Century Bancorp, Inc. Announces Record Earnings for Q3 2020, Up 8%; Record Assets, Loans, and Deposits; Increase in Quarterly Dividend Declared

Rhea-AI Summary

Century Bancorp, Inc. (NASDAQ:CNBKA) reported a net income of $30.6 million for the nine months ending September 30, 2020, marking a 5.7% increase year-over-year. Total assets grew by 14.6% to $6.3 billion. For Q3 2020, net income was $10.9 million, an 8.0% rise from the previous year's quarter. The Board announced a dividend increase for Class A and Class B stocks. Net interest income rose to $78.4 million, up 11.2%, though the net interest margin decreased to 2.01%. The provision for loan losses increased to $3.7 million, mainly due to COVID-19 uncertainties.

Positive

• Net income increased by 5.7% to $30.6 million for the nine months ended September 30, 2020.
• Total assets grew 14.6% to $6.3 billion.
• Net interest income rose to $78.4 million, an increase of 11.2%.
• Quarterly dividend increased from $0.14 to $0.16 for Class A shares and from $0.07 to $0.08 for Class B shares.
• Nonperforming assets decreased from $2.0 million at 12/31/2019 to $1.4 million.
• COVID-19 loan modifications are fully performing.

Negative

• Net interest margin decreased from 2.08% to 2.01%.
• Provision for loan losses increased by $2.975 million, indicating higher credit risk due to COVID-19.

MEDFORD, Mass.--(BUSINESS WIRE)--Century Bancorp, Inc. (NASDAQ:CNBKA) (www.centurybank.com) (“the Company”) today announced net income of $30,609,000 for the nine months ended September 30, 2020, or $5.50 per Class A share diluted, an increase of 5.7% compared to net income of $28,967,000, or $5.20 per Class A share diluted, for the same period a year ago. Total assets increased 14.6% from $5.49 billion at December 31, 2019 to $6.3 billion at September 30, 2020. For the quarter ended September 30, 2020, net income totaled $10,887,000 or $1.96 per Class A share diluted, an increase of 8.0% compared to net income of $10,084,000, or $1.81 per Class A share diluted, for the same period a year ago.

The Company's Board of Directors voted to increase its regular quarterly dividend from 14.00 cents ($0.14) per share to 16.00 cents ($0.16) per share on the Company's Class A common stock, and from 7.00 cents ($0.07) per share to 8.00 cents ($0.08) per share on the Company's Class B common stock. The dividends were declared payable November 16, 2020 to stockholders of record on November 2, 2020.

Net interest income totaled $78.4 million for the nine months ended September 30, 2020 compared to $70.5 million for the same period in 2019. The 11.2% increase in net interest income for the period is primarily due to a decrease in interest expense as a result of falling interest rates. Prepayment penalties collected amounted to approximately $946,000 for the first nine months of 2020 compared to $18,000 for the same period last year. The net interest margin decreased from 2.08% on a fully tax-equivalent basis for the first nine months of 2019 to 2.01% for the same period in 2020. This was primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve. The average balances of earning assets increased for the first nine months of 2020 compared to the same period last year, by $609.0 million or 12.3%, combined with an average yield decrease of 0.55%, resulting in a decrease in interest income of $6.2 million. The average balance of interest-bearing liabilities increased for the first nine months of 2020 compared to the same period last year, by $486.9 million or 12.1%, combined with an average interest-bearing liabilities interest cost decrease of 0.59%, resulting in a decrease in interest expense of $14.1 million.

The provision for loan losses increased by $2,975,000 from $700,000 for the nine months ended September 30, 2019 to $3,675,000 for the same period in 2020, primarily as a result of the economic uncertainties associated with the novel coronavirus disease (COVID–19) pandemic and increased loan balances.

The Company’s effective tax rate increased from 2.0% for the nine months ended September 30, 2019 to 9.5% for the same period in 2020. This was primarily as a result of an increase in taxable income relative to total income and a reduction in tax accruals, during 2019, related to sequestration of the refundable portion of our alternative minimum tax (AMT) credit carryforward. On January 14, 2019, the IRS updated its announcement “Effect of Sequestration on the Alternative Minimum Tax Credit for Corporations” to clarify that refundable AMT credits under Section 53(e) of the Internal Revenue Code are not subject to sequestration for taxable years beginning after December 31, 2017. On March 27, 2020, the Coronavirus, Aid, Relief and Economic Security (CARES) Act was signed into law. As a result of the CARES Act, the full balance of the AMT credit was refunded in 2020.

At September 30, 2020, total equity was $363.4 million compared to $332.6 million at December 31, 2019. The Company’s equity increased primarily as a result of earnings, offset somewhat by dividends paid.

The Company’s leverage ratio stood at 6.79% at September 30, 2020, compared to 7.25% at December 31, 2019. The decrease in the leverage ratio was due to an increase in quarterly average assets, offset somewhat by an increase in stockholders’ equity. Book value as of September 30, 2020 was $65.27 per share compared to $59.73 at December 31, 2019.

The Company’s allowance for loan losses was $33.4 million or 1.12% of loans outstanding at September 30, 2020 compared to $29.6 million or 1.22% of loans outstanding at December 31, 2019, and $29.1 million or 1.22% of loans outstanding at September 30, 2019. The ratio of the allowance for loan losses to loans outstanding has decreased from December 31, 2019, primarily from approximately $232 million of Payroll Protection Program (PPP) loans that are guaranteed by the U.S. Small Business Administration (SBA), which require no allowance for loan losses. Nonperforming assets totaled $1.4 million at September 30, 2020, compared to $2.0 million at December 31, 2019, and $1.1 million at September 30, 2019.

As of September 30, 2020, the Company has COVID-19 modifications of 33 loans aggregating $37,987,000, primarily consisting of short-term payment deferrals. Of these modifications, $37,987,000, or 100%, were performing in accordance with their modified terms.

The CARES Act also allows companies to delay Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments (CECL), including the current expected credit losses methodology for estimating allowances for credit losses. The Company has elected to delay FASB ASU 2016-13. This ASU will be delayed until the earlier of the date on which the national emergency concerning the COVID–19 outbreak declared by the President on March 15, 2020 terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020.

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)
		September 30,			December 31,
Assets		2020			2019
Cash and Due From Banks		$	101,679		$	44,420
Federal Funds Sold and Interest-bearing Deposits In Other Banks			310,901			214,273
Securities Available-for-Sale (AFS)			293,277			262,190
Securities Held-to-Maturity			2,407,176			2,351,120
Federal Home Loan Bank of Boston stock, at cost			13,361			19,471
Loans:
Commercial & Industrial			1,315,407			812,417
Municipal			130,047			120,455
Construction & Land Development			9,116			8,992
Commercial Real Estate			784,895			786,102
Residential Real Estate			443,703			371,897
Consumer and Other			19,866			21,893
Home Equity			287,099			304,363
Total Loans			2,990,133			2,426,119
Less: Allowance for Loan Losses			33,394			29,585
Net Loans			2,956,739			2,396,534
Bank Premises and Equipment, net			37,340			33,952
Accrued Interest Receivable			13,223			13,110
Goodwill			2,714			2,714
Other Assets			159,016			154,640
Total Assets		$	6,295,426		$	5,492,424
Liabilities
Demand Deposits		$	991,590		$	712,842
Interest Bearing Deposits:
Savings and NOW Deposits			1,932,339			1,678,250
Money Market Accounts			1,906,676			1,453,572
Time Deposits			581,866			555,447
Total Interest Bearing Deposits			4,420,881			3,687,269
Total Deposits			5,412,471			4,400,111
Borrowed Funds:
Securities Sold Under Agreements to Repurchase			231,030			266,045
Other Borrowed Funds			152,248			370,955
Total Borrowed Funds			383,278			637,000
Other Liabilities			100,160			86,649
Subordinated Debentures			36,083			36,083
Total Liabilities			5,931,992			5,159,843
Total Stockholders' Equity			363,434			332,581
Total Liabilities & Stockholders' Equity		$	6,295,426		$	5,492,424

Century Bancorp, Inc. and Subsidiaries
Consolidated Comparative Statements of Income (unaudited)
For the quarter and nine months ended September 30, 2020 and 2019
(in thousands)
		Quarter ended September 30,						Nine months ended September 30,
		2020			2019			2020			2019
Interest Income:
Loans		$	21,431		$	22,117		$	63,478		$	65,106
Securities Held-to-Maturity			14,186			14,623			44,701			43,006
Securities Available-for-Sale			818			2,184			3,493			7,305
Federal Funds Sold and Interest-bearing Deposits In Other Banks			69			928			747			3,204
Total Interest Income			36,504			39,852			112,419			118,621
Interest Expense:
Savings and NOW Deposits			1,726			5,445			7,569			16,788
Money Market Accounts			3,056			5,050			12,090			15,805
Time Deposits			2,858			3,038			9,141			8,724
Securities Sold Under Agreements to Repurchase			241			697			1,176			1,572
Other Borrowed Funds and Subordinated Debentures			1,292			1,852			4,093			5,274
Total Interest Expense			9,173			16,082			34,069			48,163
Net Interest Income			27,331			23,770			78,350			70,458
Provision For Loan Losses			900			75			3,675			700
Net Interest Income After
Provision for Loan Losses			26,431			23,695			74,675			69,758
Other Operating Income:
Service Charges on Deposit Accounts			2,239			2,310			6,558			6,801
Lockbox Fees			996			937			2,850			3,018
Net Gain on Sales of Loans			-			-			-			154
Other Income			934			1,039			3,112			3,737
Total Other Operating Income			4,169			4,286			12,520			13,710
Operating Expenses:
Salaries and Employee Benefits			11,362			10,670			33,020			32,621
Occupancy			1,477			1,463			4,448			4,686
Equipment			809			862			2,608			2,440
Other			4,519			4,467			13,306			14,170
Total Operating Expenses			18,167			17,462			53,382			53,917
Income Before Income Taxes			12,433			10,519			33,813			29,551
Income Tax Expense			1,546			435			3,204			584
Net Income		$	10,887		$	10,084		$	30,609		$	28,967

Century Bancorp, Inc. and Subsidiaries
Consolidated Year-to-Date Average Comparative Statements of Condition (unaudited)
(in thousands)
		September 30,				September 30,
Assets		2020				2019
Cash and Due From Banks		$	80,686			$	74,413
Federal Funds Sold and Interest-Bearing Deposits in Other Banks			238,525				184,035
Securities Available-For-Sale (AFS)			293,301				325,036
Securities Held-to-Maturity (HTM)			2,346,502				2,128,082
Total Loans			2,693,000				2,325,136
Less: Allowance for Loan Losses			31,359				28,936
Net Loans			2,661,641				2,296,200
Unrealized (Loss)Gain on Securities AFS and HTM Transfers			(2,861	)			(3,352	)
Bank Premises and Equipment			36,253				26,273
Accrued Interest Receivable			12,630				13,942
Goodwill			2,714				2,714
Other Assets			164,804				133,754
Total Assets		$	5,834,195			$	5,181,097
Liabilities
Demand Deposits		$	889,237			$	764,852
Interest Bearing Deposits:
Savings and NOW Deposits			1,881,897				1,818,017
Money Market Accounts			1,603,367				1,249,531
Time Deposits			597,589				512,228
Total Interest Bearing Deposits			4,082,853				3,579,776
Total Deposits			4,972,090				4,344,628
Borrowed Funds:
Securities Sold Under Agreements to Repurchase			220,796				205,185
Other Borrowed Funds			169,972				201,804
Total Borrowed Funds			390,768				406,989
Other Liabilities			88,028				79,327
Subordinated Debentures			36,083				36,083
Total Liabilities			5,486,969				4,867,027
Total Stockholders' Equity			347,226				314,070
Total Liabilities & Stockholders' Equity		$	5,834,195			$	5,181,097
Total Average Earning Assets - QTD		$	5,881,860			$	4,971,831
Total Average Earning Assets - YTD		$	5,571,328			$	4,962,289

Century Bancorp, Inc. and Subsidiaries
Consolidated Selected Key Financial Information (unaudited)
(in thousands, except share data)		September 30,				September 30,
		2020				2019
Performance Measures:
Earnings per average Class A share, diluted, quarter		$	1.96			$	1.81
Earnings per average Class A share, diluted, year-to-date		$	5.50			$	5.20
Return on average assets, year-to-date			0.70	%			0.75	%
Return on average stockholders' equity, year-to-date			11.78	%			12.33	%
Net interest margin (taxable equivalent), quarter			1.96	%			2.08	%
Net interest margin (taxable equivalent), year-to-date			2.01	%			2.08	%
Efficiency ratio, Non-GAAP (1)			55.4	%			59.1	%
Book value per share		$	65.27			$	59.08
Tangible book value per share - Non-GAAP (1)		$	64.79			$	58.59
Capital / assets			5.77	%			6.21	%
Tangible capital / tangible assets - Non-GAAP (1)			5.73	%			6.16	%
Common Share Data:
Average Class A shares outstanding, diluted, quarter and year-to-date			5,567,909				5,567,909
Shares outstanding Class A			3,655,469				3,650,449
Shares outstanding Class B			1,912,440				1,917,460
Total shares outstanding at period end			5,567,909				5,567,909
Asset Quality and Other Data:
Allowance for loan losses / loans			1.12	%			1.22	%
Nonaccrual loans		$	1,419			$	1,066
Nonperforming assets		$	1,419			$	1,066
Loans 90 days past due and still accruing		$	49			$	-
Accruing troubled debt restructures		$	2,240			$	2,404
Net charge-offs (recoveries), year-to-date		$	(134	)		$	146
Leverage ratio			6.79	%			7.25	%
Common equity tier 1 risk weighted capital ratio			11.36	%			11.90	%
Tier 1 risk weighted capital ratio			12.40	%			13.12	%
Total risk weighted capital ratio			13.39	%			14.13	%
Total risk weighted assets		$	3,370,541			$	2,867,422
(1) Non-GAAP Financial Measures are reconciled in the following tables:
Calculation of Efficiency ratio:
Total operating expenses(numerator)		$	53,382			$	53,917
Less: other real estate owned expenses			-				(139	)
Total adjusted operating expenses(numerator)		$	53,382			$	53,778
Net interest income		$	78,350			$	70,458
Total other operating income			12,520				13,710
Tax equivalent adjustment			5,558				6,875
Total income(denominator)		$	96,428			$	91,043
Efficiency ratio - Non-GAAP			55.4	%			59.1	%
Calculation of tangible book value per share:
Total stockholders' equity		$	363,434			$	328,960
Less: goodwill			2,714				2,714
Tangible stockholders' equity(numerator)		$	360,720			$	326,246
Total shares outstanding at period end(denominator)			5,567,909				5,567,909
Tangible book value per share - Non-GAAP		$	64.79			$	58.59
Book value per share - GAAP		$	65.27			$	59.08
Calculation of tangible capital / tangible assets:
Total stockholders' equity		$	363,434			$	328,960
Less: goodwill			2,714				2,714
Tangible stockholders' equity(numerator)		$	360,720			$	326,246
Total assets		$	6,295,426			$	5,299,181
Less: goodwill			2,714				2,714
Tangible assets(denominator)		$	6,292,712			$	5,296,467
Tangible capital / tangible assets - Non-GAAP			5.73	%			6.16	%
Capital / assets - GAAP			5.77	%			6.21	%