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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

Company Release - 1/15/2019 4:45 PM ET

MEDFORD, Mass.--(BUSINESS WIRE)-- 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.

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)
December 31, December 31,

Assets

2018 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)
December 31, December 31,

Assets

2018 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, December 31,
2018 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  

William P. Hornby, CPA
whornby@centurybank.com
Phone: 781-393-4630
Fax: 781-393-4071

Source: Century Bancorp, Inc.