39%  

 

 

Capital / assets — GAAP

     5.82%        5.44%  

 

 

Calculation of core earnings:

     

Net income

   $ 36,213      $ 22,301  

Add: deferred tax remeasurement charge

     —          8,448  
  

 

 

    

 

 

 

Core earnings

   $ 36,213      $ 30,749  

 

 
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