Century Bancorp, Inc. (NASDAQ:CNBKA) (www.centurybank.com) (“the Company”) today announced net income of $22.3 million for the year ended December 31, 2017, or $4.01 per Class A share diluted, a decrease of 9.1% compared to net income of $24.5 million, or $4.41 per Class A share diluted, for the same period a year ago. The Company’s core earnings(1) increased by $6.2 million or 25.3% from $24.5 in 2016 to a record $30.7 million in 2017.

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 income tax expense.

Total assets increased 7.2% from $4.46 billion at December 31, 2016 to $4.79 billion at December 31, 2017. For the quarter ended December 31, 2017, net income totaled $25,000 or $0.00 per Class A share diluted, a decrease of 99.6% compared to net income of $6,500,000, or $1.17 per Class A share diluted, for the same period a year ago.

Net interest income totaled $85.6 million for the year ended December 31, 2017 compared to $74.1 million for the same period in 2016. The 15.6% increase in net interest income for the period is primarily due to an increase in average earning assets and an increase in the net interest margin. The net interest margin increased from 2.12% on a fully taxable equivalent basis in 2016 to 2.25% for the same period in 2017. This was primarily the result of an increase in rates on earning assets and prepayment penalties collected. The average balances of earning assets increased by 8.1% combined with a similar increase in average deposits. Also, interest expense increased 23.0% primarily as a result of an increase in rates and an increase in deposit balances.

The provision for loan losses increased by $415,000 from $1.4 million for the year ended December 31, 2016 to $1.8 million for the same period in 2017, primarily as a result of an increase in loan growth offset, somewhat, by changes in historical loss factors.

The Company’s effective tax rate increased from (1.5%) for 2016 to 32.9% for the same period in 2017. 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 income tax expense as a result of the Tax Act as previously discussed. An increase in taxable income also contributed to the increase in the effective tax rate for 2017.

At December 31, 2017, total equity was $260.3 million compared to $240.0 million at December 31, 2016. The Company’s equity increased primarily as a result of earnings and a decrease in other comprehensive loss, net of taxes, offset somewhat by dividends paid. Other comprehensive loss, net of taxes, decreased primarily as a result of a decrease in unrealized losses on securities transferred from available-for-sale to held-to-maturity and a decrease in unrealized losses on securities available-for-sale. The reduction in the value of the Company’s deferred tax asset of $8.4 million impacted the Company’s total equity as a reduction to retained earnings.

The Company’s leverage ratio stood at 6.70% at December 31, 2017, compared to 6.28% at December 31, 2016. 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, 2017 was $46.75 per share compared to $43.11 at December 31, 2016.

The Company’s allowance for loan losses was $26.3 million or 1.21% of loans outstanding at December 31, 2017, compared to $24.4 million or 1.27% of loans outstanding at December 31, 2016. The change in the ratio of the allowance for loan losses to loans outstanding, when compared to December 31, 2016, was primarily due to changes in portfolio composition, lower historical loss rates, and qualitative factor adjustments. Non-performing assets totaled $1.7 million at December 31, 2017, compared to $1.1 million at December 31, 2016.

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, 2018 to stockholders of record on February 1, 2018.

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

 2017 2016
Cash and Due From Banks $ 77,199 $ 62,400
Federal Funds Sold and Interest-bearing Deposits In Other Banks 279,231 173,751
 
Short-term Investments - 3,183
 
Securities Available-for-Sale (AFS) 397,475 499,297
 
Securities Held-to-Maturity 1,701,233 1,653,986
 
Federal Home Loan Bank of Boston stock, at cost 21,779 21,042
 
Loans:
Commercial & Industrial 763,807 612,503
Municipal 106,599 135,418
Construction & Land Development 18,931 14,928
Commercial Real Estate 732,491 696,173
Residential Real Estate 287,731 241,357
Consumer and Other 19,040 11,697
Home Equity   247,345   211,857
 
Total Loans 2,175,944 1,923,933
Less: Allowance for Loan Losses   26,255   24,406
 
Net Loans 2,149,689 1,899,527
 
Bank Premises and Equipment, net 23,527 23,417
Accrued Interest Receivable 11,179 9,645
Goodwill 2,714 2,714
Other Assets   121,546   113,646
 
Total Assets $ 4,785,572 $ 4,462,608
 

Liabilities

Demand Deposits $ 736,020 $ 689,286
 
Interest Bearing Deposits:
Savings and NOW Deposits 1,367,358 1,304,394
Money Market Accounts 1,188,228 1,181,179
Time Deposits   625,361   478,359
 
Total Interest Bearing Deposits   3,180,947   2,963,932
 
Total Deposits 3,916,967 3,653,218
 
Borrowed Funds:
Securities Sold Under Agreements to Repurchase 158,990 182,280
Other Borrowed Funds   347,778   293,000
 
Total Borrowed Funds 506,768 475,280
 
Other Liabilities 65,457 57,986
Subordinated Debentures   36,083   36,083
 
Total Liabilities 4,525,275 4,222,567
 
Total Stockholders' Equity   260,297   240,041
 
Total Liabilities & Stockholders' Equity $ 4,785,572 $ 4,462,608
 
 
Century Bancorp, Inc. and Subsidiaries
Consolidated Comparative Statements of Income (unaudited)
For the quarter and year ended December 31, 2017 and 2016
(in thousands)
                       
Quarter ended December 31,   Year ended December 31,
2017 2016 2017 2016
 
Interest Income:
Loans $ 17,345 $ 14,384 $ 66,013 $ 57,764
Securities Held-to-Maturity 9,542 8,501 38,348 32,679
Securities Available-for-Sale 1,835 1,474 6,978 5,020
Federal Funds Sold and Interest-bearing Deposits In Other Banks   748   330     2,097   1,236  
 
Total Interest Income 29,470 24,689 113,436 96,699
 
Interest Expense:
Savings and NOW Deposits 1,842 1,161 6,296 4,020
Money Market Accounts 1,723 1,057 5,626 3,542
Time Deposits 2,271 1,490 7,919 5,706
Securities Sold Under Agreements to Repurchase 144 109 496 472
Other Borrowed Funds and Subordinated Debentures   1,788   2,110     7,483   8,877  
 
Total Interest Expense   7,768   5,927     27,820   22,617  
 
Net Interest Income 21,702 18,762 85,616 74,082
 
Provision For Loan Losses   450   200     1,790   1,375  
 
Net Interest Income After
Provision for Loan Losses 21,252 18,562 83,826 72,707
 
Other Operating Income
Service Charges on Deposit Accounts 2,407 2,025 8,586 7,907
Lockbox Fees 923 733 3,290 3,164
Net Gain on Sales of Loans - - 370 1,331
Other Income   1,080   942     4,306   3,820  
 
Total Other Operating Income 4,410 3,700 16,552 16,222
 
Operating Expenses
Salaries and Employee Benefits 9,769 9,688 41,913 40,048
Occupancy 1,477 1,508 6,140 6,147
Equipment 647 758 2,892 2,845
FDIC Assessment 363 399 1,581 1,902
Other   3,736   3,803     14,593   13,815  
 
Total Operating Expenses   15,992   16,156     67,119   64,757  
 
Income Before Income Taxes 9,670 6,106 33,259 24,172
 
Income Tax (Benefit) Expense   9,645   (394 )   10,958   (362 )
 
Net Income $ 25 $ 6,500   $ 22,301 $ 24,534  
 
           
Consolidated Year-to-Date Average Comparative Statements of Condition (unaudited)
(in thousands)
 
December 31, December 31,

Assets

 2017 2016
Cash and Due From Banks $ 72,455 $ 71,023
Federal Funds Sold and Interest-Bearing Deposits in Other Banks 189,193 235,339
 
Securities Available-For-Sale (AFS) 461,635 498,654
Securities Held-to-Maturity (HTM) 1,725,281 1,533,032
 
Total Loans 2,059,797 1,838,136
Less: Allowance for Loan Losses   25,329     23,872  
 
Net Loans 2,034,468 1,814,264
 
Unrealized (Loss)Gain on Securities AFS and HTM Transfers (6,394 ) (9,504 )
Bank Premises and Equipment 23,504 23,656
Accrued Interest Receivable 10,300 8,390
Goodwill 2,714 2,714
Other Assets   119,048     113,924  
 
Total Assets $ 4,632,204   $ 4,291,492  
 

Liabilities

Demand Deposits $ 687,853 $ 609,159
 
Interest Bearing Deposits:
Savings and NOW Deposits 1,457,872 1,322,714
Money Market Accounts 1,105,072 1,041,404
Time Deposits   566,940     452,562  
Total Interest Bearing Deposits   3,129,884     2,816,680  
 
Total Deposits 3,817,737 3,425,839
 
Borrowed Funds:
Securities Sold Under Agreements to Repurchase 189,684 222,956
Other Borrowed Funds   273,019     321,891  
 
Total Borrowed Funds 462,703 544,847
 
Other Liabilities 60,925 57,602
Subordinated Debentures   36,083     36,083  
 
Total Liabilities 4,377,448 4,064,371
 
Total Stockholders' Equity   254,756     227,121  
 
Total Liabilities & Stockholders' Equity $ 4,632,204   $ 4,291,492  
 
Total Average Earning Assets - QTD $ 4,441,053   $ 4,287,001  
 
Total Average Earning Assets - YTD $ 4,435,906   $ 4,105,161  
 
 
Century Bancorp, Inc. and Subsidiaries
Consolidated Selected Key Financial Information (unaudited)
(in thousands, except share data)       December 31,       December 31,
2017 2016
 

Performance Measures:

 
Earnings per average Class A share, diluted, quarter $

0.00

$ 1.17
Earnings per average Class A share, diluted, year $ 4.01 $ 4.41
Return on average assets, year 0.48 % 0.57 %
Return on average stockholders' equity, year 8.75 % 10.80 %
Net interest margin (taxable equivalent), quarter 2.26 % 2.04 %
Net interest margin (taxable equivalent), year 2.25 % 2.12 %
Efficiency ratio, year-to-date - Non-GAAP (1) 57.8 % 62.7 %
Book value per share $ 46.75 $ 43.11
Tangible book value per share - Non-GAAP (1) $ 46.26 $ 42.62
Capital / assets 5.44 % 5.38 %
Tangible capital / tangible assets - Non-GAAP (1) 5.39 % 5.32 %
 
 
Common Share Data:
Average Class A shares outstanding, diluted, quarter & year 5,567,909 5,567,909
 
Shares outstanding Class A 3,605,829 3,600,729
Shares outstanding Class B   1,962,080     1,967,180  
Total shares outstanding at period end   5,567,909     5,567,909  
 
 

Asset Quality and Other Data:

 
Allowance for loan losses / loans 1.21 % 1.27 %
Nonaccrual loans $ 1,684 $ 1,084
Nonperforming assets $ 1,684 $ 1,084
Loans 90 days past due and still accruing $ - $ -
Accruing troubled debt restructures $ 2,749 $ 3,526
Net (recoveries)charge-offs, year $ (59 ) $ (45 )
 
Leverage ratio 6.70 % 6.28 %
Common equity tier 1 risk weighted capital ratio 10.56 % 10.41 %
Tier 1 risk weighted capital ratio 11.90 % 11.70 %
Total risk weighted capital ratio 12.91 % 12.72 %
Total risk weighted assets $ 2,613,116 $ 2,398,796
 
 
(1) Non-GAAP Financial Measures are reconciled in the following tables:  
 
Calculation of Efficiency ratio:
 
Total operating expenses(numerator) $ 67,119   $ 64,757  
 
Net interest income $ 85,616 $ 74,082
Total other operating income 16,552 16,222
Tax equivalent adjustment   13,979     12,917  
Total income(denominator) $ 116,147   $ 103,221  
 
Efficiency ratio, year - Non-GAAP         57.8 %         62.7 %
 
Calculation of tangible book value per share:
 
Total stockholders' equity $ 260,297 $ 240,041
Less: goodwill   2,714     2,714  
Tangible stockholders' equity(numerator) $ 257,583   $ 237,327  
 
Total shares outstanding at period end(denominator) 5,567,909 5,567,909
 
Tangible book value per share - Non-GAAP       $ 46.26         $ 42.62  
Book value per share - GAAP       $ 46.75         $ 43.11  
 
Calculation of tangible capital / tangible assets:
 
Total stockholders' equity $ 260,297 $ 240,041
Less: goodwill   2,714     2,714  
Tangible stockholders' equity(numerator) $ 257,583   $ 237,327  
 
Total assets $ 4,785,572 $ 4,462,608
Less: goodwill   2,714     2,714  
Tangible assets(denominator) $ 4,782,858   $ 4,459,894  
 
Tangible capital / tangible assets - Non-GAAP         5.39 %         5.32 %
Capital / assets - GAAP           5.44 %         5.38 %
 
Calculation of core earnings:
 
Net income $ 22,301 $ 24,534
Add: deferred tax remeasurement charge   8,448     -  
Core earnings         $ 30,749         $ 24,534