UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2005
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission file number 0-15752
CENTURY BANCORP, INC.
(Exact name of registrant as
specified in its charter)
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COMMONWEALTH OF
MASSACHUSETTS
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04-2498617
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State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification number)
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400 MYSTIC AVENUE, MEDFORD,
MA
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02155
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(Address of principal executive
offices)
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(Zip Code)
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Registrants telephone number including area code:
(781) 391-4000
Securities registered pursuant to Section 12(g) of the
Act:
Class A Common Stock, $1.00 par value
(Title of class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
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No
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If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934. Yes
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No
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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. Yes
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No
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
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Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer
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Accelerated
filer
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Non-accelerated
filer
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
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No
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State the aggregate market value of the registrants voting
and nonvoting stock held by nonaffiliates, computed using the
closing price as reported on Nasdaq as of June 30, 2005 was
$106,196,298.
Indicate the number of shares outstanding of each of the
registrants classes of common stock as of
February 28, 2006:
Class A Common Stock, $1.00 par value
3,479,788 Shares
Class B Common Stock, $1.00 par value
2,061,300 Shares
DOCUMENTS
INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K (e.g., Part I,
Part II, etc.) into which the document is incorporated: (1)
Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to
Rule 424(b) or (c) under the Securities Act of 1933. The listed
documents should be clearly described for identification
purposes (e.g., annual report to security holders for fiscal
year ended December 24, 1980).
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(1)
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Portions of the Registrants Annual Report to Stockholders
for the fiscal year ended December 31, 2005 are incorporated
into Part II, Items 5-8 of this Form 10-K.
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CENTURY
BANCORP INC.
FORM 10-K
TABLE OF
CONTENTS
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PART I
The
Company
Certain statements contained herein are not based on historical
facts and are forward-looking statements within the
meaning of Section 21A of the Securities Exchange Act of
1934. Forward-looking statements, which are based on various
assumptions (some of which are beyond the Companys
control), may be identified by a reference to a future period or
periods, or by the use of forward-looking terminology, such as
may, will, believe,
expect, estimate, anticipate
continue or similar terms or variations on those
terms, or the negative of these terms. Actual results could
differ materially from those set forth in forward-looking
statements due to a variety of factors, including, but not
limited to, those related to the economic environment,
particularly in the market areas in which the Company operates,
competitive products and pricing, fiscal and monetary policies
of the U.S. Government, changes in government regulations
affecting financial institutions, including regulatory fees and
capital requirements, changes in prevailing interest rates,
acquisitions and the integration of acquired businesses, credit
risk management, asset/liability management, the financial and
securities market and the availability of and costs associated
with sources of liquidity.
The Company does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions
which may be made to any forward-looking statements to reflect
the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
Century Bancorp, Inc. (together with its bank subsidiary, unless
the context otherwise requires, the Company), is a
Massachusetts state chartered bank holding company headquartered
in Medford, Massachusetts. The Company is a Massachusetts
corporation formed in 1972 and has one banking subsidiary (the
Bank): Century Bank and Trust Company, formed in
1969. The Company had total assets of approximately
$1.7 billion on December 31, 2005. The Company
presently operates 23 banking offices in 16 cities and
towns in Massachusetts ranging from Braintree in the south to
Beverly in the north. The Banks customers consist
primarily of small and medium-sized businesses and retail
customers in these communities and surrounding areas, as well as
local governments and institutions throughout Massachusetts.
The Companys results of operations are largely dependent
on net interest income, which is the difference between the
interest earned on loans and securities and interest paid on
deposits and borrowings. The results of operations are also
affected by the level of income/fees from loans, deposits, as
well as operating expenses, the provision for loan losses, the
impact of federal and state income taxes and the relative levels
of interest rates and economic activity.
The Company offers a wide range of services to commercial
enterprises, state and local governments and agencies,
non-profit organizations and individuals. It emphasizes service
to small and medium-sized businesses and retail customers in its
market area. The Company makes commercial loans, real estate and
construction loans, consumer loans, and accepts savings, time
and demand deposits. In addition, the Company offers to its
corporate and institutional customers automated lockbox
collection services, cash management services and account
reconciliation services, and actively promotes the marketing of
these services to the municipal market. Also, the Company
provides full service securities brokerage services through its
subsidiary, Century Financial Services, Inc. in conjunction with
Commonwealth Equity Services, Inc., a full service securities
brokerage business.
The Company is also a provider of financial services including
cash management, transaction processing and short term financing
to municipalities in Massachusetts and Rhode Island. The Company
has deposit relationships with approximately 30% of the
351 cities and towns in Massachusetts.
During February 2003 the Company began construction of an
addition to its corporate headquarters building. The property is
located adjacent to its current headquarters in Medford,
Massachusetts and provides additional corporate office space and
an expanded banking floor. The building was substantially
completed during the fourth quarter of 2004 and $14,500,000 has
been expended in connection with this expansion. The capital
expenditure has provided a five-story addition containing
approximately 50 thousand square feet of office and branch
banking space. Occupancy costs have increased by approximately
$960,000 for 2005 as a result of the addition.
1
On March 21, 2003, the Company completed the acquisition of
Capital Crossing Banks branch office at 1220 Boylston
Street, Chestnut Hill, Massachusetts, and substantially all of
the retail deposits at Capital Crossings main office at
101 Summer Street, Boston, Massachusetts. Century closed the
Chestnut Hill branch and transferred all customers of the branch
to its nearby branch office at 1184 Boylston Street, Brookline,
Massachusetts. In addition, Century transferred all of the
retail deposits from Capital Crossings Summer Street
branch to its branch at 24 Federal Street, Boston,
Massachusetts.
The acquisition included $192,700,000 in deposits. The
acquisition also included a premium paid to Capital Crossing of
approximately $3,900,000. This premium was subsequently reduced
by a gain of $395,000 from the sale of the acquired Chestnut
Hill branch and a rebate of $282,000 for closed accounts at the
Boston office.
During the third quarter of 2005, the Company announced plans to
continue its stock repurchase plan. Under the program, the
Company is authorized to repurchase up to 300,000 shares,
or less than 9%, of Century Bancorp Class A Common Stock.
The program expires on July 11, 2006.
In 2005, the Company opened a new branch location on State
Street in Boston, Massachusetts. In 2004, the Company opened one
branch on Albany Street in Boston, Massachusetts.
During the fourth quarter of 2004, the Company announced that it
entered into an Investment Management Agreement with Blackrock
Financial Management, Inc. for the Companys
Available-For-Sale
securities portfolio. During 2005 the Company began experiencing
strong loan growth, and believes that reinvesting the investment
cash flows in loans will help to achieve improvements in its
yield. The expense related to this contract ended June 30,
2005 and the contract terminated January 31, 2006.
On December 2, 2004, Century Bancorp, Inc. (the
Company) consummated the sale of a trust preferred
securities offering, in which it issued $36,083,000 of
subordinated debt securities due 2034 to Century Bancorp Capital
Trust II, a Delaware statutory trust (the
Trust) and an unconsolidated subsidiary formed by
the Company, and the Trust simultaneously issued $35,000,000 of
trust preferred securities (35,000 trust preferred securities at
a liquidation amount of $1,000 per security). The Trust
also issued 1,083 common securities to the Company for a
purchase price of $1,000 per common security. No
underwriting commissions were paid in connection with the
issuances. All of the securities were issued in a private
placement exempt from registration under 4(2) of the Securities
Act of 1933, as amended and/or Regulation D promulgated
thereunder.
The terms of the debt securities are governed by an Indenture
dated December 2, 2004 between the Company and Wilmington
Trust Company, as Trustee. The debt securities accrue interest
(which is payable quarterly) at an initial rate of 6.65% for the
first ten years and then convert to the three month LIBOR plus a
margin of 1.87%. The debt securities are not redeemable by the
Company during the first ten years, absent certain changes in
tax, investment company or bank regulatory statutes or
regulations.
Also, the Company, through its subsidiary, Century Bancorp
Capital Trust, announced the redemption of their 8.30%
Trust Preferred Securities, with a redemption date of
January 10, 2005. The total amount of this redemption was
$29,639,000.
Availability
of Company Filings
Under the Securities Exchange Act of 1934, Sections 13 and
15(d), periodic and current reports must be filed with the
Securities and Exchange Commission (SEC). The public may read
and copy any materials filed with the SEC at the SECs
Public Reference Room at 450 Fifth Street, NW, Washington,
DC 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at
1-800-SEC-0030.
The Company electronically files the following reports with the
SEC:
Form 10-K
(Annual Report),
Form 10-Q
(Quarterly Report),
Form 11-K
(Annual Report for Employees Stock Purchase and Savings
Plans),
Form 8-K
(Report of Unscheduled Material Events) and, as required,
Form S-4, S-3
and
8-A
(Registration Statements). The Company may file additional
forms. The SEC maintains an Internet site that contains reports
and other information regarding issuers, including the Company,
that file electronically with the SEC, at
www.sec.gov
, in
which all forms filed electronically may be accessed.
Additionally, our annual report on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K
with the SEC and additional shareholder information is available
free of charge on the Companys website:
www.century-bank.com
.
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Employees
As of December 31, 2005, the Company had 288 full-time
and 103 part-time employees. The Companys employees
are not represented by any collective bargaining unit. The
Company believes that its employee relations are good.
Financial
Services Modernization
On November 12, 1999, President Clinton signed into law The
Gramm-Leach-Bliley Act (Gramm-Leach) which
significantly altered banking laws in the United States. Gramm
Leach enables combinations among banks, securities firms and
insurance companies beginning March 11, 2000. As a result
of Gramm Leach, many of the depression-era laws that restricted
these affiliations and other activities that may be engaged in
by banks and bank holding companies, were repealed. Under
Gramm-Leach, bank holding companies are permitted to offer their
customers virtually any type of financial service that is
financial in nature or incidental thereto, including banking,
securities underwriting, insurance (both underwriting and
agency) and merchant banking.
In order to engage in these new financial activities, a bank
holding company must qualify and register with the Federal
Reserve Board as a financial holding company by
demonstrating that each of its bank subsidiaries is well
capitalized, well managed, and has at least a
satisfactory rating under the Community Reinvestment
Act of 1977 (CRA). The Company has not elected to
become a financial holding company under Gramm-Leach.
These new financial activities authorized by Gramm-Leach may
also be engaged in by a financial subsidiary of a
national or state bank, except for insurance or annuity
underwriting, insurance company portfolio investments, real
estate investment and development and merchant banking, which
must be conducted in a financial holding company. In order for
the new financial activities to be engaged in by a financial
subsidiary of a national or state bank, Gramm-Leach requires
each of the parent bank (and any bank affiliates) to be well
capitalized and well managed; the aggregate consolidated assets
of all of that banks financial subsidiaries may not exceed
the lesser of 45% of its consolidated total assets or
$50 billion; the bank must have at least a satisfactory CRA
rating; and, if that bank is one of the 100 largest banks, it
must meet certain financial rating or other comparable
requirements.
Gramm-Leach establishes a system of functional regulation, under
which the federal banking agencies will regulate the banking
activities of financial holding companies and banks
financial subsidiaries, the U.S. Securities and Exchange
Commission will regulate their securities activities, and state
insurance regulators will regulate their insurance activities.
Gramm-Leach also provides new protections against the transfer
and use by financial institutions of consumers nonpublic,
personal information.
Holding
Company Regulation
The Company is a bank holding company as defined by the Bank
Holding Company Act of 1956, as amended (the Holding
Company Act) and is registered as such with the Board of
Governors of the Federal Reserve System (the FRB),
which is responsible for administration of the Holding Company
Act. Although the Company may meet the qualifications for
electing to become a financial holding company under
Gramm-Leach, the Company has elected to retain its
pre-Gramm-Leach status for the present time under the Holding
Company Act. As required by the Holding Company Act, the Company
files with the FRB an annual report regarding its financial
condition and operations, management and intercompany
relationships of the Company and the Bank. It is also subject to
examination by the FRB and must obtain FRB approval before
(i) acquiring direct or indirect ownership or control of
more than 5% of the voting stock of any bank, unless it already
owns or controls a majority of the voting stock of that bank,
(ii) acquiring all or substantially all of the assets of a
bank, except through a subsidiary which is a bank, or
(iii) merging or consolidating with any other bank holding
company. A bank holding company must also give the FRB prior
written notice before purchasing or redeeming its equity
securities, if the gross consideration for the purchase or
redemption, when aggregated with the net consideration paid by
the company for all such purchases or redemptions during the
preceding 12 months, is equal to 10% or more of the
Companys consolidated net worth.
The Holding Company Act prohibits a bank holding company, with
certain exceptions, from (i) acquiring direct or indirect
ownership or control of more than 5% of any class of voting
shares of any company which is not a bank or a bank holding
company, or (ii) engaging in any activity other than
managing or controlling banks, or
3
furnishing services to or performing services for its
subsidiaries. A bank holding company may own, however, shares of
a company engaged in activities which the FRB has determined are
so closely related to banking or managing or controlling banks
as to be a proper incident thereto.
The Company and its subsidiaries are examined by federal and
state regulators. The FRB has responsibility for holding company
activities and performed a review as of December 2003.
Federal
Deposit Insurance Corporation Improvement Act of 1991
On December 19, 1991, the FDIC Improvement Act of 1991 (the
1991 Act) was enacted. This legislation provides
for, among other things: enhanced federal supervision of
depository institutions, including greater authority for the
appointment of a conservator or receiver for undercapitalized
institutions; the establishment of risk-based deposit insurance
premiums; a requirement that the federal banking agencies amend
their risk-based capital requirements to include components for
interest-rate risk, concentration of credit risk, and the risk
of nontraditional activities; expanded authority for
cross-industry mergers and acquisitions; mandated consumer
protection disclosures with respect to deposit accounts; and
imposed restrictions on the activities of state-chartered banks,
including the Bank.
Provisions of the 1991 Act relating to the activities of
state-chartered banks significantly impact the way the Company
conducts its business. In this regard, the 1991 Act provides
that insured state banks, such as the Bank, may not engage as
principal in any activity that is not permissible for a national
bank, unless the FDIC has determined that the activity would
pose no significant risk to the BIF and the state bank is in
compliance with applicable capital standards. Activities of
subsidiaries of insured state banks are similarly restricted to
those activities permissible for subsidiaries of national banks,
unless the FDIC has determined that the activity would pose no
significant risk to the BIF and the state bank is in compliance
with applicable capital standards.
Interstate
Banking
The Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994, as amended (the Interstate Banking Act)
generally permits bank holding companies to acquire banks in any
state and preempts all state laws restricting the ownership by a
bank holding company of banks in more than one state. The
Interstate Banking Act also permits a bank to merge with an
out-of-state
bank and convert any offices into branches of the resulting bank
if both states have not opted out of interstate branching;
permits a bank to acquire branches from an
out-of-state
bank if the law of the state where the branches are located
permits the interstate branch acquisition; and operated de novo
interstate branches whenever the host state opts-in to de novo
branching. Bank holding companies and banks seeking to engage in
transactions authorized by the Interstate Banking Act must be
adequately capitalized and managed.
USA
PATRIOT Act
Under Title III of the USA PATRIOT Act, also known as the
International Money Laundering Abatement and
Anti-Terrorism Act of 2001, all financial institutions are
required in general to identify their customers, adopt formal
and comprehensive anti-money laundering programs, scrutinize or
prohibit altogether certain transactions of special concern, and
be prepared to respond to inquiries from U.S. law
enforcement agencies concerning their customers and their
transactions. Additional information-sharing among financial
institutions, regulators, and law enforcement authorities is
encouraged by the presence of an exemption from the privacy
provisions of the Gramm-Leach Act for financial institutions
that comply with this provision and the authorization of the
Secretary of the Treasurer to adopt rules to further encourage
cooperation and information-sharing. The effectiveness of a
financial institution in combating money laundering activities
is a factor to be considered in any application submitted by the
financial institution under the Bank Merger Act.
Sarbanes-Oxley
Act
The Sarbanes-Oxley Act, signed into law July 30, 2002,
addresses, among other issues, corporate governance, auditor
independence and accounting standards, executive compensation,
insider loans, whistleblower protection and enhanced and timely
disclosure of corporate information. The SEC has adopted a
substantial number of
4
implementing rules and the National Association of Securities
Dealers, Inc. has adopted corporate governance rules that have
been approved by the SEC and are applicable to the Company. The
proposed changes are intended to allow stockholders to monitor
more effectively the performance of companies and management. As
directed by Section 302(a) of the Sarbanes-Oxley Act, the
Companys Chief Executive Officer and Chief Financial
Officer are each required to certify that the Companys
quarterly and annual reports do not contain any untrue statement
of a material fact. This requirement has several parts,
including certification that these officers are responsible for
establishing, maintaining and regularly evaluating the
effectiveness of the Companys disclosure controls and
procedures and internal controls over financial reporting; that
they have made certain disclosures to the Companys
auditors and the Board of Directors about the Companys
disclosure controls and procedures and internal controls over
financial reporting, and that they have included information in
the Companys quarterly and annual reports about their
evaluation of the Companys internal controls and whether
there have been significant changes in the Companys
internal disclosure controls or in other factors that could
significantly affect controls subsequent to the evaluation and
whether there have been any significant changes in the
Companys internal controls over financial reporting that
have materially affected or reasonably likely to materially
affect the Companys internal controls over finance
reporting, and compliance with certain other disclosure
objectives. Section 906 of the Sarbanes-Oxley Act requires
an additional certification that each periodic report containing
financial statements fully complies with the requirements of
Section 13(a) and 15(d) of the Securities Exchange Act of
1934 and that the information in the report fairly presents, in
all material respects, the financial conditions and results of
operations of the Company.
Competition
The Company experiences substantial competition in attracting
deposits and making loans from commercial banks, thrift
institutions and other enterprises such as insurance companies
and mutual funds. These competitors include several major
commercial banks whose greater resources may afford them a
competitive advantage by enabling them to maintain numerous
branch offices and mount extensive advertising campaigns. A
number of these competitors are not subject to the regulatory
oversight that the Company is subject to, which increases these
competitors flexibility.
ITEM 1A.
RISK
FACTORS
The risk factors that may affect the Companys performance
and results of operations include the following:
(i) the Companys business is dependent upon general
economic conditions in Massachusetts;
(ii) the Companys earnings depend to a great extent
upon the level of net interest income generated by the Company,
and therefore the Companys results of operations may be
adversely affected by increases or decreases in interest rates
or by the shape of the yield curve;
(iii) the banking business is highly competitive and the
profitability of the Company depends upon the Companys
ability to attract loans and deposits in Massachusetts, where
the Company competes with a variety of traditional banking
companies, some of which have vastly greater resources, and
nontraditional institutions such as credit unions and finance
companies;
(iv) at December 31, 2005, approximately 57.5% of the
Companys loan portfolio was comprised of commercial and
commercial real estate loans, exposing the Company to the risks
inherent in financings based upon analyses of credit risk, the
value of underlying collateral, including real estate, and other
more intangible factors, which are considered in making
commercial loans;
(v) at December 31, 2005, approximately 32.3% of the
Companys loan portfolio was comprised of residential real
estate loans, exposing the Company to the risks inherent in
financings based upon analyses of credit risk and the value of
underlying collateral. Accordingly, the Companys
profitability may be negatively impacted by errors in risk
analyses, by loan defaults and the ability of certain borrowers
to repay such loans may be adversely affected by any downturn in
general economic conditions;
(vi) acts or threats of terrorism and actions taken by the
United States or other governments as a result of such acts or
threats, including possible military action, could further
adversely affect business and economic conditions in the United
States of America generally and in the Companys markets,
which could adversely
5
affect the Companys financial performance and that of the
Companys borrowers and on the financial markets and the
price of the Companys Class A common stock;
(vii) changes in the extensive laws, regulations and
policies governing bank holding companies and their subsidiaries
could alter the Companys business environment or affect
the Companys operations; and
(viii) the potential need to adapt to industry changes in
information technology systems, on which the Company is highly
dependent to secure bank and customer financial information,
could present operational issues, require significant capital
spending or impact the Companys reputation.
These factors, as well as general economic and market conditions
in the United States of America, may materially and adversely
affect the Companys performance, results of operations and
the market price of shares of the Companys Class A
common stock.
ITEM 1B.
UNRESOLVED
STAFF COMMENTS
The SECs Division of Corporate Finance uses a comment
letter process to communicate SEC staff concerns and potential
deficiencies to issuers in order to improve disclosure. No
comments received by the Company from the SEC during the year
ended December 31, 2005 remain unresolved.
The Company owns its main banking office, headquarters, and
operations center in Medford, which have just been expanded, and
12 of the 23 other facilities in which its branch offices are
located. The remaining offices are occupied under leases
expiring on various dates from 2006 to 2026. The Company
believes that its banking offices are in good condition.
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ITEM 3.
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LEGAL
PROCEEDINGS
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The Company and its subsidiaries are parties to various claims
and lawsuits arising in the course of their normal business
activities. Although the ultimate outcome of these suits cannot
be ascertained at this time, it is the opinion of management
that none of these matters, even if it resolved adversely to the
Company, will have a material adverse effect on the
Companys consolidated financial position.
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ITEM 4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of the Companys
Stockholders during the fourth quarter of the fiscal year ended
December 31, 2005.
6
PART II
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ITEM 5.
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MARKET
FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
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(a) The Class A Common Stock of the Company is traded
on the NASDAQ National Market system under the symbol
CNBKA. The price range of the Companys
Class A common stock since January 1, 2004 is shown on
page 8. The Companys Class B Common Stock is not
traded on NASDAQ or any other national securities exchange.
Generally speaking, the shares of Class A Common Stock are
not entitled to vote on any matter, including in the election of
Company Directors, but, in limited circumstances, may be
entitled to vote as a class on certain extraordinary
transactions, including any merger or consolidation (other than
one in which the Company is the surviving corporation or one
which by law may be approved by the directors without any
stockholder vote) or the sale, lease, or exchange of all or
substantially all of the property and assets of the Company.
Since the vote of a majority of the shares of Class B
Common Stock, voting as a class, is required to approve certain
extraordinary corporate transactions, the holders of
Class B Common Stock have the power to prevent any takeover
of the Company not approved by them.
(b) Approximate number of equity security holders as of
December 31, 2005.
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Approximate Number
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Title of Class
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of Record Holders
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Class A Common Stock
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348
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Class B Common Stock
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54
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(c) Under the Companys Articles of Organization, the
holders of the Class A Common Stock are entitled to receive
dividends per share equal to at least 200% of dividends paid, if
any, from time to time, on each share of Class B Common
Stock.
The following table shows the dividends paid by the Company on
the Class A and Class B Common Stock for the periods
indicated.
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Dividends Per Share
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Class A
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Class B
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2004
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First quarter
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$
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.12
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$
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.06
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Second quarter
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.12
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.06
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Third quarter
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.12
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.06
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Fourth quarter
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.12
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.06
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2005
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First quarter
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$
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.12
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$
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.06
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Second quarter
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.12
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.06
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Third quarter
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.12
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.06
|
|
Fourth quarter
|
|
|
.12
|
|
|
|
.06
|
|
As a bank holding company, the Companys ability to pay
dividends is dependent in part upon the receipt of dividends
from the Bank, which is subject to certain restrictions on the
payment of dividends. A Massachusetts trust company may pay
dividends out of net profits from time to time, provided that
either (i) the trust companys capital stock and
surplus account equal an aggregate of at least 10% of its
deposit liabilities, or (ii) the amount of its surplus
account is equal to at least the amount of its capital account.
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
The information required herein is shown on page 9.
7
Financial
Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(Dollars in thousands, except
share data)
|
|
|
FOR THE YEAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
72,811
|
|
|
$
|
65,033
|
|
|
$
|
69,298
|
|
|
$
|
71,124
|
|
|
$
|
67,459
|
|
Interest expense
|
|
|
32,820
|
|
|
|
23,646
|
|
|
|
23,942
|
|
|
|
24,718
|
|
|
|
27,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
39,991
|
|
|
|
41,387
|
|
|
|
45,356
|
|
|
|
46,406
|
|
|
|
39,758
|
|
Provision for loan losses
|
|
|
600
|
|
|
|
300
|
|
|
|
450
|
|
|
|
1,200
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
39,391
|
|
|
|
41,087
|
|
|
|
44,906
|
|
|
|
45,206
|
|
|
|
38,258
|
|
Other operating income
|
|
|
10,973
|
|
|
|
10,431
|
|
|
|
10,009
|
|
|
|
10,266
|
|
|
|
8,863
|
|
Operating expenses
|
|
|
40,318
|
|
|
|
37,663
|
|
|
|
34,272
|
|
|
|
34,089
|
|
|
|
30,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
10,046
|
|
|
|
13,855
|
|
|
|
20,643
|
|
|
|
21,383
|
|
|
|
17,096
|
|
Provision for income taxes
|
|
|
3,166
|
|
|
|
4,974
|
|
|
|
8,963
|
|
|
|
7,879
|
|
|
|
6,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,880
|
|
|
$
|
8,881
|
|
|
$
|
11,680
|
|
|
$
|
13,504
|
|
|
$
|
10,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding, basic
|
|
|
5,535,202
|
|
|
|
5,526,202
|
|
|
|
5,519,800
|
|
|
|
5,516,590
|
|
|
|
5,535,309
|
|
Average shares outstanding, diluted
|
|
|
5,548,467
|
|
|
|
5,553,197
|
|
|
|
5,548,615
|
|
|
|
5,534,059
|
|
|
|
5,541,745
|
|
Shares outstanding at year-end
|
|
|
5,535,442
|
|
|
|
5,534,088
|
|
|
|
5,524,438
|
|
|
|
5,517,425
|
|
|
|
5,515,350
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.24
|
|
|
$
|
1.61
|
|
|
$
|
2.12
|
|
|
$
|
2.45
|
|
|
$
|
1.96
|
|
Diluted
|
|
$
|
1.24
|
|
|
$
|
1.60
|
|
|
$
|
2.11
|
|
|
$
|
2.44
|
|
|
$
|
1.96
|
|
Dividend payout ratio
|
|
|
31.3
|
%
|
|
|
24.2
|
%
|
|
|
17.2
|
%
|
|
|
13.9
|
%
|
|
|
15.2
|
%
|
AT YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
1,728,769
|
|
|
$
|
1,833,701
|
|
|
$
|
1,688,911
|
|
|
$
|
1,557,201
|
|
|
$
|
1,271,022
|
|
Loans
|
|
|
689,645
|
|
|
|
580,003
|
|
|
|
512,314
|
|
|
|
514,249
|
|
|
|
462,772
|
|
Deposits
|
|
|
1,217,040
|
|
|
|
1,394,010
|
|
|
|
1,338,853
|
|
|
|
1,146,284
|
|
|
|
888,408
|
|
Stockholders equity
|
|
|
103,201
|
|
|
|
104,773
|
|
|
|
103,728
|
|
|
|
100,256
|
|
|
|
84,599
|
|
Book value per share
|
|
$
|
18.64
|
|
|
$
|
18.93
|
|
|
$
|
18.78
|
|
|
$
|
18.17
|
|
|
$
|
15.34
|
|
SELECTED FINANCIAL PERCENTAGES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
.41
|
%
|
|
|
.55
|
%
|
|
|
.74
|
%
|
|
|
1.02
|
%
|
|
|
1.03
|
%
|
Return on average
stockholders equity
|
|
|
6.57
|
%
|
|
|
8.61
|
%
|
|
|
11.57
|
%
|
|
|
14.64
|
%
|
|
|
13.70
|
%
|
Net interest margin, taxable
equivalent
|
|
|
2.58
|
%
|
|
|
2.75
|
%
|
|
|
3.08
|
%
|
|
|
3.77
|
%
|
|
|
4.06
|
%
|
Net (recoveries) charge-offs as a
percent of average loans
|
|
|
0.04
|
%
|
|
|
0.01
|
%
|
|
|
0.04
|
%
|
|
|
(0.04
|
)%
|
|
|
0.01
|
%
|
Average stockholders equity
to average assets
|
|
|
6.31
|
%
|
|
|
6.38
|
%
|
|
|
6.40
|
%
|
|
|
6.98
|
%
|
|
|
7.49
|
%
|
Efficiency Ratio
|
|
|
79.1
|
%
|
|
|
72.7
|
%
|
|
|
61.9
|
%
|
|
|
60.1
|
%
|
|
|
61.7
|
%
|
9
Per Share
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005, Quarter Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
Market price range
(Class A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
32.00
|
|
|
$
|
35.19
|
|
|
$
|
31.55
|
|
|
$
|
30.35
|
|
Low
|
|
|
27.00
|
|
|
|
30.31
|
|
|
|
26.00
|
|
|
|
27.75
|
|
Dividends
Class A
|
|
|
0.12
|
|
|
|
0.12
|
|
|
|
0.12
|
|
|
|
0.12
|
|
Dividends
Class B
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004, Quarter Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
Market price range (Class A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
32.79
|
|
|
$
|
33.62
|
|
|
$
|
33.74
|
|
|
$
|
37.51
|
|
Low
|
|
|
28.15
|
|
|
|
30.38
|
|
|
|
29.75
|
|
|
|
32.80
|
|
Dividends Class A
|
|
|
0.12
|
|
|
|
0.12
|
|
|
|
0.12
|
|
|
|
0.12
|
|
Dividends Class B
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
0.06
|
|
10
Managements
Discussion and Analysis of Results of Operations and Financial
Condition
Forward-looking
Statements
Certain statements contained herein are not based on historical
facts and are forward-looking statements within the
meaning of Section 21A of the Securities Exchange Act of
1934. Forward-looking statements, which are based on various
assumptions (some of which are beyond the Companys
control), may be identified by reference to a future period or
periods, or by the use of forward-looking terminology, such as
may, will, believe,
expect, estimate,
anticipate, continue or similar terms or
variations on those terms, or the negative of these terms.
Actual results could differ materially from those set forth in
forward-looking statements due to a variety of factors,
including, but not limited to, those related to the economic
environment, particularly in the market areas in which the
Company operates, competitive products and pricing, fiscal and
monetary polices of the U.S. Government, changes in
government regulations affecting financial institutions,
including regulatory fees and capital requirements, changes in
prevailing interest rates, acquisitions and the integration of
acquired businesses, credit risk management, asset/liability
management, the financial and securities markets and the
availability of and costs associated with sources of liquidity.
The Company does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions
which may be made to any forward-looking statements to reflect
the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
Overview
Century Bancorp, Inc. (together with its bank subsidiary, unless
the context otherwise requires, the Company), is a
Massachusetts state chartered bank holding company headquartered
in Medford, Massachusetts. The Company is a Massachusetts
corporation formed in 1972 and has one banking subsidiary (the
Bank): Century Bank and Trust Company formed in
1969. The Company had total assets of $1.7 billion on
December 31, 2005. The Company presently operates 23
banking offices in 16 cities and towns in Massachusetts
ranging from Braintree in the south to Beverly in the north. The
Banks customers consist primarily of small and medium-sized
businesses and retail customers in these communities and
surrounding areas, as well as local governments and institutions
throughout Massachusetts.
The Companys results of operations are largely dependent
on net interest income, which is the difference between the
interest earned on loans and securities and interest paid on
deposits and borrowings. The results of operations are also
affected by the level of income/fees from loans, deposits, as
well as operating expenses, the provision for loan losses, the
impact of federal and state income taxes and the relative levels
of interest rates and economic activity.
The Company offers a wide range of services to commercial
enterprises, state and local governments and agencies,
non-profit organizations and individuals. It emphasizes service
to small and medium-sized businesses and retail customers in its
market area. The Company makes commercial loans, real estate and
construction loans, consumer loans, and accepts savings, time
and demand deposits. In addition, the Company offers to its
corporate and institutional customers automated lockbox
collection services, cash management services and account
reconciliation services, and actively promotes the marketing of
these services to the municipal market. Also, the Company
provides full service securities brokerage services through its
subsidiary, Century Financial Services, Inc. in conjunction
with Commonwealth Equity Services, Inc., a full service
securities brokerage business.
The Company is also a provider of financial services including
cash management, transaction processing and short term financing
to municipalities in Massachusetts and Rhode Island. The Company
has deposit relationships with approximately 30% of the
351 cities and towns in Massachusetts.
Century Bancorp, Inc. (the Company) had net income
of $6,880,000 for the year ended December 31, 2005,
compared with net income of $8,881,000 for year ended
December 31, 2004 and net income of $11,680,000 for the
year ended December 31, 2003. Basic earnings per share were
$1.24 in 2005, compared to $1.61 in 2004 and $2.12 in 2003.
Diluted earnings per share were $1.24 in 2005, compared to $1.60
in 2004 and $2.11 in 2003. The
11
Companys earnings in 2005 were negatively impacted by a
decrease in net interest income, increases in salary expense as
well as costs associated with the Companys new addition to
its corporate headquarters building and the addition of a
lockbox image system. The Company believes that the net interest
margin will continue to be challenged as rates continue to rise.
This is mainly the result of deposit and borrowing pricing that
has the potential to increase faster than corresponding asset
categories. During 2003, the Companys earnings were also
negatively affected by a net tax charge of $1,183,000 associated
with the Real Estate Investment Trust (REIT)
settlement. This charge was the result of an agreement with the
Massachusetts Department of Revenue (DOR) settling a
dispute related to taxes that the DOR claimed were owed from the
Companys REIT.
Total assets were $1,728,769,000 at December 31, 2005, a
decrease of 5.7% from total assets of $1,833,701,000 on
December 31, 2004.
On December 31, 2005, stockholders equity totaled
$103,201,000, compared with $104,773,000 on December 31,
2004. Book value per share decreased to $18.64 at
December 31, 2005 from $18.93 on December 31, 2004.
During February 2003, the Company began construction of an
addition to its corporate headquarters building. The property is
located adjacent to its current headquarters in Medford,
Massachusetts and provides additional corporate office space and
an expanded banking floor. The building was substantially
completed during the fourth quarter of 2004 and $14,500,000 has
been expended in connection with this expansion. The capital
expenditure has provided a five-story addition containing
approximately 50,000 square feet of office and branch
banking space. Occupancy costs have increased by approximately
$960,000 for 2005 as a result of the addition.
On March 21, 2003, the Company completed the acquisition of
Capital Crossing Banks branch office at 1220 Boylston
Street, Chestnut Hill, Massachusetts, and substantially all of
the retail deposits at Capital Crossings main office at 101
Summer Street, Boston, Massachusetts. Century closed the
Chestnut Hill branch and transferred all customers of the branch
to its nearby branch office at 1184 Boylston Street, Brookline,
Massachusetts. In addition, Century transferred all of the
retail deposits from Capital Crossings Summer Street branch to
its branch at 24 Federal Street, Boston, Massachusetts. The
acquisition included $192,700,000 in deposits. The acquisition
also included a premium paid to Capital Crossing of
approximately $3,900,000. This premium was subsequently reduced
by a gain of $395,000 from the sale of the acquired Chestnut
Hill branch and a rebate of $282,000 for closed accounts at the
Boston office.
During the third quarter of 2005, the Company announced plans to
continue its stock repurchase plan. Under the program, the
Company is authorized to repurchase up to 300,000 shares,
or less than 9%, of Century Bancorp Class A Common Stock.
The program expires on July 11, 2006.
In 2005, the Company opened a new branch location on State
Street in Boston, Massachusetts. In 2004, the Company opened one
branch on Albany Street in Boston, Massachusetts.
During the fourth quarter of 2004, the Company announced that it
entered into an Investment Management Agreement with BlackRock
Financial Management, Inc. for the Companys
Available-For-Sale
securities portfolio. During 2005 the Company began experiencing
strong loan growth, and believes that reinvesting the investment
cash flows in loans will help to achieve improvements in its
yield. The expense related to this contract ended on
June 30, 2005 and the contract terminated January 31,
2006.
Also during the fourth quarter of 2004, the Company consummated
the sale of a trust preferred securities offering, in which it
issued $36,083,000 of subordinated debt securities due 2034 to
its newly formed unconsolidated subsidiary Century Bancorp
Capital Trust II. Century Bancorp Capital Trust II
issued 35,000 shares of Cumulative Trust Preferred
Securities with a liquidation value of $1,000 per share.
These securities pay dividends at an annualized rate of 6.65%
for the first ten years and then convert to the three-month
LIBOR rate plus 1.87% for the remaining twenty years. The total
amount of this issuance was $36,083,000. The Company is using
the proceeds primarily for general business purposes. Also, the
Company, through its subsidiary, Century Bancorp Capital Trust,
announced the redemption of their 8.30% Trust Preferred
Securities, with a redemption date of January 10, 2005. The
total amount of this redemption was $29,639,000.
12
Critical
Accounting Policies
Accounting policies involving significant judgments and
assumptions by management, which have, or could have, a material
impact on the carrying value of certain assets and impact
income, are considered critical accounting policies. The Company
considers the following to be its critical accounting policies:
allowance for loan losses and impairment of investment
securities. There have been no significant changes in the
methods or assumptions used in the accounting policies that
require material estimates and assumptions.
Allowance
for Loan Losses
Arriving at an appropriate level of allowance for loan losses
necessarily involves a high degree of judgment. Management
maintains an allowance for loan losses to absorb losses inherent
in the loan portfolio. The allowance is based on assessments of
the probable estimated losses inherent in the loan portfolio.
Managements methodology for assessing the appropriateness of the
allowance consists of several key elements, which include the
formula allowance, specific allowances for identified problem
loans and the unallocated allowance.
The formula allowance evaluates groups of loans to determine the
allocation appropriate within each portfolio segment. Individual
loans within the commercial and industrial, commercial real
estate and real estate construction loan portfolio segments are
assigned internal risk ratings to group them with other loans
possessing similiar risk characteristics. Changes in risk grades
affect the amount of the formula allowance. Risk grades are
determined by reviewing current collateral value, financial
information, cash flow, payment history and other relevant facts
surrounding the particular credit. Provisions for losses on the
remaining commercial and commercial real estate loans are based
on pools of similar loans using a combination of historical loss
experience and qualitative adjustments. For the residential real
estate and consumer loan portfolios, the reserves are calculated
by applying historical charge-off and recovery experience and
qualitative adjustments to the current outstanding balance in
each loan category. Loss factors are based on the Companys
historical loss experience, as well as regulatory guidelines.
Specific allowances for loan losses entails the assignment of
allowance amounts to individual loans on the basis of loan
impairment. Certain loans are evaluated individually and are
judged to be impaired when management believes it is probable
that the Company will not collect all the contractual interest
and principle payments as scheduled in the loan agreement. Under
this method, loans are selected for evaluation based upon a
change in internal risk rating, occurence of delinquency, loan
classification or non-accrual status. A specific allowance
amount is allocated to an individual loan when such loan has
been deemed impaired and when the amount of a probable loss is
able to be estimated on the basis of: (a.) fair value of
collateral, (b.) present value of anticipated future cash flows
or (c.) the loans observable fair market price.
The unallocated allowance recognizes the model and estimation
risk associated with the formula allowance and specific
allowances, as well as managements evaluation of various
conditions, including business and economic conditions,
delinquency trends, charge-off experience and other quality
factors, the effects of which are not directly measured in the
determination of the formula and specific allowances. The
evaluation of the inherent loss with respect to these conditions
is subject to a higher degree of uncertainly because they are
not identified with specific problem credits.
Management has identified certain risk factors, which could
impact the degree of loss sustained within the portfolio. These
include: (a.) market risk factors, such as the effects of
economic variability on the entire portfolio, and (b.) unique
portfolio risk factors that are inherent characteristics of the
Companys loan portfolio. Market risk factors may consist
of changes to general economic and business conditions that may
impact the Companys loan portfolio customer base in terms
of ability to repay and that may result in changes in value of
underlying collateral. Unique portfolio risk factors may include
industry concentrations and geographic concentrations or trends
that may exacerbate losses resulting from economic events which
the Company may not be able to fully diversify out its portfolio.
Management believes that the allowance for loan losses is
adequate. In addition, various regulatory agencies, as part of
the examination process, periodically review the Companys
allowance for loan losses. Such agencies may require the Company
to recognize additions to the allowance based on their judgments
about information available to them at the time of their
examination.
13
Impaired
investment Securities
If a material decline in fair value below the amortized cost
basis of an investment security is judged to be
other-than-temporary, the cost basis of the
investment is written down to fair value. The amount of the
write down is included as a charge to earnings. An
other-than-temporary impairment exists for
debt securities if it is probable that the Company will be
unable to collect all amounts due according to contractual terms
of the security. Some factors considered for other
than temporary impairment related to a debt security
include an analysis of yield which results in a decrease in
expected cash flows, whether an unrealized loss is issuer
specific, whether the issuer has defaulted on scheduled interest
and principal payments, whether the issuers current
financial condition hinder its ability to make future scheduled
interest and principal payments on a timely basis or whether
there was downgrade in ratings by rating agencies.
The Company has the ability and intent to hold these investments
until recovery of fair value, which may be maturity.
14
Results
of Operations and Financial Condition
The following table sets forth the distribution of the
Companys average assets, liabilities and
stockholders equity, and average rates earned or paid on a
fully taxable equivalent basis for each of the years indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
Interest
|
|
|
Rate
|
|
|
|
|
|
Interest
|
|
|
Rate
|
|
|
|
|
|
Interest
|
|
|
Rate
|
|
|
|
Average
|
|
|
Income/
|
|
|
Earned/
|
|
|
Average
|
|
|
Income/
|
|
|
Earned/
|
|
|
Average
|
|
|
Income/
|
|
|
Earned/
|
|
|
|
Balance
|
|
|
Expense(1)
|
|
|
Paid(1)
|
|
|
Balance
|
|
|
Expense(1)
|
|
|
Paid(1)
|
|
|
Balance
|
|
|
Expense(1)
|
|
|
Paid(1)
|
|
|
|
(Dollars in thousands)
|
|
|
ASSETS
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans(2)
|
|
$
|
641,103
|
|
|
$
|
41,274
|
|
|
|
6.44
|
%
|
|
$
|
546,147
|
|
|
$
|
33,384
|
|
|
|
6.11
|
%
|
|
$
|
500,723
|
|
|
$
|
33,134
|
|
|
|
6.62
|
%
|
Securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
580,129
|
|
|
|
19,518
|
|
|
|
3.36
|
|
|
|
570,935
|
|
|
|
18,528
|
|
|
|
3.25
|
|
|
|
782,782
|
|
|
|
28,735
|
|
|
|
3.67
|
|
Tax-exempt
|
|
|
878
|
|
|
|
22
|
|
|
|
2.51
|
|
|
|
61
|
|
|
|
1
|
|
|
|
1.64
|
|
|
|
92
|
|
|
|
3
|
|
|
|
3.26
|
|
Securities
held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
311,738
|
|
|
|
11,635
|
|
|
|
3.73
|
|
|
|
319,860
|
|
|
|
12,296
|
|
|
|
3.84
|
|
|
|
162,988
|
|
|
|
7,152
|
|
|
|
4.39
|
|
Federal funds sold
|
|
|
15,847
|
|
|
|
362
|
|
|
|
2.28
|
|
|
|
69,461
|
|
|
|
824
|
|
|
|
1.19
|
|
|
|
24,730
|
|
|
|
274
|
|
|
|
1.11
|
|
Interest-bearing deposits in other
banks
|
|
|
50
|
|
|
|
|
|
|
|
0.64
|
|
|
|
251
|
|
|
|
|
|
|
|
0.13
|
|
|
|
30
|
|
|
|
|
|
|
|
0.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
1,549,745
|
|
|
|
72,811
|
|
|
|
4.70
|
%
|
|
|
1,506,715
|
|
|
|
65,033
|
|
|
|
4.32
|
|
|
|
1,471,345
|
|
|
|
69,298
|
|
|
|
4.71
|
%
|
Non interest-earning assets
|
|
|
118,325
|
|
|
|
|
|
|
|
|
|
|
|
120,306
|
|
|
|
|
|
|
|
|
|
|
|
114,919
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(9,353
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,813
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,901
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,658,717
|
|
|
|
|
|
|
|
|
|
|
$
|
1,618,208
|
|
|
|
|
|
|
|
|
|
|
$
|
1,577,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
237,016
|
|
|
$
|
3,265
|
|
|
|
1.38
|
%
|
|
$
|
250,224
|
|
|
$
|
1,966
|
|
|
|
0.79
|
%
|
|
$
|
260,383
|
|
|
$
|
2,267
|
|
|
|
0.87
|
%
|
Savings accounts
|
|
|
76,131
|
|
|
|
287
|
|
|
|
0.38
|
|
|
|
79,037
|
|
|
|
302
|
|
|
|
0.38
|
|
|
|
79,333
|
|
|
|
319
|
|
|
|
0.40
|
|
Money market accounts
|
|
|
366,622
|
|
|
|
7,018
|
|
|
|
1.91
|
|
|
|
412,220
|
|
|
|
5,010
|
|
|
|
1.22
|
|
|
|
392,066
|
|
|
|
5,111
|
|
|
|
1.30
|
|
Time deposits
|
|
|
265,310
|
|
|
|
8,835
|
|
|
|
3.33
|
|
|
|
242,791
|
|
|
|
6,833
|
|
|
|
2.81
|
|
|
|
239,189
|
|
|
|
7,246
|
|
|
|
3.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
945,079
|
|
|
|
19,405
|
|
|
|
2.05
|
|
|
|
984,272
|
|
|
|
14,111
|
|
|
|
1.43
|
|
|
|
970,971
|
|
|
|
14,943
|
|
|
|
1.54
|
|
Securities sold under agreements to
repurchase
|
|
|
39,746
|
|
|
|
813
|
|
|
|
2.05
|
|
|
|
40,937
|
|
|
|
331
|
|
|
|
0.81
|
|
|
|
51,402
|
|
|
|
457
|
|
|
|
0.89
|
|
Other borrowed funds and
subordinated debentures
|
|
|
268,878
|
|
|
|
12,602
|
|
|
|
4.69
|
|
|
|
194,932
|
|
|
|
9,204
|
|
|
|
4.72
|
|
|
|
170,344
|
|
|
|
8,542
|
|
|
|
5.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
1,253,703
|
|
|
|
32,820
|
|
|
|
2.62
|
%
|
|
|
1,220,141
|
|
|
|
23,646
|
|
|
|
1.94
|
%
|
|
|
1,192,717
|
|
|
|
23,942
|
|
|
|
2.01
|
%
|
Non interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
283,876
|
|
|
|
|
|
|
|
|
|
|
|
279,361
|
|
|
|
|
|
|
|
|
|
|
|
267,284
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
16,463
|
|
|
|
|
|
|
|
|
|
|
|
15,511
|
|
|
|
|
|
|
|
|
|
|
|
16,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,554,042
|
|
|
|
|
|
|
|
|
|
|
|
1,515,013
|
|
|
|
|
|
|
|
|
|
|
|
1,476,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
104,675
|
|
|
|
|
|
|
|
|
|
|
|
103,195
|
|
|
|
|
|
|
|
|
|
|
|
100,933
|
|
|
|
|
|
|
|
|
|
Total liabilities &
stockholders equity
|
|
$
|
1,658,717
|
|
|
|
|
|
|
|
|
|
|
$
|
1,618,208
|
|
|
|
|
|
|
|
|
|
|
$
|
1,577,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income(1)
|
|
|
|
|
|
$
|
39,991
|
|
|
|
|
|
|
|
|
|
|
$
|
41,387
|
|
|
|
|
|
|
|
|
|
|
$
|
45,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.08
|
%
|
|
|
|
|
|
|
|
|
|
|
2.38
|
%
|
|
|
|
|
|
|
|
|
|
|
2.70
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
2.58
|
%
|
|
|
|
|
|
|
|
|
|
|
2.75
|
%
|
|
|
|
|
|
|
|
|
|
|
3.08
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
On a fully taxable equivalent basis calculated using a federal
tax rate of 35%.
|
|
(2)
|
|
Nonaccrual loans are included in average amounts outstanding.
|
15
The following table summarizes the year to year changes in the
Companys net interest income resulting from fluctuations
in interest rates and volume changes in earning assets and
interest-bearing liabilities. Changes due to rate are computed
by multiplying the change in rate by the prior years
volume. Changes due to volume are computed by multiplying the
change in volume by the prior years rate. Changes in
volume and rate that cannot be separately identified have been
allocated in proportion to the relationship of the absolute
dollar amounts of each change.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2005 Compared with 2004
|
|
|
2004 Compared with 2003
|
|
|
|
Increase/(Decrease)
|
|
|
Increase/(Decrease)
|
|
|
|
Due to Change in
|
|
|
Due to Change in
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
6,041
|
|
|
$
|
1,849
|
|
|
$
|
7,890
|
|
|
$
|
2,881
|
|
|
$
|
(2,631
|
)
|
|
$
|
250
|
|
Securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
302
|
|
|
|
688
|
|
|
|
990
|
|
|
|
(7,145
|
)
|
|
|
(3,063
|
)
|
|
|
(10,208
|
)
|
Tax-exempt
|
|
|
20
|
|
|
|
1
|
|
|
|
21
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
Securities
held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
(308
|
)
|
|
|
(353
|
)
|
|
|
(661
|
)
|
|
|
6,128
|
|
|
|
(984
|
)
|
|
|
5,144
|
|
Federal funds sold
|
|
|
(903
|
)
|
|
|
440
|
|
|
|
(463
|
)
|
|
|
529
|
|
|
|
21
|
|
|
|
550
|
|
Interest-bearing deposits in other
banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
5,152
|
|
|
|
2,625
|
|
|
|
7,777
|
|
|
|
2,393
|
|
|
|
(6,659
|
)
|
|
|
(4,266
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
|
(109
|
)
|
|
|
1,408
|
|
|
|
1,299
|
|
|
|
(86
|
)
|
|
|
(215
|
)
|
|
|
(301
|
)
|
Savings accounts
|
|
|
(11
|
)
|
|
|
(4
|
)
|
|
|
(15
|
)
|
|
|
(1
|
)
|
|
|
(16
|
)
|
|
|
(17
|
)
|
Money market accounts
|
|
|
(606
|
)
|
|
|
2,614
|
|
|
|
2,008
|
|
|
|
255
|
|
|
|
(356
|
)
|
|
|
(101
|
)
|
Time deposits
|
|
|
673
|
|
|
|
1,329
|
|
|
|
2,002
|
|
|
|
108
|
|
|
|
(521
|
)
|
|
|
(413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
(53
|
)
|
|
|
5,347
|
|
|
|
5,294
|
|
|
|
276
|
|
|
|
(1,108
|
)
|
|
|
(832
|
)
|
Securities sold under agreements
to repurchase
|
|
|
(10
|
)
|
|
|
492
|
|
|
|
482
|
|
|
|
(87
|
)
|
|
|
(39
|
)
|
|
|
(126
|
)
|
Other borrowed funds and
subordinated debentures
|
|
|
3,466
|
|
|
|
(68
|
)
|
|
|
3,398
|
|
|
|
1,152
|
|
|
|
(490
|
)
|
|
|
662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
3,403
|
|
|
|
5,771
|
|
|
|
9,174
|
|
|
|
1,341
|
|
|
|
(1,637
|
)
|
|
|
(296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income
|
|
$
|
1,749
|
|
|
$
|
(3,146
|
)
|
|
$
|
(1,397
|
)
|
|
$
|
1,052
|
|
|
$
|
(5,022
|
)
|
|
$
|
(3,970
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys operating results depend primarily on net
interest income and fees received for providing services. Net
interest income on a fully taxable equivalent basis decreased
3.4% in 2005 to $39,991,000, compared with $41,387,000 in 2004.
The decrease in net interest income for 2005 was mainly due to
an 6.2% or a seventeen basis point decrease in the net interest
margin. The level of interest rates, the ability of the
Companys earning assets and liabilities to adjust to
changes in interest rates and the mix of the Companys
earning assets and liabilities affect net interest income. The
net interest margin on a fully taxable equivalent basis
decreased to 2.58% in 2005 from 2.75% in 2004, which had
decreased from 3.08% in 2003. The Company believes that the net
interest margin will continue to be challenged as rates continue
to rise. This is mainly the result of deposit and borrowing
pricing that has the potential to increase faster than
corresponding asset categories.
Average earning assets were $1,549,745,000 in 2005, an increase
of $43,030,000 or 2.9% from the average in 2004, which was 2.4%
higher than the average in 2003. Total average securities,
including securities
available-for-sale
and securities
held-to-maturity
were $892,745,000. The stable securities volume was mainly
attributable to a continued shift in asset concentration to
loans. An increase in securities rates resulted in higher
16
securities income, which increased 1.1% to $31,175,000. Total
average loans increased 17.4% to $641,103,000 after increasing
$45,424,000 in 2004. The primary reason for the increase in
loans across all of the business lines is due, in large part, to
the hiring of additional officers as well as an emphasis on
small business loans. The increase in loan volume and increases
in loan rates resulted in higher loan income, which increased by
23.6% or $7,890,000 to $41,274,000. Total loan income was
$33,134,000 in 2003.
The Companys sources of funds include deposits and
borrowed funds. On average, deposits showed an decrease of 2.7%
or $34,678,000 in 2005 after increasing by 2.0% or $25,378,000
in 2004. Deposits decreased in 2005 primarily as a result of a
decrease in money market accounts, which decreased by 11% or
$45,598,000. Borrowed funds and subordinated debentures
increased by 37.9% in 2005 following an increase of 14.4% in
2004. The majority of the Companys borrowed funds are
borrowings from the Federal Home Loan Bank (FHLB) and
retail repurchase agreements. Borrowings from the FHLB increased
by approximately $69,542,000 and retail repurchase agreements
decreased by $1,191,000. Interest expense totaled $32,820,000 in
2005, an increase of $9,174,000 or 38.8% from 2004 when interest
expense decreased 1.2% from 2003. This increase in interest
expense is due to increases in deposit and borrowed funds rates.
Provision
for Loan Loss
The provision for loan losses was $600,000 in 2005, compared
with $300,000 in 2004 and $450,000 in 2003. These provisions are
the result of managements evaluation of the amounts and quality
of the loan portfolio considering such factors as loan status,
collateral values, financial condition of the borrower, the
state of the economy and other relevant information. Additional
provisions have been made due to growth in the loan portfolio.
The allowance for loan losses was $9,340,000 at
December 31, 2005, compared with $9,001,000 at
December 31, 2004. Expressed as a percentage of outstanding
loans at year-end, the allowance was 1.35% in 2005 and 1.55% in
2004. The coverage ratio decreased mainly as a result of the
continued low levels of problem assets.
Non-performing loans, which include all non-accruing loans and
certain restructured, accruing loans, totaled $949,000 on
December 31, 2005, compared with $628,000 on
December 31, 2004.
Other
Operating Income
During 2005, the Company continued to experience positive
results in its fee-based services including fees derived from
traditional banking activities such as deposit related services,
its automated lockbox collection system and full service
securities brokerage offered through Commonwealth Equity
Services, Inc., an unaffiliated registered securities
broker-dealer and investment adviser.
Under the lockbox program, which is not tied to extensions of
credit by the Company, the Companys customer arranges for
payments of its accounts receivable to be made directly to the
Company. The Company records the amounts paid to its customers,
deposits the funds to the customers account and provides
automated records of the transactions to customers. Typical
customers for the lockbox service are municipalities who use it
to automate tax collections, cable TV companies and other
commercial enterprises.
Through Commonwealth Equity Services, Inc., an unaffiliated
company, the Bank provides full service securities brokerage
services. Registered representatives employed by the Bank offer
investment advice, execute transactions and assist customers in
financial and retirement planning. Commonwealth Equity Services,
Inc. provides research to and supervises representatives in
exchange for payment by the Bank for a fixed fee and a share in
the commission revenues.
Total other operating income in 2005 was $10,973,000, an
increase of $542,000 or 5.2% compared to 2004. This increase
followed an increase of $422,000 or 4.2% in 2004, compared to
2003. Service charge income, which continues to be a major area
of other operating income with $5,846,000 in 2005, saw an
increase of $575,000 compared to 2004. This follows an increase
of $489,000 compared to 2003. Service charges on deposit
accounts increased mainly because of an increase in overdraft
charges associated with a new overdraft fee protection program.
Lockbox revenues totaled $2,807,000, down $143,000 in 2005 and a
decrease of $236,000 in 2004. This decrease was mainly
attributable to competitive pricing pressures. Through
Commonwealth Equity Services, Inc.,
17
brokerage commissions decreased to $462,000 in 2005, from
$670,000 in 2004, primarily as a result of decreased transaction
volume. Brokerage commissions increased in 2004 by $91,000
mainly as a result of increased transaction volume.
Operating
Expenses
Total operating expenses were $40,318,000 in 2005, compared to
$37,663,000 in 2004 and $34,272,000 in 2003.
Salaries and employee benefits expenses increased by $931,000 or
4.0% in 2005, after increasing by 6.9% in 2004. The
increases for 2005 and 2004 were mainly attributable to an
increase in staff levels and merit increases in salaries.
Occupancy expense increased by $801,000 or 26.7% in 2005, this
followed an increase of $349,000 or 13.2% in 2004. The increase
in 2005 was mainly attributable to depreciation and real estate
taxes associated with the addition to the corporate headquarters
as well as full-year costs associated with the opening of one
new branch in 2004 and partial year costs associated with the
opening of one new branch in 2005. The increase in 2004 was
mainly attributable to full-year costs associated with the
opening of two new branches in 2003 and the partial year cost
associated with the opening of one new branch in 2004. Equipment
expense increased by $607,000 or 25.5% in 2005; this followed an
increase of $677,000 or 39.8% in 2004. The increase in 2005 was
mainly attributable to full-year costs of depreciation and
service contract expense associated with the addition of the
lockbox image system, as well as depreciation associated with
the addition to the corporate headquarters. The increase in 2004
was mainly attributable to increased depreciation and service
contract expense associated with the additions of check and
lockbox image systems. Other operating expenses increased by
$316,000 in 2005, which followed a $862,000 increase in 2004.
The increase for 2005 was primarily the result of increased
consulting costs associated with the BlackRock contract. The
expense related to this contract ended on June 30, 2005 and
the contract terminated January 31, 2006. The increase for
2004 was primarily the result of increased legal, audit,
personnel recruitment and marketing expense. The costs increased
mainly because of compliance related services. Marketing
increased because of an increase in advertising.
Provision
for Income Taxes
Income tax expense was $3,166,000 in 2005, $4,974,000 in 2004
and $8,963,000 in 2003. The effective tax rate was 31.5% in
2005, 35.9% in 2004 and 43.4% (37.7%, excluding REIT settlement)
in 2003. The decrease in the effective tax rate for 2005 and
2004 was mainly attributable to less earnings at the Bank that
caused a decrease in both federal and state taxes. The portion
of earnings subject to a higher tax rate decreased in 2005 and
2004. The federal tax rate was 34% in 2005 and 35% in 2004.
Also, 2005 had a higher proportion of non-taxable income.
Included in tax expense for 2003 is a net tax charge of
$1,183,000 associated with the REIT settlement. This charge was
the result of an agreement with the Massachusetts DOR settling a
dispute related to taxes that the DOR claimed were owed from the
Companys REIT.
Market
Risk and Asset Liability Management
Market risk is the risk of loss from adverse changes in market
prices and rates. The Companys market risk arises
primarily from interest rate risk inherent in its lending and
deposit taking activities, and to that end, management actively
monitors and manages its interest rate risk exposure.
The Companys profitability is affected by fluctuations in
interest rates. A sudden and substantial increase in interest
rates may adversely impact the Companys earnings to the
extent that the interest rates borne by assets and liabilities
do not change at the same speed, to the same extent, or on the
same basis. The Company monitors the impact of changes in
interest rates on its net interest income using several tools.
One measure of the Companys exposures to differential
changes in interest rates between assets and liabilities is an
interest rate risk management
18
test. This test measures the impact on net interest income of an
immediate change in interest rates in 100 basis point
increments.
|
|
|
|
|
|
|
Change in Interest Rates
|
|
|
Percentage Change in
|
|
(in Basis Points)
|
|
|
Net Interest Income(1)
|
|
|
|
+300
|
|
|
|
(13.1
|
)%
|
|
+200
|
|
|
|
(8.6
|
)%
|
|
+100
|
|
|
|
(4.3
|
)%
|
|
−100
|
|
|
|
1.1
|
%
|
|
−200
|
|
|
|
1.5
|
%
|
|
|
|
(1)
|
|
The percentage change in this column represents net interest
income for 12 months in various rate scenarios versus the
net interest income in a stable interest rate environment.
|
The Companys primary objective in managing interest rate
risk is to minimize the adverse impact of changes in interest
rates on the Companys net interest income and capital,
while structuring the Companys asset-liability structure
to obtain the maximum yield-cost spread on that structure. The
Company relies primarily on its asset-liability structure to
control interest rate risk.
Liquidity
and Capital Resources
Liquidity is provided by maintaining an adequate level of liquid
assets that include cash and due from banks, federal funds sold
and other temporary investments. Liquid assets totaled
$152,679,000 on December 31, 2005, compared with
$238,235,000 on December 31, 2004. In each of these two
years, deposit and borrowing activity has generally been
adequate to support asset activity.
The source of funds for dividends paid by the Company is
dividends received from the Bank. The Company and the Bank are
regulated enterprises and their abilities to pay dividends are
subject to regulatory review and restriction. Certain regulatory
and statutory restrictions exist regarding dividends, loans and
advances from the Bank to the Company. Generally, the Bank has
the ability to pay dividends to the Company subject to minimum
regulatory capital requirements.
Capital
Adequacy
Total stockholders equity was $103,201,000 at
December 31, 2005, compared with $104,773,000 at
December 31, 2004. The decrease in 2005 was primarily the
result of a decrease in accumulated other comprehensive income
somewhat offset by earnings less dividends paid.
Federal banking regulators have issued risk-based capital
guidelines, which assign risk factors to asset categories and
off-balance sheet items. The current guidelines require a
Tier 1
capital-to-risk
assets ratio of at least 4.00% and a total
capital-to-risk
assets ratio of at least 8.00%. The Company and the Bank
exceeded these requirements with a Tier 1
capital-to-risk
assets ratio of 15.46% and 12.11%, respectively, and total
capital-to-risk
assets ratio of 16.48% and 13.13%, respectively at
December 31, 2005. Additionally, federal banking regulators
have issued leverage ratio guidelines, which supplement the
risk-based capital guidelines. The minimum leverage ratio
requirement applicable to the Company is 4.00% and at
December 31, 2005, the Company and the Bank exceeded this
requirement with leverage ratios of 8.58% and 6.72%,
respectively.
19
Contractual
Obligations, Commitments, and Contingencies
The Company has entered into contractual obligations and
commitments. The following tables summarize the Companys
contractual cash obligations and other commitments at
December 31, 2005.
Contractual
Obligations and Commitments by Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by
Period
|
|
|
|
|
|
|
Less than
|
|
|
One to
|
|
|
Three to
|
|
|
After Five
|
|
Contractual
Obligations
|
|
Total
|
|
|
One Year
|
|
|
Three Years
|
|
|
Five Years
|
|
|
Years
|
|
|
|
(Dollars in thousands)
|
|
|
FHLB advances
|
|
$
|
298,656
|
|
|
$
|
197,156
|
|
|
$
|
22,000
|
|
|
$
|
63,500
|
|
|
$
|
16,000
|
|
Subordinated
debentures
|
|
|
36,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,083
|
|
Retirement benefit
obligations
|
|
|
16,978
|
|
|
|
1,457
|
|
|
|
3,083
|
|
|
|
3,255
|
|
|
|
9,183
|
|
Lease obligations
|
|
|
5,342
|
|
|
|
1,081
|
|
|
|
1,964
|
|
|
|
1,344
|
|
|
|
953
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury, tax and
loan
|
|
|
1,418
|
|
|
|
1,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer repurchase
agreements
|
|
|
50,010
|
|
|
|
50,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash
obligations
|
|
$
|
408,487
|
|
|
$
|
251,122
|
|
|
$
|
27,047
|
|
|
$
|
68,099
|
|
|
$
|
62,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Commitment
Expiring by Period
|
|
|
|
|
|
|
Less than
|
|
|
One to
|
|
|
Three to
|
|
|
After Five
|
|
Other Commitments
|
|
Total
|
|
|
One Year
|
|
|
Three Years
|
|
|
Five Years
|
|
|
Years
|
|
|
Lines of credit
|
|
$
|
143,533
|
|
|
$
|
27,407
|
|
|
$
|
26,016
|
|
|
$
|
1,769
|
|
|
$
|
88,341
|
|
Standby letters of
credit
|
|
|
10,272
|
|
|
|
3,915
|
|
|
|
390
|
|
|
|
5,200
|
|
|
|
767
|
|
Other commitments
|
|
|
62,217
|
|
|
|
13,369
|
|
|
|
35,966
|
|
|
|
2,199
|
|
|
|
10,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments
|
|
$
|
216,022
|
|
|
$
|
44,691
|
|
|
$
|
62,372
|
|
|
$
|
9,168
|
|
|
$
|
99,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Instruments With Off-Balance Sheet Risk
The Company is party to financial instruments with off-balance
sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments
primarily include commitments to originate and sell loans,
standby letters of credit, unused lines of credit and unadvanced
portions of construction loans. The instruments involve, to
varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the consolidated balance
sheet. The contract or notational amounts of those instruments
reflect the extent of involvement the Company has in these
particular classes of financial instruments.
The Companys exposure to credit loss in the event of
non-performance by the other party to the financial instrument
for loan commitments, standby letters of credit and unadvanced
portions of construction loans is represented by the contractual
amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it
does for on-balance sheet instruments. Financial instruments
with off-balance sheet risk at December 31,are as follows:
|
|
|
|
|
|
|
|
|
Contract or Notational
Amount
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in thousands)
|
|
|
Financial instruments whose
contract amount represents credit risk:
|
|
|
|
|
|
|
|
|
Commitments to originate 1-4
family mortgages
|
|
$
|
1,814
|
|
|
$
|
2,511
|
|
Standby letters of credit
|
|
|
10,272
|
|
|
|
11,195
|
|
Unused lines of credit
|
|
|
143,533
|
|
|
|
118,008
|
|
Unadvanced portions of
construction loans
|
|
|
52,469
|
|
|
|
33,754
|
|
Unadvanced portions of other loans
|
|
|
7,934
|
|
|
|
10,907
|
|
20
Commitments to originate loans, unadvanced portions of
construction loans and unused letters of credit are generally
agreements to lend to a customer provided there is no violation
of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future
cash requirements. The Company evaluates each customers
credit worthiness on a
case-by-case
basis. The amount of collateral obtained, if deemed necessary by
the Company upon extension of credit, is based on
managements credit evaluation of the borrower.
Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance by a customer to a
third party. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending
loan facilities to customers.
Recent
Accounting Developments
FASB Emerging Issues Task Force (EITF)
Issue 03-1,
The Meaning of
Other-Than-Temporary
Impairment and Its Application to Certain Investments
In November 2005, the FASB issued FSP
FAS 115-1
and 124-1 The Meaning of
Other-Than-Temporary
Impairment and Its Application to Certain Investments.
This FSP nullifies certain requirements of
EITF 03-1
and supersedes EITF Topic
No. D-44,
Recognition of
Other-Than-Temporary
Impairment upon the Planned Sale of a Security Whose Cost
Exceeds Fair Value. This FSP addresses the determination
as to when an investment is considered impaired, whether that
impairment is other than temporary, and the measurement of an
impairment loss. Additionally, the FSP addresses accounting
considerations subsequent to the recognition of
other-than-temporarily
impairment and requires certain disclosures about unrealized
losses that have not been recognized as
other-than-temporary
impairments.
Other-than-temporary
impairment per FSP
FAS 115-1
and
FAS 124-1
require an investor to apply other existing guidance that is
pertinent to the determination of whether an impairment is other
than temporary rather than the evaluation guidance set forth in
EITF 03-1.
The guidance does require an impairment charge to be recognized
in the current period if it is determined that a security will
be sold in a subsequent period where the fair value is not
expected to be fully recovered by the time of sale. This FSP is
effective for
other-than-temporary
impairment analysis conducted in periods beginning after
December 15, 2005. The adoptions of
EITF 03-1
and
EITF 03-1-1did
not have a material impact on the Companys financial
position or results of operations and the Company does not
believe that the adoption of FSP
FAS 115-1
and 124-1 will have a material impact on the Companys
financial position.
In December 2004, the FASB issued a revised Statement
No. 123, (revised 2004) (SFAS 123R), Share-Based
Payment. This Statement replaces SFAS No. 123,
Accounting for Stock-Based Compensation
, and supercedes
APB Opinion No. 25,
Accounting for Stock Issued to
Employees
, and its related implementation guidance. This
Statement establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments
for goods or services. This Statement requires a public entity
to measure the cost of employee services received in exchange
for an award of equity instruments based on the grant-date fair
value of the award (with limited exceptions). That cost will be
recognized over the period during which an employee is required
to provide service in exchange for the
award-the
requisite service period (usually the vesting period).This
Statement is effective as of the beginning of the first annual
reporting period that begins after June 15, 2005. The
Company voted to accelerate the vesting of certain unvested
out-of-the-money
stock options awarded to Century Bank employees pursuant to the
Century Bancorp, Inc. 2000 and 2004 Employee Stock Option Plans
so that they immediately vested as of December 30, 2005.
The Board also voted a technical amendment to each of the Plans
to eliminate the possibility that the terms of any outstanding
or future stock option would require a cash settlement on the
occurrence of any circumstance outside the control of the
Company. These amendments avoid classification of the
Companys stock options as liabilities under SFAS 123R.
21
The Company decided to accelerate the vesting of certain stock
options primarily to reduce the non-cash compensation expense
that would otherwise be expected to be recorded in conjunction
with the Companys required adoption of SFAS 123R in
2006. SFAS 123R, which becomes effective for the Company on
January 1, 2006, is an accounting rule that requires
companies to record compensation expense over a stock
options vesting period, even if the exercise price of a
stock option exceeds the current market value of the
companys common stock. There will be no earnings impact in
2006.
On December 30, 2005 the Board vote approved the
acceleration and immediate vesting of all unvested options with
an exercise price of $31.60 and $31.83 or greater per share. As
a consequence of the Board vote, options to purchase
23,950 shares of Century Bancorp Class A common stock
became exercisable immediately. The average of the high and low
price at which the Companys common stock traded on
December 30, 2005, the date of the Board vote, was
$29.28 per share. The Company estimates that, as a result
of this accelerated vesting, approximately $190,000 of 2006
non-cash compensation expense will be eliminated that would
otherwise have been recognized in the Companys earnings.
22
CENTURY
BANCORP, INC.
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in thousands except
share data)
|
|
|
ASSETS
|
Cash and due from banks
(note 2)
|
|
$
|
47,626
|
|
|
$
|
36,209
|
|
Federal funds sold and
interest-bearing deposits in other banks
|
|
|
105,053
|
|
|
|
202,026
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
152,679
|
|
|
|
238,235
|
|
Securities
available-for-sale,
amortized cost $546,524 in 2005 and $614,729 in 2004
(note 3)
|
|
|
532,982
|
|
|
|
609,806
|
|
Securities
held-to-maturity,
market value $277,769 in 2005 and $343,399 in 2004 (notes 4
and 9)
|
|
|
286,578
|
|
|
|
345,369
|
|
Loans, net (note 5)
|
|
|
689,645
|
|
|
|
580,003
|
|
Less: allowance for loan losses
(note 6)
|
|
|
9,340
|
|
|
|
9,001
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
|
680,305
|
|
|
|
571,002
|
|
Bank premises and equipment
(note 7)
|
|
|
25,228
|
|
|
|
26,265
|
|
Accrued interest receivable
|
|
|
7,127
|
|
|
|
6,800
|
|
Other assets (note 12)
|
|
|
43,870
|
|
|
|
36,224
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,728,769
|
|
|
$
|
1,833,701
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Demand deposits
|
|
$
|
296,696
|
|
|
$
|
280,871
|
|
Savings and NOW deposits
|
|
|
239,326
|
|
|
|
268,317
|
|
Money market accounts
|
|
|
279,245
|
|
|
|
485,006
|
|
Time deposits (note 8)
|
|
|
401,773
|
|
|
|
359,816
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
1,217,040
|
|
|
|
1,394,010
|
|
Securities sold under agreements to
repurchase (note 9)
|
|
|
50,010
|
|
|
|
38,650
|
|
Other borrowed funds (note 10)
|
|
|
304,722
|
|
|
|
214,906
|
|
Subordinated debentures
(note 10)
|
|
|
36,083
|
|
|
|
65,722
|
|
Other liabilities
|
|
|
17,713
|
|
|
|
15,640
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,625,568
|
|
|
|
1,728,928
|
|
Commitments and contingencies
(notes 7, 14 and 15)
|
|
|
|
|
|
|
|
|
Stockholders equity
(note 11):
|
|
|
|
|
|
|
|
|
Common stock, Class A,
|
|
|
|
|
|
|
|
|
$1.00 par value per share;
authorized 10,000,000 shares; issued 3,453,202 shares
in 2005 and 3,434,448 shares in 2004
|
|
|
3,453
|
|
|
|
3,434
|
|
Common stock, Class B,
|
|
|
|
|
|
|
|
|
$1.00 par value per share;
authorized 5,000,000 shares; issued 2,082,240 shares
in 2005 and 2,099,640 shares in 2004
|
|
|
2,082
|
|
|
|
2,099
|
|
Additional
paid-in-capital
|
|
|
11,416
|
|
|
|
11,395
|
|
Retained earnings
|
|
|
97,338
|
|
|
|
92,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,289
|
|
|
|
109,539
|
|
Unrealized loses on securities
available-for-sale,
net of taxes
|
|
|
(8,270
|
)
|
|
|
(3,009
|
)
|
Additional minimum pension
liability, net of taxes
|
|
|
(2,818
|
)
|
|
|
(1,757
|
)
|
|
|
|
|
|
|
|
|
|
Total accumulated other
comprehensive income, net of taxes (note 3)
|
|
|
(11,088
|
)
|
|
|
(4,766
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
103,201
|
|
|
|
104,773
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
1,728,769
|
|
|
$
|
1,833,701
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements.
23
CENTURY
BANCORP, INC.
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands except
share data)
|
|
|
INTEREST INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
41,274
|
|
|
$
|
33,384
|
|
|
$
|
33,134
|
|
Securities
available-for-sale
|
|
|
19,540
|
|
|
|
18,529
|
|
|
|
28,738
|
|
Securities
held-to-maturity
|
|
|
11,635
|
|
|
|
12,296
|
|
|
|
7,152
|
|
Federal funds sold and
interest-bearing deposits in other banks
|
|
|
362
|
|
|
|
824
|
|
|
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
72,811
|
|
|
|
65,033
|
|
|
|
69,298
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and NOW deposits
|
|
|
3,552
|
|
|
|
2,268
|
|
|
|
2,586
|
|
Money market accounts
|
|
|
7,018
|
|
|
|
5,010
|
|
|
|
5,111
|
|
Time deposits (note 8)
|
|
|
8,835
|
|
|
|
6,833
|
|
|
|
7,246
|
|
Securities sold under agreements
to repurchase
|
|
|
813
|
|
|
|
331
|
|
|
|
457
|
|
Other borrowed funds and
subordinated debentures
|
|
|
12,602
|
|
|
|
9,204
|
|
|
|
8,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
32,820
|
|
|
|
23,646
|
|
|
|
23,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
39,991
|
|
|
|
41,387
|
|
|
|
45,356
|
|
Provision for loan losses
(note 6)
|
|
|
600
|
|
|
|
300
|
|
|
|
450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
39,391
|
|
|
|
41,087
|
|
|
|
44,906
|
|
OTHER OPERATING INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
|
|
5,846
|
|
|
|
5,271
|
|
|
|
4,782
|
|
Lockbox fees
|
|
|
2,807
|
|
|
|
2,950
|
|
|
|
3,186
|
|
Brokerage commissions
|
|
|
462
|
|
|
|
670
|
|
|
|
579
|
|
Net (losses) gains on sales of
securities
|
|
|
|
|
|
|
(91
|
)
|
|
|
1
|
|
Other income
|
|
|
1,858
|
|
|
|
1,631
|
|
|
|
1,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other operating income
|
|
|
10,973
|
|
|
|
10,431
|
|
|
|
10,009
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
(note 13)
|
|
|
24,197
|
|
|
|
23,266
|
|
|
|
21,763
|
|
Occupancy
|
|
|
3,798
|
|
|
|
2,997
|
|
|
|
2,648
|
|
Equipment
|
|
|
2,987
|
|
|
|
2,380
|
|
|
|
1,703
|
|
Other (note 16)
|
|
|
9,336
|
|
|
|
9,020
|
|
|
|
8,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
40,318
|
|
|
|
37,663
|
|
|
|
34,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
10,046
|
|
|
|
13,855
|
|
|
|
20,643
|
|
Provision for income taxes
(note 12)
|
|
|
3,166
|
|
|
|
4,974
|
|
|
|
7,780
|
|
Retroactive REIT settlement
(note 12)
|
|
|
|
|
|
|
|
|
|
|
1,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,880
|
|
|
$
|
8,881
|
|
|
$
|
11,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARE DATA (NOTE 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding, basic
|
|
|
5,535,202
|
|
|
|
5,526,202
|
|
|
|
5,519,800
|
|
Weighted average number of shares
outstanding, diluted
|
|
|
5,548,467
|
|
|
|
5,553,197
|
|
|
|
5,548,615
|
|
Net income per share, basic
|
|
$
|
1.24
|
|
|
$
|
1.61
|
|
|
$
|
2.12
|
|
Net income per share, diluted
|
|
|
1.24
|
|
|
|
1.60
|
|
|
|
2.11
|
|
See accompanying Notes to Consolidated Financial Statements.
24
CENTURY
BANCORP, INC.
Consolidated
Statements of Changes in Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Additional
|
|
|
|
|
|
Treasury
|
|
|
Treasury
|
|
|
Other
|
|
|
Total
|
|
|
|
Common
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Stock
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Class A
|
|
|
Class B
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
|
(Dollars in thousands except
share data)
|
|
|
BALANCE, DECEMBER 31, 2002
|
|
$
|
3,781
|
|
|
$
|
2,168
|
|
|
$
|
11,123
|
|
|
$
|
81,755
|
|
|
$
|
(5,941
|
)
|
|
$
|
(41
|
)
|
|
$
|
7,411
|
|
|
$
|
100,256
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,680
|
|
Other comprehensive income, net of
tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses arising
during period, net of $3,200 in taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,311
|
)
|
|
|
(6,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,369
|
|
Conversion of Class B Common
Stock to Class A Common Stock, 5,010 shares
|
|
|
5
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised,
7,013 shares
|
|
|
7
|
|
|
|
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111
|
|
Cash dividends, Class A Common
Stock, $0.45 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,532
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,532
|
)
|
Cash dividends, Class B Common
Stock, $0.225 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2003
|
|
|
3,793
|
|
|
|
2,163
|
|
|
|
11,227
|
|
|
|
91,427
|
|
|
|
(5,941
|
)
|
|
|
(41
|
)
|
|
|
1,100
|
|
|
|
103,728
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,881
|
|
Other comprehensive income, net of
tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses arising
during period, net of $2,741 in taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,164
|
)
|
|
|
(4,164
|
)
|
Less: reclassification adjustment
for gains included in net income, net of $36 in taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
55
|
|
Minimum pension liability adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,757
|
)
|
|
|
(1,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,015
|
|
Conversion of Class B Common
Stock to Class A Common Stock, 15,460 shares
|
|
|
16
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised,
9,650 shares
|
|
|
9
|
|
|
|
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
177
|
|
Cash dividends, Class A Common
Stock, $0.48 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,642
|
)
|
Cash dividends, Class B Common
Stock, $0.24 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(505
|
)
|
Elimination of treasury stock due
to change in Massachusetts law (Note 1)
|
|
|
(384
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
(5,550
|
)
|
|
|
5,941
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2004
|
|
|
3,434
|
|
|
|
2,099
|
|
|
|
11,395
|
|
|
|
92,611
|
|
|
|
|
|
|
|
|
|
|
|
(4,766
|
)
|
|
|
104,773
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,880
|
|
Other comprehensive income, net
of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses
arising during period, net of $3,357 in taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,261
|
)
|
|
|
(5,261
|
)
|
Minimum pension liability
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,061
|
)
|
|
|
(1,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
558
|
|
Conversion of Class B
Common Stock to Class A Common Stock,
17,400 shares
|
|
|
17
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised,
1,354 shares
|
|
|
2
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Cash dividends, Class A
Common Stock, $0.48 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,649
|
)
|
Cash dividends, Class B
Common Stock, $0.24 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31,
2005
|
|
$
|
3,453
|
|
|
$
|
2,082
|
|
|
$
|
11,416
|
|
|
$
|
97,338
|
|
|
|
|
|
|
|
|
|
|
$
|
(11,088
|
)
|
|
$
|
103,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements.
25
CENTURY
BANCORP, INC.
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands)
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,880
|
|
|
$
|
8,881
|
|
|
$
|
11,680
|
|
Adjustments to reconcile net income
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
600
|
|
|
|
300
|
|
|
|
450
|
|
Deferred income taxes
|
|
|
128
|
|
|
|
470
|
|
|
|
(1,416
|
)
|
Net depreciation and amortization
|
|
|
3,348
|
|
|
|
1,848
|
|
|
|
1,754
|
|
(Increase) decrease in accrued
interest receivable
|
|
|
(327
|
)
|
|
|
1,650
|
|
|
|
920
|
|
Increase in other assets
|
|
|
(3,646
|
)
|
|
|
(4,368
|
)
|
|
|
(6,639
|
)
|
Loans originated for sale
|
|
|
|
|
|
|
|
|
|
|
(267
|
)
|
Proceeds from sales of loans
|
|
|
|
|
|
|
|
|
|
|
270
|
|
Gain on sales of loans
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
Loss (gain) on sales of securities
available-for-sale
|
|
|
|
|
|
|
91
|
|
|
|
(1
|
)
|
Increase (decrease) in other
liabilities
|
|
|
299
|
|
|
|
1,699
|
|
|
|
(6,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
7,282
|
|
|
|
10,571
|
|
|
|
134
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from calls/maturities of
securities
available-for-sale
|
|
|
180,317
|
|
|
|
389,172
|
|
|
|
665,635
|
|
Proceeds from sales of securities
available-for-sale
|
|
|
|
|
|
|
88,198
|
|
|
|
|
|
Purchase of securities
available-for-sale
|
|
|
(112,235
|
)
|
|
|
(390,398
|
)
|
|
|
(616,783
|
)
|
Proceeds from calls/maturities of
securities
held-to-maturity
|
|
|
60,950
|
|
|
|
56,930
|
|
|
|
125,254
|
|
Purchase of securities
held-to-maturity
|
|
|
(2,022
|
)
|
|
|
(204,309
|
)
|
|
|
(195,991
|
)
|
(Decrease) increase in investments
purchased payable
|
|
|
|
|
|
|
(29,330
|
)
|
|
|
(13,739
|
)
|
Net (increase) decrease in loans
|
|
|
(110,369
|
)
|
|
|
(67,639
|
)
|
|
|
2,102
|
|
Capital expenditures
|
|
|
(1,916
|
)
|
|
|
(6,728
|
)
|
|
|
(10,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
14,725
|
|
|
|
(164,104
|
)
|
|
|
(43,739
|
)
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in time deposit
accounts
|
|
|
41,957
|
|
|
|
199
|
|
|
|
137,292
|
|
Net (decrease) increase in demand,
savings, money market and NOW deposits
|
|
|
(218,927
|
)
|
|
|
54,958
|
|
|
|
55,277
|
|
Net proceeds from the exercise of
stock options
|
|
|
23
|
|
|
|
177
|
|
|
|
112
|
|
Cash dividends
|
|
|
(2,153
|
)
|
|
|
(2,147
|
)
|
|
|
(2,008
|
)
|
Net increase (decrease) in
securities sold under agreements to repurchase
|
|
|
11,360
|
|
|
|
(1,400
|
)
|
|
|
(11,750
|
)
|
Net increase (decrease) in other
borrowed funds
|
|
|
89,816
|
|
|
|
78,577
|
|
|
|
(33,091
|
)
|
Issuance (retirement) of
subordinated debentures
|
|
|
(29,639
|
)
|
|
|
36,083
|
|
|
|
889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
financing activities
|
|
|
(107,563
|
)
|
|
|
166,447
|
|
|
|
146,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and
cash equivalents
|
|
|
(85,556
|
)
|
|
|
12,914
|
|
|
|
103,116
|
|
Cash and cash equivalents at
beginning of year
|
|
|
238,235
|
|
|
|
225,321
|
|
|
|
122,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of
year
|
|
$
|
152,679
|
|
|
$
|
238,235
|
|
|
$
|
225,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
33,369
|
|
|
$
|
23,165
|
|
|
$
|
24,102
|
|
Income taxes
|
|
|
3,050
|
|
|
|
4,600
|
|
|
|
15,632
|
|
Change in unrealized gains on
securities
available-for-sale,
net of taxes
|
|
$
|
(5,261
|
)
|
|
$
|
(4,109
|
)
|
|
$
|
(6,311
|
)
|
See accompanying Notes to Consolidated Financial Statements.
26
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial Statements
1. Summary
of Significant Accounting Policies
BASIS
OF FINANCIAL STATEMENT PRESENTATION
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 consolidated financial statements also
include the accounts of the Banks wholly-owned
subsidiaries, Century Subsidiary Investments, Inc. (CSII),
Century Subsidiary Investments, Inc. II (CSII II),
Century Subsidiary Investments, Inc. III
(CSII III) and Century Financial Services Inc. (CFSI).
CSII, CSII II, CSII III are engaged in buying, selling
and holding investment securities. CFSI has the power to engage
in financial agency, securities brokerage and investment and
financial advisory services and related securities credit.
The Company also owns 100% of Century Bancorp Capital
Trust II (CBCT II). The entity is an unconsolidated
subsidiary of the Company.
All significant intercompany accounts and transactions have been
eliminated in consolidation. 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 Federal Deposit Insurance Corporation
(the FDIC) and the Commonwealth of Massachusetts
Commissioner of Banks. 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
Companys business are highly competitive. The Company
faces aggressive competition from other lending institutions and
from numerous other providers of financial services. The Company
has one reportable operating segment.
The financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America 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 loan losses. Management
believes that the allowance for loan losses is adequate based on
independent appraisals and review of other factors associated
with the loans. While management uses available information to
recognize loan losses, future additions to the allowance for
loan losses may be necessary based on changes in economic
conditions. In addition, regulatory agencies periodically review
the Companys allowance for loan losses. Such agencies may
require the Company to recognize additions to the allowance for
loan losses based on their judgements about information
available to them at the time of their examination.
Certain reclassifications were made to prior year amounts to
conform with the current year presentation.
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
27
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
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 write down 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.
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 or 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 managements evaluation as to the
collectibility of principal.
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 the present value of the expected future cash flows
discounted at the loans 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. 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. Loans are charged-off when management believes
that the collectibility of the loans 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.
ALLOWANCE
FOR LOAN LOSSES
The allowance for loan losses is based on managements
evaluation of the quality of the loan portfolio and is used to
provide for 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.
Management maintains an allowance for loan losses to absorb
losses inherent in the loan portfolio. The allowance is based on
assessments of the probable estimated losses inherent in the
loan portfolio. Managements methodology for assessing the
appropriateness of the allowance consists of several key
elements, which include the formula allowance, specific
allowances for identified problem loans and the unallocated
allowance.
28
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
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 managements
opinion, collectibility is not probable.
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.
STOCK
OPTION ACCOUNTING
The Company currently accounts for employee stock options using
the intrinsic value method. Under the intrinsic value method, no
compensation cost is recognized related to options if the
exercise price of the option is greater than or equal to the
fair market value of the underlying stock on the date of grant.
Under an alternative method, the fair value method, the
cost of the option is estimated on the date of grant
using an option valuation model and recognized as compensation
expense over the vesting period of the option. The Company
generally awards stock options annually.
Had compensation cost for the Companys stock option plans
been determined based on the fair value at the grant date, the
Companys net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands,
|
|
|
|
except share data)
|
|
|
Net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
6,880
|
|
|
$
|
8,881
|
|
|
$
|
11,680
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma stock based compensation
cost (net of tax):
|
|
$
|
282
|
|
|
$
|
151
|
|
|
$
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma and diluted
|
|
$
|
6,598
|
|
|
$
|
8,730
|
|
|
$
|
11,540
|
|
Basic earning per share
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
1.24
|
|
|
$
|
1.61
|
|
|
$
|
2.12
|
|
Pro forma
|
|
$
|
1.19
|
|
|
$
|
1.58
|
|
|
$
|
2.09
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
1.24
|
|
|
$
|
1.60
|
|
|
$
|
2.11
|
|
Pro forma
|
|
$
|
1.19
|
|
|
$
|
1.57
|
|
|
$
|
2.08
|
|
In determining the pro forma amounts, the fair value of each
option grant was estimated as of the date of grant using
Black-Scholes option-pricing model with the following weighted
average assumptions:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2004
|
|
|
2003
|
|
|
Dividend yields
|
|
|
1.59
|
%
|
|
|
1.69
|
%
|
Expected life
|
|
|
9 years
|
|
|
|
8 years
|
|
Expected volatility
|
|
|
28
|
%
|
|
|
26
|
%
|
Risk-free interest rate
|
|
|
3.95
|
%
|
|
|
3.78
|
%
|
On December 30, 2005 the Board vote approved the
acceleration and immediate vesting of all unvested options with
an exercise price of $31.60 and $31.83 or greater per share. As
a consequence of the Board vote, options to purchase
23,950 shares of Century Bancorp Class A common stock
became exercisable immediately. The average
29
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
of the high and low price at which the Companys common
stock traded on December 30, 2005, the date of the Board
vote, was $29.28 per share. The Company estimates that, as
a result of this accelerated vesting, approximately $190,000 of
2006 non-cash compensation expense will be eliminated that would
otherwise have been recognized in the Companys earnings.
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.
TREASURY
STOCK
Effective July 1, 2004, companies incorporated in
Massachusetts became subject to Chapter 156D of the
Massachusetts Business Corporation Act, provisions of which
eliminate the concept of treasury stock and provide that shares
reaquired by a company are to be treated as authorized but
unissued shares. As a result of this change in law, the Company
has reclassified, for the balance sheets presented, shares
previously classified as treasury shares as a reduction to
issued shares of common stock, and, accordingly, adjusted the
stated value of common stock and paid in capital. At
December 31, 2004 the Company had 431,150 shares at a
cost of $5,982,000 previously classified as treasury stock.
PENSION
The Bank provides pension benefits to its employees under a
noncontributory, defined benefit plan which is funded on a
current basis in compliance with the requirements at the
Employee Retirement Income Security Act of 1974 (ERISA) and
recognizes costs over the estimated employee service period.
|
|
2.
|
Cash and
Due From Banks
|
The Company is required to maintain a portion of its cash and
due from banks as a reserve balance under the Federal Reserve
Act. Such reserve is calculated based upon deposit levels and
amounted to $746,000 at December 31, 2005 and $725,000 at
December 31, 2004.
|
|
3.
|
Securities
Available-for-Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
December 31, 2004
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. Government and Agencies
|
|
$
|
301,914
|
|
|
|
|
|
|
$
|
7,782
|
|
|
$
|
294,132
|
|
|
$
|
384,504
|
|
|
$
|
182
|
|
|
$
|
3,824
|
|
|
$
|
380,862
|
|
Mortgage Backed Securities
|
|
|
224,256
|
|
|
|
24
|
|
|
|
5,728
|
|
|
|
218,552
|
|
|
|
187,170
|
|
|
|
165
|
|
|
|
1,577
|
|
|
|
185,758
|
|
Obligations of states and political
subdivisions
|
|
|
807
|
|
|
|
|
|
|
|
|
|
|
|
807
|
|
|
|
499
|
|
|
|
|
|
|
|
|
|
|
|
499
|
|
FHLB Stock
|
|
|
16,312
|
|
|
|
|
|
|
|
|
|
|
|
16,312
|
|
|
|
13,895
|
|
|
|
|
|
|
|
|
|
|
|
13,895
|
|
Other
|
|
|
3,235
|
|
|
|
46
|
|
|
|
102
|
|
|
|
3,179
|
|
|
|
28,661
|
|
|
|
174
|
|
|
|
43
|
|
|
|
28,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
546,524
|
|
|
$
|
70
|
|
|
$
|
13,612
|
|
|
$
|
532,982
|
|
|
$
|
614,729
|
|
|
$
|
521
|
|
|
$
|
5,444
|
|
|
$
|
609,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2003
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. Government and Agencies
|
|
$
|
674,766
|
|
|
$
|
3,981
|
|
|
$
|
2,253
|
|
|
$
|
676,494
|
|
Mortgage Backed Securities
|
|
|
8,977
|
|
|
|
209
|
|
|
|
145
|
|
|
|
9,041
|
|
Obligations of states and
political subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB Stock
|
|
|
13,084
|
|
|
|
|
|
|
|
|
|
|
|
13,084
|
|
Other
|
|
|
4,617
|
|
|
|
278
|
|
|
|
179
|
|
|
|
4,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
701,444
|
|
|
$
|
4,468
|
|
|
$
|
2,577
|
|
|
$
|
703,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in U.S. Government and Agencies is one
U.S. Government security totalling $2,000,000 with gross
unrealized gains (losses) totalling ($21,000), ($5,000) and
$6,000 in 2005, 2004 and 2003, respectively. Also included in
U.S. Government and Agency securities are securities pledged to
secure public deposits and repurchase agreements amounting to
$53,774,000 at December 31, 2005. Also included are
securities pledged for borrowing at the Federal Home
Loan Bank amounting to $262,051,000 at December 31,
2005.
The following table shows the temporarily impaired securities of
the Companys securities
available-for-sale
portfolio at December 31, 2005. This table shows the
unrealized market loss of securities that have been in a
continuous unrealized loss position for 12 months or less
and a continuous loss position for 12 months and longer.
There are 22 and 99 securities that are temporarily impaired for
less than 12 months and for 12 months or longer,
respectively out of a total of 178 holdings at
December 31,2005. The Company believes that the investments
are temporarily impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
Less Than
12 Months
|
|
|
12 Months or
Longer
|
|
|
Total
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
Temporarily Impaired
Investments*
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. Government and
Agencies
|
|
$
|
16,636
|
|
|
$
|
346
|
|
|
$
|
277,496
|
|
|
$
|
7,436
|
|
|
$
|
294,132
|
|
|
$
|
7,782
|
|
Mortgage Backed
Securities
|
|
|
72,786
|
|
|
|
1,308
|
|
|
|
144,913
|
|
|
|
4,420
|
|
|
|
217,699
|
|
|
|
5,728
|
|
Other
|
|
|
132
|
|
|
|
16
|
|
|
|
1,464
|
|
|
|
86
|
|
|
|
1,596
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired
securities
|
|
$
|
89,554
|
|
|
$
|
1,670
|
|
|
$
|
423,873
|
|
|
$
|
11,942
|
|
|
$
|
513,427
|
|
|
$
|
13,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The decline in market value is attributable to changes in
interest rates and not credit quality and because the Company
has the ability and intent to hold these investments until
recovery of fair value, which may be maturity, the Company does
not consider these investments to be
other-than-temporarily
impaired at December 31, 2005.
|
31
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
The following table shows the temporary impaired securities of
the Companys securities
available-for-sale
portfolio at December 31, 2004. This table shows the
unrealized market loss of securities that have been in a
continuous unrealized loss position for 12 months or less
and a continuous loss position for 12 months and longer.
There are 93 and 9 securities that are temporarily impaired for
less than 12 months and for 12 months or longer,
respectively out of a total of 176 holdings at December 31,
2004. The Company believes that the investments are temporarily
impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004
|
|
|
|
Less Than
12 Months
|
|
|
12 Months or
Longer
|
|
|
Total
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
Temporarily Impaired
Investments*
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. Government and Agencies
|
|
$
|
238,849
|
|
|
$
|
3,064
|
|
|
$
|
29,232
|
|
|
$
|
760
|
|
|
$
|
268,081
|
|
|
$
|
3,824
|
|
Mortgage Backed Securities
|
|
|
161,567
|
|
|
|
1,436
|
|
|
|
4,258
|
|
|
|
141
|
|
|
|
165,825
|
|
|
|
1,577
|
|
Other
|
|
|
25,990
|
|
|
|
12
|
|
|
|
1,519
|
|
|
|
31
|
|
|
|
27,509
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired
securities
|
|
$
|
426,406
|
|
|
$
|
4,512
|
|
|
$
|
35,009
|
|
|
$
|
932
|
|
|
$
|
461,415
|
|
|
$
|
5,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The decline in market value is attributable to changes in
interest rates and not credit quality and because the Company
has the ability and intent to hold these investments until
recovery of fair value, which may be maturity, the Company does
not consider these investments to be
other-than-temporarily
impaired at December 31, 2004.
|
The following tables show the contractual maturity distribution
of the Companys securities
available-for-sale
at December 31, 2005 and the weighted average yields of
securities, which are based on the amortized cost, calculated on
a fully taxable equivalent basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of States and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
|
|
|
|
|
Political
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
U.S. Government
|
|
|
|
|
|
Backed
|
|
|
|
|
|
Subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
|
and Agencies
|
|
|
Yield
|
|
|
Securities
|
|
|
Yield
|
|
|
and Other
|
|
|
Yield
|
|
|
Total
|
|
|
Yield
|
|
|
Value
|
|
|
|
(Dollars in thousands)
|
|
|
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within one year
|
|
$
|
74,997
|
|
|
|
2.29
|
%
|
|
$
|
|
|
|
|
0.00
|
%
|
|
$
|
907
|
|
|
|
3.36
|
%
|
|
$
|
75,904
|
|
|
|
2.30
|
%
|
|
$
|
74,785
|
|
After one but within five
years
|
|
|
226,917
|
|
|
|
3.09
|
%
|
|
|
220,544
|
|
|
|
3.97
|
%
|
|
|
600
|
|
|
|
4.20
|
%
|
|
|
448,061
|
|
|
|
3.52
|
%
|
|
|
435,898
|
|
After five but within ten
years
|
|
|
|
|
|
|
0.00
|
%
|
|
|
3,713
|
|
|
|
3.52
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
3,713
|
|
|
|
3.52
|
%
|
|
|
3,499
|
|
Non-maturing
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
18,846
|
|
|
|
4.30
|
%
|
|
|
18,846
|
|
|
|
4.30
|
%
|
|
|
18,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
301,914
|
|
|
|
2.89
|
%
|
|
$
|
224,257
|
|
|
|
3.96
|
%
|
|
$
|
20,353
|
|
|
|
4.25
|
%
|
|
$
|
546,524
|
|
|
|
3.38
|
%
|
|
$
|
532,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The actual maturities of mortgage backed securities,
collateralized mortgage obligations and corporate debt
securities will differ from the contractual maturities due to
the ability of the issuers to prepay underlying obligations.
The weighted average remaining life of investment securities
available-for-sale
at December 31, 2005, 2004 and 2003 was 2.3, 2.7 and
3.5 years, respectively. Included in the weighted average
remaining life calculation at December 31, 2005 and 2004
there were $15,000,000 and $134,100,000 respectively of U.S.
agency obligations that are callable at the discretion of the
issuer. These call dates were not utilized in computing the
weighted average remaining life. The Bank realized gross gains
in 2004 and 2003 of $693,000 and $0, respectively. The Bank
realized gross losses in 2004 and 2003 of $784,000 and $1,000,
respectively.
32
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
4.
|
Investment
Securities
Held-to-Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
December 31, 2004
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. Government
Agencies
|
|
$
|
159,952
|
|
|
$
|
|
|
|
$
|
4,770
|
|
|
$
|
155,182
|
|
|
$
|
186,324
|
|
|
$
|
175
|
|
|
$
|
1,609
|
|
|
$
|
184,890
|
|
Mortgage Backed
Securities
|
|
|
126,626
|
|
|
|
109
|
|
|
|
4,148
|
|
|
|
122,587
|
|
|
|
159,045
|
|
|
|
589
|
|
|
|
1,125
|
|
|
|
158,509
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
286,578
|
|
|
$
|
109
|
|
|
$
|
8,918
|
|
|
$
|
277,769
|
|
|
$
|
345,369
|
|
|
$
|
764
|
|
|
$
|
2,734
|
|
|
$
|
343,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2003
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. Government Agencies
|
|
$
|
6,400
|
|
|
$
|
278
|
|
|
$
|
|
|
|
$
|
6,678
|
|
Mortgage Backed Securities
|
|
|
191,447
|
|
|
|
1,548
|
|
|
|
908
|
|
|
|
192,087
|
|
Other
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
197,872
|
|
|
$
|
1,826
|
|
|
$
|
908
|
|
|
$
|
198,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in U.S. Government Agencies securities are
securities pledged to secure public deposits amounting to
$6,000,000 at December 31, 2005. Also included are
securities pledged for borrowing at the Federal Home
Loan Bank amounting to $124,632,000 at December 31,
2005.
The following table shows the temporarily impaired securities of
the Companys securities
held-to-maturity
portfolio at December 31, 2005. This table shows the
unrealized market loss of securities that have been in a
continuous unrealized loss position for 12 months or less
and a continuous loss position for 12 months and longer.
There are 20 and 64 securities that are temporarily impaired for
less than 12 months and for 12 months or longer,
respectively out of a total of 91 holdings at December 31,
2005. The Company believes that the investments are temporarily
impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
Less Than
12 Months
|
|
|
12 Months or
Longer
|
|
|
Total
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
Temporarily Impaired
Investments*
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. Government
Agencies
|
|
$
|
19,561
|
|
|
$
|
407
|
|
|
$
|
135,621
|
|
|
$
|
4,363
|
|
|
$
|
155,182
|
|
|
$
|
4,770
|
|
Mortgage Backed
Securities
|
|
|
29,740
|
|
|
|
624
|
|
|
|
89,038
|
|
|
|
3,524
|
|
|
|
118,778
|
|
|
|
4,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired
securities
|
|
$
|
49,301
|
|
|
$
|
1,031
|
|
|
$
|
224,659
|
|
|
$
|
7,887
|
|
|
$
|
273,960
|
|
|
$
|
8,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The decline in market value is attributable to changes in
interest rates and not credit quality and because the Company
has the ability and intent to hold these investments until
recovery of fair value, which may be maturity, the Company does
not consider these investments to be
other-than-temporarily
impaired at December 31, 2005.
|
33
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
The following table shows the temporary impaired securities of
the Companys securities
held-to-maturity
portfolio at December 31, 2004. This table shows the
unrealized market loss of securities that have been in a
continuous unrealized loss position for 12 months or less
and a continuous loss position for 12 months and longer.
There are 50 and 5 securities temporarily impaired for less than
12 months and for 12 months or longer, respectively
out of a total of 98 holdings at December 31, 2004. The
Company believes that the investments are temporarily impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004
|
|
|
|
Less Than
12 Months
|
|
|
12 Months or
Longer
|
|
|
Total
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
Temporarily Impaired
Investments*
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. Government Agencies
|
|
$
|
133,367
|
|
|
$
|
1,609
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
133,367
|
|
|
$
|
1,609
|
|
Mortgage Backed Securities
|
|
|
74,165
|
|
|
|
673
|
|
|
|
15,678
|
|
|
|
452
|
|
|
|
89,843
|
|
|
|
1,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired
securities
|
|
$
|
207,532
|
|
|
$
|
2,282
|
|
|
$
|
15,678
|
|
|
$
|
452
|
|
|
$
|
223,210
|
|
|
$
|
2,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The decline in market value is attributable to changes in
interest rates and not credit quality and because the Company
has the ability and intent to hold these investments until
recovery of fair value, which may be maturity, the Company does
not consider these investments to be
other-than-temporarily
impaired at December 31, 2004.
|
The following tables show the contractual maturity distribution
of the Companys securities
held-to-maturity
at December 31, 2005 and the weighted average yields of
securities, which are based on the amortized cost, calculated on
a fully taxable equivalent basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
Mortgage
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
Government
|
|
|
|
|
|
Backed
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
Agencies
|
|
|
Yield
|
|
|
Securities
|
|
|
Yield
|
|
|
Total
|
|
|
Yield
|
|
|
Value
|
|
|
|
(Dollars in thousands)
|
|
|
Within one year
|
|
$
|
|
|
|
|
0.00
|
%
|
|
$
|
297
|
|
|
|
6.52
|
%
|
|
$
|
297
|
|
|
|
6.52
|
%
|
|
$
|
302
|
|
After one but within five
years
|
|
|
159,952
|
|
|
|
3.27
|
%
|
|
|
117,230
|
|
|
|
4.20
|
%
|
|
|
277,182
|
|
|
|
3.67
|
%
|
|
|
268,793
|
|
After five but within ten
years
|
|
|
|
|
|
|
0.00
|
%
|
|
|
9,099
|
|
|
|
4.04
|
%
|
|
|
9,099
|
|
|
|
4.04
|
%
|
|
|
8,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
159,952
|
|
|
|
3.27
|
%
|
|
$
|
126,626
|
|
|
|
4.20
|
%
|
|
$
|
286,578
|
|
|
|
3.68
|
%
|
|
$
|
277,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The actual maturities of mortgage backed securities,
collateralized mortgage obligations and corporate debt
securities will differ from the contractual maturities due to
the ability of the assuers to prepay underlying obligations.
The weighted average remaining life of investment securities
held-to-maturity
at December 31, 2005, 2004 and 2003 was 3.0, 3.3 and
3.5 years, respectively. Included in the weighted average
remaining life calculation at December 31, 2005 and 2004
there were $5,000,000 and $139,900,000 respectively of U.S.
agency obligations that are callable at the discretion of the
issuer. These call dates were not utilized in computing the
weighted average remaining life.
The Companys lending activities are conducted principally
in Massachusetts. The company grants single and multi-family
residential loans, commercial and commercial real estate loans,
and a variety of consumer loans. To a lesser extent, the Company
grants loans for the construction of residential homes,
multi-family properties, commercial real estate properties, and
land development. Most loans granted by the company are secured
by real estate collateral. The ability and willingness of
commercial real estate, commercial, construction, residential
34
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
and consumer loan borrowers to honor their repayment commitments
is generally dependent on the health of the real estate market
in the borrowers geographic areas and the general economy.
The following summary shows the composition of the loan
portfolio at the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
Amount
|
|
|
of Total
|
|
|
Amount
|
|
|
of Total
|
|
|
Amount
|
|
|
of Total
|
|
|
Amount
|
|
|
of Total
|
|
|
Amount
|
|
|
of Total
|
|
|
Construction and land development
|
|
$
|
58,846
|
|
|
|
8.5
|
%
|
|
$
|
51,918
|
|
|
|
9.0
|
%
|
|
$
|
34,121
|
|
|
|
6.7
|
%
|
|
$
|
33,155
|
|
|
|
6.4
|
%
|
|
$
|
39,256
|
|
|
|
8.5
|
%
|
Commercial and industrial
|
|
|
94,139
|
|
|
|
13.7
|
%
|
|
|
71,962
|
|
|
|
12.4
|
%
|
|
|
39,742
|
|
|
|
7.8
|
%
|
|
|
46,044
|
|
|
|
9.0
|
%
|
|
|
59,162
|
|
|
|
12.8
|
%
|
Industrial revenue bonds
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
48
|
|
|
|
0.0
|
%
|
Commercial real estate
|
|
|
302,279
|
|
|
|
43.8
|
%
|
|
|
258,524
|
|
|
|
44.6
|
%
|
|
|
293,781
|
|
|
|
57.3
|
%
|
|
|
291,598
|
|
|
|
56.7
|
%
|
|
|
241,419
|
|
|
|
52.2
|
%
|
Residential real estate
|
|
|
146,355
|
|
|
|
21.2
|
%
|
|
|
118,223
|
|
|
|
20.4
|
%
|
|
|
86,780
|
|
|
|
16.9
|
%
|
|
|
92,291
|
|
|
|
17.9
|
%
|
|
|
88,450
|
|
|
|
19.1
|
%
|
Consumer
|
|
|
9,977
|
|
|
|
1.5
|
%
|
|
|
8,607
|
|
|
|
1.5
|
%
|
|
|
8,025
|
|
|
|
1.6
|
%
|
|
|
8,169
|
|
|
|
1.6
|
%
|
|
|
7,701
|
|
|
|
1.7
|
%
|
Home Equity
|
|
|
76,710
|
|
|
|
11.1
|
%
|
|
|
69,957
|
|
|
|
12.0
|
%
|
|
|
49,382
|
|
|
|
9.6
|
%
|
|
|
41,527
|
|
|
|
8.1
|
%
|
|
|
26,016
|
|
|
|
5.6
|
%
|
Overdrafts
|
|
|
1,339
|
|
|
|
0.2
|
%
|
|
|
812
|
|
|
|
0.1
|
%
|
|
|
483
|
|
|
|
0.1
|
%
|
|
|
1,465
|
|
|
|
0.3
|
%
|
|
|
720
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
689,645
|
|
|
|
100.0
|
%
|
|
$
|
580,003
|
|
|
|
100.0
|
%
|
|
$
|
512,314
|
|
|
|
100.0
|
%
|
|
$
|
514,249
|
|
|
|
100.0
|
%
|
|
$
|
462,772
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2005, 2004, 2003, 2002 and 2001 loans were
carried net of discounts of $4,000, $20,000, $138,000, $492,000,
and $969,000 respectively. Included in these amounts at
December 31, 2005, 2004, 2003, 2002 and 2001, residential
real estate loans were carried net of discounts of $0, $16,000,
$133,000, $487,000 and $959,000 respectively, associated with
the acquisition of loans from another financial institution. Net
deferred loan fees of $482,000, $485,000, $389,000, $315,000,
and $389,000 were carried in 2005, 2004, 2003, 2002 and 2001
respectively.
The following table summarizes the remaining maturity
distribution of certain components of the Companys loan
portfolio on December 31, 2005. The table excludes loans
secured by
one-to-four
family residential real estate and loans for household and
family personal expenditures. Maturities are presented as if
scheduled principal amortization payments are due on the last
contractual payment date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Maturities of Selected
Loans at
|
|
|
|
December 31, 2005
|
|
|
|
One Year
|
|
|
One to Five
|
|
|
Over
|
|
|
|
|
|
|
or Less
|
|
|
Years
|
|
|
Five Years
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Construction and land
development
|
|
$
|
19,973
|
|
|
$
|
31,270
|
|
|
$
|
7,603
|
|
|
$
|
58,846
|
|
Commercial and
industrial
|
|
|
39,999
|
|
|
|
46,011
|
|
|
|
8,129
|
|
|
|
94,139
|
|
Commercial real
estate
|
|
|
34,762
|
|
|
|
107,441
|
|
|
|
160,076
|
|
|
|
302,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
94,734
|
|
|
$
|
184,722
|
|
|
$
|
175,808
|
|
|
$
|
455,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
The following table indicates the rate variability of the above
loans due after one year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
One to Five
|
|
|
Over
|
|
|
|
|
|
|
Years
|
|
|
Five Years
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Predetermined interest
rates
|
|
$
|
111,403
|
|
|
$
|
26,869
|
|
|
$
|
138,272
|
|
Floating or adjustable interest
rates
|
|
|
73,319
|
|
|
|
148,939
|
|
|
|
222,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
184,722
|
|
|
$
|
175,808
|
|
|
$
|
360,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys commercial and industrial (C&I) loan
customers represent various small and middle market established
businesses involved in manufacturing, distribution, retailing
and services. Most clients are privately owned with markets that
range from local to national in scope. Many of the loans to this
segment are secured by liens on corporate assets and the
personal guarantees of the principals. The Bank is placing
greater emphasis on building its C&I base in the future. The
regional economic strength or weakness impacts the relative
risks in this loan category. There is little concentration to
any one business sector and loan risks are generally diversified
among many borrowers.
Commercial real estate loans are extended to finance various
manufacturing, warehouse, light industrial, office, retail and
residential properties in the Banks market area, which
generally includes Eastern Massachusetts and Southern New
Hampshire. Loans are normally extended in amounts up to a
maximum of 80% of appraised value and normally for terms between
three to five years. Amortization schedules are long-term and
thus a balloon payment is due at maturity. Under most
circumstances, the Bank will offer to re-write or otherwise
extend the loan at prevailing interest rates. During recent
years, the Bank has emphasized non-residential type
owner-occupied properties. This compliments our C&I emphasis
placed on the operating business entities and will be continued.
The regional economic environment affects the risk of both
non-residential and residential mortgages.
Residential real estate (1-4 family) includes two categories of
loans. Approximately $10,322,000 of loans are classified as
Commercial and Industrial type loans secured by 1-4
family real estate. Primarily, these are small businesses with
modest capital or shorter operating histories where the
collateral mitigates some risk. This category of loans shares
similar risk characteristics with the C&I loans,
notwithstanding the collateral position.
The other category of residential real estate loans are mostly
1-4 family residential properties located in the Banks
market area. General underwriting criteria are largely the same
as those used by Fannie Mae but normally only one or three year
adjustable interest rates are used. The Bank utilizes mortgage
insurance to provide lower down payment products and has
provided a First Time Homebuyer product to encourage
new home ownership. Residential real estate loan volume has
increased and remains a core consumer product. The economic
environment impacts the risks associated with this category.
Home equity loans are extended as both first and second
mortgages on owner occupied residential properties in the
Banks market area. Loans are underwritten to a maximum
loan to property value of 75%.
The Bank intends to maintain a market for construction loans,
principally for smaller local residential projects or an owner
occupied commercial project. Individual consumer residential
home construction loans are also extended on a similar basis.
Bank officers evaluate the feasibility of construction projects,
based on independent appraisals of the project, architects or
engineers evaluations of the cost of construction, and other
relevant data. As of December 31, 2005, the Company was
obligated to advance a total of $52,469,000 to complete projects
under construction.
36
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
The composition of non-accrual loans and impaired loan
agreements is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(Dollars in thousands)
|
|
|
Loans on non-accrual
|
|
$
|
949
|
|
|
$
|
628
|
|
|
$
|
1,175
|
|
|
$
|
511
|
|
|
$
|
423
|
|
Impaired loans on non-accrual
included above
|
|
$
|
886
|
|
|
$
|
452
|
|
|
$
|
1,137
|
|
|
$
|
487
|
|
|
$
|
292
|
|
Total recorded investment in
impaired loans
|
|
$
|
886
|
|
|
$
|
964
|
|
|
$
|
1,618
|
|
|
$
|
1,116
|
|
|
$
|
1,089
|
|
Average recorded value of impaired
loans
|
|
$
|
1,384
|
|
|
$
|
1,156
|
|
|
$
|
2,043
|
|
|
$
|
1,273
|
|
|
$
|
2,149
|
|
Loans 90 days past due and
still accruing
|
|
$
|
|
|
|
$
|
160
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9
|
|
Interest income on non-accrual
loans according to their original terms
|
|
$
|
75
|
|
|
$
|
66
|
|
|
$
|
100
|
|
|
$
|
50
|
|
|
$
|
43
|
|
Interest income on non-accrual
loans actually recorded
|
|
$
|
|
|
|
$
|
|
|
|
$
|
70
|
|
|
$
|
|
|
|
$
|
32
|
|
Interest income recognized on
impaired loans
|
|
$
|
202
|
|
|
$
|
105
|
|
|
$
|
116
|
|
|
$
|
60
|
|
|
$
|
116
|
|
The composition of impaired loans at December 31, is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
Residential real estate,
multi-family
|
|
$
|
|
|
|
$
|
512
|
|
|
$
|
541
|
|
|
$
|
629
|
|
|
$
|
656
|
|
Construction and land development
|
|
|
675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
487
|
|
|
|
433
|
|
Commercial and industrial
|
|
|
211
|
|
|
|
452
|
|
|
|
1,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
886
|
|
|
$
|
964
|
|
|
$
|
1,618
|
|
|
$
|
1,116
|
|
|
$
|
1,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no impaired loans with specific reserves from
December 31, 2000 through December 31, 2005 and in the
opinion of management, none of the above listed impaired loans
required a specific reserve.
The Company was servicing mortgage loans sold to others without
recourse of approximately $1,078,000, $1,538,000, $2,397,000,
$4,444,000 and $6,888,000 at December 31, 2005, 2004, 2003,
2002 and at December 31, 2001 respectively. Additionally,
the Company was servicing mortgage loans sold to others with
limited recourse. The outstanding balance of these loans with
limited recourse was approximately $80,000, $86,000, $183,000,
$194,000, and $338,000 at December 31, 2005, 2004, 2003,
2002 and at December 31, 2001 respectively.
Directors and officers of the Company and their associates are
customers of, and have other transactions with, the Company in
the normal course of business. All loans and commitments
included in such transactions were made on substantially the
same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
persons and do not involve more than normal risk of collection
or present other unfavorable features.
The following table shows the aggregate amount of loans to
directors and officers of the Company and their associates
during 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
Repayments
|
|
|
Balance at
|
|
December 31, 2004
|
|
Additions
|
|
|
and Deletions
|
|
|
December 31, 2005
|
|
(Dollars in thousands)
|
|
|
$1,482
|
|
$
|
743
|
|
|
$
|
289
|
|
|
$
|
1,936
|
|
Loans are placed on non-accrual status when any payment of
principal
and/or
interest is 90 days or more past due, unless the collateral
is sufficient to cover both principal and interest and the loan
is in the process of collection. The Company monitors closely
the performance of its loan portfolio. In addition to internal
loan review, the Company has contracted with an independent
organization to review the Companys commercial and
commercial
37
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
real estate loan portfolios. This independent review was
performed in each of the past five years. The status of
delinquent loans, as well as situations identified as potential
problems, are reviewed on a regular basis by senior management
and monthly by the Board of Directors of the Company.
The relatively low level of nonperforming assets of $949,000 in
2005 and $628,000 in 2004 resulted from fewer additions to
nonperforming assets during the year combined with an
improvement in the resolution of nonperforming assets including
payments on nonperforming loans.
In addition to the above, as of December 31, 2005, the
Company continues to monitor closely $14,077,000 of loans for
which management has concerns regarding the ability of the
borrowers to perform. The majority of the loans are secured by
real estate and are considered to have adequate collateral value
to cover the loan balances at December 31, 2005, although
such values can fluctuate with changes in the economy and the
real estate market.
|
|
6.
|
Allowance
for Loan Losses
|
The Company maintains an allowance for loan losses in an amount
determined by management on the basis of the character of the
loans, loan performance, the financial condition of borrowers,
the value of collateral securing loans and other relevant
factors. The following table summarizes the changes in the
Companys allowance for loan losses for the years indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(Dollars in thousands)
|
|
|
Year-end loans outstanding (net of
unearned discount)
|
|
$
|
689,645
|
|
|
$
|
580,003
|
|
|
$
|
512,314
|
|
|
$
|
514,249
|
|
|
$
|
462,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans outstanding (net of
unearned discount)
|
|
$
|
641,103
|
|
|
$
|
546,147
|
|
|
$
|
500,723
|
|
|
$
|
488,465
|
|
|
$
|
443,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of allowance for loan
losses at the beginning of year
|
|
$
|
9,001
|
|
|
$
|
8,769
|
|
|
$
|
8,506
|
|
|
$
|
7,112
|
|
|
$
|
5,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans charged-off:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
366
|
|
|
$
|
1
|
|
|
$
|
240
|
|
|
$
|
|
|
|
$
|
27
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
343
|
|
Residential real estate
|
|
|
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Consumer
|
|
|
324
|
|
|
|
113
|
|
|
|
125
|
|
|
|
87
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans charged-off
|
|
|
690
|
|
|
|
308
|
|
|
|
365
|
|
|
|
145
|
|
|
|
437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery of loans previously
charged-off:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
75
|
|
|
|
117
|
|
|
|
127
|
|
|
|
276
|
|
|
|
154
|
|
Real estate
|
|
|
235
|
|
|
|
103
|
|
|
|
29
|
|
|
|
|
|
|
|
184
|
|
Consumer
|
|
|
119
|
|
|
|
20
|
|
|
|
22
|
|
|
|
63
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries of loans
previously charged off:
|
|
|
429
|
|
|
|
240
|
|
|
|
178
|
|
|
|
339
|
|
|
|
387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loan charge-offs (recoveries)
|
|
|
261
|
|
|
|
68
|
|
|
|
187
|
|
|
|
(194
|
)
|
|
|
50
|
|
Additions to allowance charged to
operating expense
|
|
|
600
|
|
|
|
300
|
|
|
|
450
|
|
|
|
1,200
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
9,340
|
|
|
$
|
9,001
|
|
|
$
|
8,769
|
|
|
$
|
8,506
|
|
|
$
|
7,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of net charge-offs during
the year to average loans outstanding
|
|
|
0.04
|
%
|
|
|
0.01
|
%
|
|
|
0.04
|
%
|
|
|
(0.04
|
)%
|
|
|
0.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of allowance for loan losses
to loans outstanding
|
|
|
1.35
|
%
|
|
|
1.55
|
%
|
|
|
1.71
|
%
|
|
|
1.65
|
%
|
|
|
1.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These provisions are the result of managements evaluation
of the quality of the loan portfolio considering such factors as
loan status, collateral values, financial condition of the
borrower, the state of the economy and other relevant
information. The pace of the charge-offs depends on many factors
including the national and regional economy. Cyclical lagging
factors may result in charge-offs being higher than historical
levels.
The allowance for loan losses is an estimate of the amount
needed for an adequate reserve related to the inherent risk of
loss. This amount is determined by an evaluation of the loan
portfolio including input from an independent organization
engaged to review selected larger loans, a review of loan loss
experience and current economic conditions. At December 31
of each year the allowance was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
of Loans
|
|
|
|
|
|
of Loans
|
|
|
|
|
|
of Loans
|
|
|
|
|
|
of Loans
|
|
|
|
|
|
of Loans
|
|
|
|
|
|
|
in Each
|
|
|
|
|
|
in Each
|
|
|
|
|
|
in Each
|
|
|
|
|
|
in Each
|
|
|
|
|
|
in Each
|
|
|
|
|
|
|
Category
|
|
|
|
|
|
Category
|
|
|
|
|
|
Category
|
|
|
|
|
|
Category
|
|
|
|
|
|
Category
|
|
|
|
|
|
|
to Total
|
|
|
|
|
|
to Total
|
|
|
|
|
|
to Total
|
|
|
|
|
|
to Total
|
|
|
|
|
|
to Total
|
|
|
|
Amount
|
|
|
Loans
|
|
|
Amount
|
|
|
Loans
|
|
|
Amount
|
|
|
Loans
|
|
|
Amount
|
|
|
Loans
|
|
|
Amount
|
|
|
Loans
|
|
|
|
(Dollars in thousands)
|
|
|
Construction and land development
|
|
$
|
1,014
|
|
|
|
8.5
|
%
|
|
$
|
806
|
|
|
|
9.0
|
%
|
|
$
|
563
|
|
|
|
6.7
|
%
|
|
$
|
303
|
|
|
|
6.4
|
%
|
|
$
|
402
|
|
|
|
8.5
|
%
|
Commercial and industrial
|
|
|
1,575
|
|
|
|
13.7
|
|
|
|
1,232
|
|
|
|
12.4
|
|
|
|
895
|
|
|
|
7.8
|
|
|
|
832
|
|
|
|
9.0
|
|
|
|
971
|
|
|
|
12.8
|
|
Commercial real estate
|
|
|
4,131
|
|
|
|
43.8
|
|
|
|
3,626
|
|
|
|
44.6
|
|
|
|
4,182
|
|
|
|
57.3
|
|
|
|
3,131
|
|
|
|
56.7
|
|
|
|
2,554
|
|
|
|
52.2
|
|
Residential real estate
|
|
|
778
|
|
|
|
21.2
|
|
|
|
628
|
|
|
|
20.4
|
|
|
|
551
|
|
|
|
16.9
|
|
|
|
556
|
|
|
|
17.9
|
|
|
|
498
|
|
|
|
19.1
|
|
Consumer and other
|
|
|
173
|
|
|
|
1.7
|
|
|
|
144
|
|
|
|
1.6
|
|
|
|
130
|
|
|
|
1.7
|
|
|
|
147
|
|
|
|
1.9
|
|
|
|
130
|
|
|
|
1.8
|
|
Home equity
|
|
|
600
|
|
|
|
11.1
|
|
|
|
546
|
|
|
|
12.0
|
|
|
|
385
|
|
|
|
9.6
|
|
|
|
321
|
|
|
|
8.1
|
|
|
|
203
|
|
|
|
5.6
|
|
Unallocated
|
|
|
1,069
|
|
|
|
|
|
|
|
2,019
|
|
|
|
|
|
|
|
2,063
|
|
|
|
|
|
|
|
3,216
|
|
|
|
|
|
|
|
2,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,340
|
|
|
|
100.0
|
%
|
|
$
|
9,001
|
|
|
|
100.0
|
%
|
|
$
|
8,769
|
|
|
|
100.0
|
%
|
|
$
|
8,506
|
|
|
|
100.0
|
%
|
|
$
|
7,112
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
7.
|
Bank
Premises and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Estimated Useful Life
|
|
|
|
(Dollars in thousands)
|
|
|
Land
|
|
$
|
3,650
|
|
|
$
|
3,650
|
|
|
$
|
3,650
|
|
|
|
|
|
Bank premises
|
|
|
16,916
|
|
|
|
6,198
|
|
|
|
6,198
|
|
|
|
30-39 years
|
|
Construction in progress
(note 14)
|
|
|
|
|
|
|
11,766
|
|
|
|
7,506
|
|
|
|
|
|
Furniture and equipment
|
|
|
22,726
|
|
|
|
19,740
|
|
|
|
17,969
|
|
|
|
3-10 years
|
|
Leasehold improvements
|
|
|
5,102
|
|
|
|
5,083
|
|
|
|
4,446
|
|
|
|
30-39 years or lease term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,394
|
|
|
|
46,437
|
|
|
|
39,769
|
|
|
|
|
|
Accumulated depreciation and
amortization
|
|
|
(23,166
|
)
|
|
|
(20,172
|
)
|
|
|
(18,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,228
|
|
|
$
|
26,265
|
|
|
$
|
21,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company and its subsidiaries are obligated under a number of
noncancelable operating leases for premises and equipment
expiring in various years through 2026. Total lease expense
approximated $1,076,000, $1,084,000 and $886,000 for the years
ended December 31, 2005, 2004 and 2003, respectively.
Future minimum rental commitments for noncancelable operating
leases with initial or remaining terms of one year or more at
December 31, 2005 were as follows:
|
|
|
|
|
Year
|
|
Amount
|
|
|
|
(Dollars in thousands)
|
|
|
2006
|
|
$
|
1,081
|
|
2007
|
|
|
1,017
|
|
2008
|
|
|
947
|
|
2009
|
|
|
743
|
|
2010
|
|
|
601
|
|
Thereafter
|
|
|
953
|
|
|
|
|
|
|
|
|
$
|
5,342
|
|
|
|
|
|
|
The Company offers savings accounts, NOW accounts, demand
deposits, time deposits and money market accounts. The Company
offers cash management accounts which provide either automatic
transfer of funds above a specified level from the
customers checking account to a money market account or
short-term borrowings. Also, an account reconciliation service
is offered whereby the Company provides a computerized report
balancing the customers checking account.
Interest rates on deposits are set bi-monthly by the Banks
rate-setting committee, based on factors including loan demand,
maturities and a review of competing interest rates offered.
Interest rate policies are reviewed periodically by the
Executive Management Committee.
40
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
Time Deposits as of December 31, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands)
|
|
|
Three months or less
|
|
$
|
205,722
|
|
|
$
|
206,518
|
|
|
$
|
207,180
|
|
Three months through six months
|
|
|
46,398
|
|
|
|
36,323
|
|
|
|
33,011
|
|
Six months through twelve months
|
|
|
60,677
|
|
|
|
36,059
|
|
|
|
52,640
|
|
Over twelve months
|
|
|
88,976
|
|
|
|
80,916
|
|
|
|
66,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
401,773
|
|
|
$
|
359,816
|
|
|
$
|
359,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Deposits of $100,000 or more as of December 31, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands)
|
|
|
Three months or less
|
|
$
|
181,146
|
|
|
$
|
169,423
|
|
|
$
|
165,198
|
|
Three months through six months
|
|
|
27,455
|
|
|
|
15,576
|
|
|
|
2,852
|
|
Six months through twelve months
|
|
|
20,317
|
|
|
|
7,866
|
|
|
|
8,003
|
|
Over twelve months
|
|
|
30,383
|
|
|
|
20,428
|
|
|
|
3,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
259,301
|
|
|
$
|
213,293
|
|
|
$
|
179,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Securities
Sold Under Agreements to Repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands)
|
|
|
Amount outstanding at
December 31,
|
|
$
|
50,010
|
|
|
$
|
38,650
|
|
|
$
|
40,500
|
|
Weighted average rate at
December 31,
|
|
|
3.05
|
%
|
|
|
0.97
|
%
|
|
|
0.77
|
%
|
Maximum amount outstanding at any
month end
|
|
$
|
52,680
|
|
|
$
|
49,700
|
|
|
$
|
58,830
|
|
Daily average balance outstanding
during the year
|
|
$
|
39,746
|
|
|
$
|
40,937
|
|
|
$
|
51,402
|
|
Weighted average rate during the
year
|
|
|
2.05
|
%
|
|
|
0.81
|
%
|
|
|
0.89
|
%
|
Amounts outstanding at December 31, 2005, 2004, and 2003
carried maturity dates of the next business day.
U.S. Government and Agency securities with a total book
value of $52,009,000, $39,460,000, and $40,560,000 were pledged
as collateral and held by custodians to secure the agreements at
December 31, 2005, 2004, and 2003, respectively. The
approximate market value of the collateral at those dates was
$50,328,000, $38,989,000, and $40,638,000, respectively.
|
|
10.
|
Other
Borrowed Funds and Subordinated Debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands)
|
|
|
Amount outstanding at
December 31,
|
|
$
|
340,805
|
|
|
$
|
280,628
|
|
|
$
|
165,968
|
|
Weighted average rate at
December 31,
|
|
|
4.79
|
%
|
|
|
4.62
|
%
|
|
|
4.86
|
%
|
Maximum amount outstanding at any
month end
|
|
$
|
393,734
|
|
|
$
|
280,628
|
|
|
$
|
233,600
|
|
Daily average balance outstanding
during the year
|
|
$
|
268,878
|
|
|
$
|
194,932
|
|
|
$
|
170,344
|
|
Weighted average rate during the
year
|
|
|
4.69
|
%
|
|
|
4.72
|
%
|
|
|
5.01
|
%
|
FEDERAL
HOME LOAN BANK BORROWINGS
Federal Home Loan Bank (FHLB) borrowings are
collateralized by a blanket pledge agreement on the Banks
FHLB stock, certain qualified investment securities, deposits at
the Federal Home Loan Bank and
41
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
residential mortgages held in the Banks portfolio. The
Banks borrowing capacity at the Federal Home
Loan Bank at December 31, 2005 was approximately
$320,256,000 based on levels of FHLB stock held and mix of
overnight and term advances on that date. In addition, the Bank
has a $14,500,000 line of credit with the FHLB. A schedule of
the maturity distribution of FHLB advances with the weighted
average interest rates is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
|
|
Rate
|
|
|
|
(Dollars in thousands)
|
|
|
Within 1 year
|
|
$
|
197,156
|
|
|
|
4.15
|
%
|
|
$
|
105,000
|
|
|
|
2.22
|
%
|
|
$
|
35,000
|
|
|
|
1.55
|
%
|
Over 1 year to 2 years
|
|
|
2,500
|
|
|
|
3.66
|
%
|
|
|
1,120
|
|
|
|
7.20
|
%
|
|
|
|
|
|
|
0.00
|
%
|
Over 2 years to 3 years
|
|
|
19,500
|
|
|
|
5.38
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
1,178
|
|
|
|
7.20
|
%
|
Over 3 years to 5 years
|
|
|
63,500
|
|
|
|
5.72
|
%
|
|
|
51,500
|
|
|
|
5.25
|
%
|
|
|
19,500
|
|
|
|
5.38
|
%
|
Over 5 years
|
|
|
16,000
|
|
|
|
4.43
|
%
|
|
|
55,500
|
|
|
|
5.32
|
%
|
|
|
78,500
|
|
|
|
5.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
298,656
|
|
|
|
4.58
|
%
|
|
$
|
213,120
|
|
|
|
3.79
|
%
|
|
$
|
134,178
|
|
|
|
4.41
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUBORDINATED
DEBENTURES
In May 1998, the Company consummated the sale of a trust
preferred securities offering, in which it issued $29,639,000 of
subordinated debt securities due 2029 to its newly formed
unconsolidated subsidiary Century Bancorp Capital Trust.
Century Bancorp Capital Trust then issued 2,875,000 shares
of Cumulative Trust Preferred Securities with a liquidation
value of $10 per share. These securities pay dividends at
an annualized rate of 8.30%. The Company redeemed through its
subsidiary, Century Bancorp Capital Trust, their 8.30%
Trust Preferred Securities, January 10, 2005.
In December 2004, the Company consummated the sale of a trust
preferred securities offering, in which it issued $36,083,000 of
subordinated debt securities due 2034 to its newly formed
unconsolidated subsidiary Century Bancorp Capital Trust II.
Century Bancorp Capital Trust II then issued
35,000 shares of Cumulative Trust Preferred Securities
with a liquidation value of $1,000 per share. These
securities pay dividends at an annualized rate of 6.65% for the
first ten years and then convert to the three-month LIBOR rate
plus 1.87% for the remaining twenty years. The Company is using
the proceeds primarily for general business purposes.
OTHER
BORROWED FUNDS
The Bank had $4,500,000 of overnight federal funds purchased on
December 31, 2005. This borrowing carried an interest rate
at 4.00%.
The Bank serves as a Treasury Tax and Loan depository under a
note option with the Federal Reserve Bank of Boston. This
open-ended interest bearing borrowing carries an interest rate
equal to the daily Federal funds rate less 0.25%. This amount
totaled $1,418,000 and $1,638,000 at December 31, 2005 and
2004, respectively.
The Bank also has an outstanding loan in the amount of $148,000
borrowed against the cash value of a whole life insurance policy
for a key executive of the bank.
42
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
DIVIDENDS
Holders of the Class A common stock may not vote in the
election of directors, but may vote as a class to approve
certain extraordinary corporate transactions. Holders of
Class B may vote in the election of directors. Class A
common stockholders are entitled to receive dividends per share
equal to at least 200% per share of that paid, if any, on
each share of Class B common stock. Class A common
stock is publicly traded. Class B common stock is not
publicly traded, however, it can be converted on a share for
share basis to Class A common stock at any time at the
option of the holder. Dividend payments by the Company are
dependent in part on the dividends it receives from the Bank,
which are subject to certain regulatory restrictions.
EARNINGS
PER SHARE (EPS)
Diluted EPS includes the dilutive effect of common stock
equivalents; basic EPS excludes all common stock equivalents.
The only common stock equivalents for the Company are the stock
options discussed below. The dilutive effect of these stock
options for 2005, 2004 and 2003 was an increase of 13,265,
26,995 and 28,815 shares, respectively.
STOCK
OPTION PLAN
During 2000 and 2004, common stockholders of the Company
approved stock option plans (the Option Plans) that
provides for granting of options for not more than
150,000 shares of Class A common stock per plan. Under
the Option Plans, all officers and key employees of the Company
are eligible to receive non-qualified and incentive stock
options to purchase shares of Class A common stock. The
Option Plans are administered by the Compensation Committee of
the Board of Directors, whose members are ineligible to
participate in the Option Plans. Based on managements
recommendations, the Committee submits its recommendations to
the Board of Directors as to persons to whom options are to be
granted, the number of shares granted to each, the option price
(which may not be less than 85% of the fair market value for
non-qualified stock options, or the fair market value for
incentive stock options, of the shares on the date of grant) and
the time period over which the options are exercisable (not more
than ten years from the date of grant). There were 130,133
options exercisable at December 31, 2005.
Stock option activity under the plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
December 31, 2004
|
|
|
December 31, 2003
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Amount
|
|
|
Exercise Price
|
|
|
Amount
|
|
|
Exercise Price
|
|
|
Amount
|
|
|
Exercise Price
|
|
|
Shares under option:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
$
|
131,787
|
|
|
$
|
26.65
|
|
|
|
95,062
|
|
|
$
|
22.84
|
|
|
|
67,000
|
|
|
$
|
19.52
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
47,050
|
|
|
|
32.64
|
|
|
|
35,750
|
|
|
|
27.58
|
|
Cancelled
|
|
|
(300
|
)
|
|
|
28.56
|
|
|
|
(675
|
)
|
|
|
26.68
|
|
|
|
(675
|
)
|
|
|
15.49
|
|
Exercised
|
|
|
(1,354
|
)
|
|
|
16.82
|
|
|
|
(9,650
|
)
|
|
|
18.31
|
|
|
|
(7,013
|
)
|
|
|
15.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
130,133
|
|
|
$
|
26.74
|
|
|
|
131,787
|
|
|
$
|
26.65
|
|
|
|
95,062
|
|
|
$
|
22.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year
|
|
|
130,133
|
|
|
$
|
26.74
|
|
|
|
67,486
|
|
|
$
|
22.22
|
|
|
|
42,399
|
|
|
$
|
18.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available to be granted at end of
year
|
|
|
149,775
|
|
|
|
|
|
|
|
149,475
|
|
|
|
|
|
|
|
45,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value of
options granted during the year
|
|
|
NA
|
|
|
|
|
|
|
$
|
10.69
|
|
|
|
|
|
|
$
|
6.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
At December 31, 2005, the 130,133 options outstanding have
exercise prices between $15.063 and $35.010, with a weighted
average exercise price at $26.74 and a weighted average
remaining contractual life of 6 years.
The Bank and the Company are subject to various regulatory
requirements administered by federal banking agencies. Failure
to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material
affect on the Bank and the Companys financial statements.
Under capital adequacy guidelines and regulatory framework for
prompt corrective action, the Bank and the Company must meet
specific capital guidelines that involve quantitative measures
of the Bank and the Companys assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank and the Companys capital
amounts and classification are also qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Bank and the Company to maintain
minimum amounts and ratios (set forth in the table below) of
total and Tier 1 capital (as defined in the regulation) to
risk weighted assets (as defined), and Tier 1 capital (as
defined) to average assets (as defined). Management believes, as
of December 31, 2005, that the Bank and the Company meet
all capital adequacy requirements to which it is subject.
As of December 31, 2005, the most recent notification from
the FDIC categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum
total risk-based, Tier risk- based, and Tier 1 leverage
ratios as set forth in the table. There are no conditions or
events since that notification that management believes would
cause a change in the Banks categorization.
The Banks actual capital amounts and ratios are presented
in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Capital
|
|
|
To be Well Capitalized
|
|
|
|
Actual
|
|
|
|
|
|
Adequacy Purposes
|
|
|
Action Provisions
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
As of December 31,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to risk-weighted
assets)
|
|
$
|
119,839
|
|
|
|
13.13
|
%
|
|
$
|
73,001
|
|
|
|
8.00%
|
|
|
$
|
91,251
|
|
|
|
10.00%
|
|
Tier 1 capital (to
risk-weighted assets)
|
|
|
110,499
|
|
|
|
12.11
|
%
|
|
|
36,500
|
|
|
|
4.00%
|
|
|
|
54,751
|
|
|
|
6.00%
|
|
Tier 1 capital (to
4th Qtr. average assets)
|
|
|
110,499
|
|
|
|
6.72
|
%
|
|
|
65,729
|
|
|
|
4.00%
|
|
|
|
82,162
|
|
|
|
5.00%
|
|
As of December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to risk-weighted
assets)
|
|
|
116,698
|
|
|
|
13.47
|
%
|
|
|
69,312
|
|
|
|
8.00%
|
|
|
|
86,640
|
|
|
|
10.00%
|
|
Tier 1 capital (to
risk-weighted assets)
|
|
|
107,697
|
|
|
|
12.43
|
%
|
|
|
34,656
|
|
|
|
4.00%
|
|
|
|
51,984
|
|
|
|
6.00%
|
|
Tier 1 capital (to
4th Qtr. average assets)
|
|
|
107,697
|
|
|
|
6.54
|
%
|
|
|
65,835
|
|
|
|
4.00%
|
|
|
|
82,294
|
|
|
|
5.00%
|
|
44
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
The Companys actual capital amounts and ratios are
presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
|
|
|
For Capital Adequacy
Purposes
|
|
|
To be Well Capitalized Under
Prompt Corrective Action Provisions
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
As of December 31,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to risk-weighted
assets)
|
|
$
|
150,603
|
|
|
|
16.48
|
%
|
|
$
|
73,108
|
|
|
|
8.00%
|
|
|
$
|
91,385
|
|
|
|
10.00%
|
|
Tier 1 capital (to
risk-weighted assets)
|
|
|
141,263
|
|
|
|
15.46
|
%
|
|
|
36,554
|
|
|
|
4.00%
|
|
|
|
54,831
|
|
|
|
6.00%
|
|
Tier 1 capital (to
4th Qtr. average assets)
|
|
|
141,263
|
|
|
|
8.58
|
%
|
|
|
65,821
|
|
|
|
4.00%
|
|
|
|
82,276
|
|
|
|
5.00%
|
|
As of December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to risk-weighted
assets)
|
|
|
174,984
|
|
|
|
20.14
|
%
|
|
|
69,503
|
|
|
|
8.00%
|
|
|
|
86,879
|
|
|
|
10.00%
|
|
Tier 1 capital (to
risk-weighted assets)
|
|
|
136,311
|
|
|
|
15.69
|
%
|
|
|
34,752
|
|
|
|
4.00%
|
|
|
|
52,127
|
|
|
|
6.00%
|
|
Tier 1 capital (to
4th Qtr. average assets)
|
|
|
136,311
|
|
|
|
8.27
|
%
|
|
|
65,940
|
|
|
|
4.00%
|
|
|
|
82,425
|
|
|
|
5.00%
|
|
The current and deferred components of income tax expense for
the years ended December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands)
|
|
|
Current expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
2,842
|
|
|
$
|
4,277
|
|
|
$
|
5,783
|
|
State
|
|
|
196
|
|
|
|
227
|
|
|
|
4,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current expense
|
|
|
3,038
|
|
|
|
4,504
|
|
|
|
10,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
117
|
|
|
|
427
|
|
|
|
102
|
|
State
|
|
|
11
|
|
|
|
43
|
|
|
|
(1,518
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred expense (benefit)
|
|
|
128
|
|
|
|
470
|
|
|
|
(1,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
3,166
|
|
|
$
|
4,974
|
|
|
$
|
8,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax accounts included in other assets at December 31
are as follows:
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in thousands)
|
|
|
Currently receivable
|
|
$
|
486
|
|
|
$
|
474
|
|
Deferred income tax asset, net
|
|
|
12,509
|
|
|
|
8,518
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,995
|
|
|
$
|
8,992
|
|
|
|
|
|
|
|
|
|
|
Income tax expense for the years presented is different from the
amounts computed by applying the statutory Federal income tax
rate of 35% for 2005 and 35% for 2004 and 2003 to income before
Federal income taxes. The
45
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
following tabulation reconciles Federal income tax expense based
on statutory rates to the actual income tax expense for the
years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands)
|
|
|
Federal income tax expense at
statutory rates
|
|
$
|
3,516
|
|
|
$
|
4,849
|
|
|
$
|
7,225
|
|
State income tax, net of federal
income tax benefit
|
|
|
135
|
|
|
|
176
|
|
|
|
2,001
|
|
Insurance gains
|
|
|
(356
|
)
|
|
|
(260
|
)
|
|
|
(159
|
)
|
Effect of tax-exempt interest
|
|
|
(8
|
)
|
|
|
|
|
|
|
(1
|
)
|
Other
|
|
|
(121
|
)
|
|
|
209
|
|
|
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,166
|
|
|
$
|
4,974
|
|
|
$
|
8,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
31.5
|
%
|
|
|
35.9
|
%
|
|
|
43.4
|
%
|
The following table sets forth the Companys gross deferred
income tax assets and gross deferred income tax liabilities at
December 31:
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in thousands)
|
|
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
3,907
|
|
|
$
|
3,765
|
|
Deferred compensation
|
|
|
4,136
|
|
|
|
3,855
|
|
Unrealized loss on securities
available-for-sale
|
|
|
5,271
|
|
|
|
1,914
|
|
Unrecognized SERF liability
|
|
|
2,026
|
|
|
|
1,264
|
|
Acquisition premium
|
|
|
380
|
|
|
|
721
|
|
Investments writedown
|
|
|
33
|
|
|
|
33
|
|
Deferred gain
|
|
|
156
|
|
|
|
176
|
|
Other
|
|
|
1
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Gross deferred income tax asset
|
|
|
15,910
|
|
|
|
11,736
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
Accrued dividends
|
|
|
(70
|
)
|
|
|
(41
|
)
|
Depreciation
|
|
|
(1,191
|
)
|
|
|
(1,277
|
)
|
Limited partnerships
|
|
|
(2,048
|
)
|
|
|
(1,836
|
)
|
Other
|
|
|
(92
|
)
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
Gross deferred income tax liability
|
|
|
(3,401
|
)
|
|
|
(3,218
|
)
|
|
|
|
|
|
|
|
|
|
Deferred income tax asset net
|
|
$
|
12,509
|
|
|
$
|
8,518
|
|
|
|
|
|
|
|
|
|
|
During 2003, the Company incurred a net tax charge of $1,183,000
associated with the Real Estate Investment Trust
(REIT) settlement. This charge was the result of an
agreement with the Massachusetts Department of Revenue
(DOR) settling a dispute related to taxes that the
DOR claimed were owed from the Companys REIT.
Based on the Companys historical and current pretax
earnings, management believes it is more likely than not that
the Company will realize the deferred income tax asset existing
at December 31, 2005. Management believes that existing net
deductible temporary differences which give rise to the deferred
tax asset will reverse during periods in which the Company
generates net taxable income. In addition, gross deductible
temporary differences are expected to reverse in periods during
which offsetting gross taxable temporary differences are
expected to reverse. Factors beyond managements control,
such as the general state of the economy and real estate values,
can effect
46
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
future levels of taxable income, and no assurance can be given
that sufficient taxable income will be generated to fully absorb
gross deductible temporary differences.
The Company has a qualified Defined Benefit Pension Plan (the
Plan), which is offered to all employees reaching
minimum age and service requirements. Stability in the size of
the work force, modest increases in compensation expense offset
by lower accruals for those hired after March 31, 2004
resulted in a decrease in pension cost.
The measurement date for the Plan is September 30 for each
year. The benefits expected to be paid in each year from
2006-2010
are $563,000, $572,000, $613,000, $687,000, and $754,000. The
aggregate benefits expected to be paid in the five years from
2011-2015 are $4,922,000. The Company plans to contribute
$1,480,000 to the Plan in 2006.
The weighted-average asset allocation of pension benefit assets
at September 30, were:
|
|
|
|
|
|
|
|
|
Asset Category
|
|
2005
|
|
|
2004
|
|
|
Debt Securities
|
|
|
73%
|
|
|
|
66%
|
|
Equity Securities
|
|
|
14%
|
|
|
|
15%
|
|
Other
|
|
|
13%
|
|
|
|
19%
|
|
The Company has a Supplemental Insurance/Retirement Plan (the
Supplemental Plan), which is limited to certain officers and
employees of the Company. The Supplemental Plan is voluntary and
participants are required to contribute to its cost. Under the
Supplemental Plan, each participant will receive a retirement
benefit based on compensation and length of service. Individual
life insurance policies, which are owned by the Company, are
purchased covering the lives of each participant. Decreased
compensation expense resulted in decreased cost for the
Supplemental Plan.
The measurement date for the Supplemental Plan is
September 30 for each year. The benefits expected to be
paid in each year from
2006-2010
are $894,000, $960,000, $938,000, $916,000, and $898,000. The
aggregate benefits expected to be paid in the five years from
2011-2015 are $4,261,000.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Insurance/
|
|
|
|
Defined Benefit Pension
Plan
|
|
|
Retirement Plan
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
|
Change in benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of
year
|
|
$
|
14,076
|
|
|
$
|
13,353
|
|
|
$
|
11,857
|
|
|
$
|
13,368
|
|
Service cost
|
|
|
760
|
|
|
|
714
|
|
|
|
128
|
|
|
|
12
|
|
Interest cost
|
|
|
914
|
|
|
|
868
|
|
|
|
746
|
|
|
|
869
|
|
Actuarial (gain)/loss
|
|
|
2,869
|
|
|
|
(628
|
)
|
|
|
1,676
|
|
|
|
(2,331
|
)
|
Benefits paid
|
|
|
(280
|
)
|
|
|
(231
|
)
|
|
|
(277
|
)
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
18,339
|
|
|
$
|
14,076
|
|
|
$
|
14,130
|
|
|
$
|
11,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of year
|
|
$
|
10,803
|
|
|
$
|
9,285
|
|
|
|
|
|
|
|
|
|
Actual return on pian assets
|
|
|
282
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
1,389
|
|
|
|
1,525
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(280
|
)
|
|
|
(231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end
of year
|
|
$
|
12,194
|
|
|
$
|
10,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Insurance/
|
|
|
|
Defined Benefit Pension
Plan
|
|
|
Retirement Plan
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
|
(Unfunded) funded status
|
|
$
|
(6,145
|
)
|
|
$
|
(3,273
|
)
|
|
$
|
(14,130
|
)
|
|
$
|
(11,857
|
)
|
Unrecognized prior service benefit
(cost)
|
|
|
1,421
|
|
|
|
1,441
|
|
|
|
(1,091
|
)
|
|
|
(1,155
|
)
|
Unrecognized net actuarial loss
|
|
|
(7,401
|
)
|
|
|
(4,216
|
)
|
|
|
(3,062
|
)
|
|
|
(1,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit cost
|
|
$
|
(165
|
)
|
|
$
|
(498
|
)
|
|
$
|
(9,977
|
)
|
|
$
|
(9,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
16,680
|
|
|
$
|
13,037
|
|
|
$
|
13,291
|
|
|
$
|
11,151
|
|
Weighted-average assumptions as of
December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
rate Liability
|
|
|
5.50
|
%
|
|
|
6.50
|
%
|
|
|
5.50
|
%
|
|
|
6.50
|
%
|
Discount
rate Expense
|
|
|
6.00
|
%
|
|
|
6.50
|
%
|
|
|
6.00
|
%
|
|
|
6.50
|
%
|
Expected return on plan assets
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
Components of net periodic benefit
cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
760
|
|
|
$
|
714
|
|
|
$
|
128
|
|
|
$
|
12
|
|
Interest cost
|
|
|
914
|
|
|
|
868
|
|
|
|
746
|
|
|
|
869
|
|
Expected return on plan assets
|
|
|
(854
|
)
|
|
|
(597
|
)
|
|
|
|
|
|
|
|
|
Recognized prior service cost
|
|
|
(20
|
)
|
|
|
(4
|
)
|
|
|
64
|
|
|
|
64
|
|
Recognized net losses
|
|
|
256
|
|
|
|
224
|
|
|
|
51
|
|
|
|
174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
|
$
|
1,056
|
|
|
$
|
1,205
|
|
|
$
|
989
|
|
|
$
|
1,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional minimum pension
liability
|
|
$
|
3,135
|
|
|
$
|
2,201
|
|
|
$
|
1,708
|
|
|
$
|
820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions for expected return on plan assets and discount
rates in the Companys Plan and Supplemental Plan are
periodically reviewed. As part of the review, management in
consultation with independent consulting actuaries perform an
analysis of expected returns based on the plans asset
allocation. This forecast reflects the Companys and
actuarial firms expected return on plan assets for each
significant asset class or economic indicator. The range of
returns developed relies both on forecasts and on broad-market
historical benchmarks for expected return, correlation, and
volatility for each asset class. Also, as a part of the review,
the Companys management in consultation with independent
consulting actuaries perform an analysis of discount rates based
on expected returns of high grade fixed income debt securities.
The Company offers a 401 (k) defined contribution plan for
all employees reaching minimum age and service requirements. The
pian is voluntary and employee contributions are matched by the
Company at a rate of 33.3% for the first 6% of compensation
contributed by each employee. The Companys match totaled
$217,000 for 2005, $211,000 for 2004 and $218,000 for 2003.
Administrative costs associated with the plan are absorbed by
the Company. The Company does not offer any post retirement
programs other than pensions.
|
|
14.
|
Commitments
and Contingencies
|
A number of legal claims against the Company arising in the
normal course of business were outstanding at December 31,
2005. Management, after reviewing these claims with legal
counsel, is of the opinion that their resolution will not have a
material adverse effect on the Companys consolidated
financial position or results of operation.
48
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
15.
|
Financial
Instruments With Off-Balance Sheet Risk
|
The Company is party to financial instruments with off-balance
sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments
primarily include commitments to originate and sell loans,
standby letters of credit, unused lines of credit and unadvanced
portions of construction loans. The instruments involve, to
varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the consolidated balance
sheet. The contract or notational amounts of those instruments
reflect the extent of involvement the Company has in these
particular classes of financial instruments.
The Companys exposure to credit loss in the event of
non-performance by the other party to the financial instrument
for loan commitments, standby letters of credit and unadvanced
portions of construction loans is represented by the contractual
amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it
does for on-balance sheet instruments. Financial instruments
with off-balance sheet risk at December 31, are as follows:
Contract
or Notational Amount
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in thousands)
|
|
|
Financial instruments whose
contract amount represents credit risk:
|
|
|
|
|
|
|
|
|
Commitments to originate 1-4
family mortgages
|
|
$
|
1,814
|
|
|
$
|
2,511
|
|
Standby letters of credit
|
|
|
10,272
|
|
|
|
11,195
|
|
Unused lines of credit
|
|
|
143,533
|
|
|
|
118,008
|
|
Unadvanced portions of
construction loans
|
|
|
52,469
|
|
|
|
33,754
|
|
Unadvanced portions of other loans
|
|
|
7,934
|
|
|
|
10,907
|
|
Commitments to originate loans, unadvanced portions of
construction loans and unused letters of credit are generally
agreements to lend to a customer provided there is no violation
of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future
cash requirements. The Company evaluates each customers
credit worthiness on a
case-by-case
basis. The amount of collateral obtained, if deemed necessary by
the Company upon extension of credit, is based on
managements credit evaluation of the borrower.
Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance by a customer to a
third party. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending
loan facilities to customers.
49
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
16.
|
Other
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands)
|
|
|
Marketing
|
|
$
|
1,478
|
|
|
$
|
1,403
|
|
|
$
|
1,265
|
|
Processing services
|
|
|
1,281
|
|
|
|
1,379
|
|
|
|
1,292
|
|
Supplies
|
|
|
605
|
|
|
|
728
|
|
|
|
775
|
|
Telephone
|
|
|
489
|
|
|
|
583
|
|
|
|
511
|
|
Postage and delivery
|
|
|
820
|
|
|
|
826
|
|
|
|
735
|
|
Legal and audit
|
|
|
881
|
|
|
|
812
|
|
|
|
478
|
|
Consulting
|
|
|
616
|
|
|
|
316
|
|
|
|
316
|
|
Software maintenance/amortization
|
|
|
876
|
|
|
|
653
|
|
|
|
743
|
|
Insurance
|
|
|
370
|
|
|
|
316
|
|
|
|
248
|
|
Directors fees
|
|
|
200
|
|
|
|
258
|
|
|
|
270
|
|
FDIC assessment
|
|
|
186
|
|
|
|
198
|
|
|
|
208
|
|
Core deposit tangible amortization
|
|
|
388
|
|
|
|
388
|
|
|
|
320
|
|
Capital expense amortization
|
|
|
9
|
|
|
|
|
|
|
|
137
|
|
Other
|
|
|
1,137
|
|
|
|
1,160
|
|
|
|
860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,336
|
|
|
$
|
9,020
|
|
|
$
|
8,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.
|
Fair
Values of Financial Instruments
|
The following methods and assumptions were used by the Company
in estimating fair values of its financial instruments.
Excluded from this disclosure are certain financial instruments
for which it is not practical to estimate their value and all
nonfinancial instruments. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of the
Company.
CASH
AND CASH EQUIVALENTS
The carrying amounts reported in the balance sheet for cash and
cash equivalents approximate the fair values of these assets
because of the short-term nature of these financial instruments.
SECURITIES
HELD-TO-MATURITY
AND SECURITIES
AVAILABLE-FOR-SALE
The fair value of these securities, excluding certain state and
municipal securities whose fair value is estimated at book value
because they are not readily marketable, is estimated based on
bid prices published in financial newspapers or bid quotations
received from securities dealers.
LOANS
For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on
carrying amounts. The fair value of other loans is estimated
using discounted cash flow analysis, based on interest rates
currently being offered for loans with similar terms to
borrowers of similar credit quality. Incremental credit risk for
non-performing loans has been considered.
50
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
ACCRUED
INTEREST RECEIVABLE AND PAYABLE
The carrying amounts for accrued interest receivable and payable
approximate fair values because of the short-term nature of
these financial instruments.
DEPOSITS
The fair value of deposits with no stated maturity is equal to
the carrying amount. The fair value of time deposits is based on
the discounted value of contractual cash flows, applying
interest rates currently being offered on the deposit products
of similar maturities. The fair value estimates for deposits do
not include the benefit that results from the low-cost funding
provided by the deposit liabilities compared to the cost of
alternative forms of funding (deposit base
intangibles).
REPURCHASE
AGREEMENTS AND OTHER BORROWED FUNDS
The fair value of repurchase agreements and other borrowed funds
is based on the discounted value of contractual cash flows. The
discount rate used is estimated based on the rates currently
offered for other borrowed funds of similar remaining maturities.
SUBORDINATED
DEBENTURES
The fair value of subordinated debentures is based on the
discounted value of contractual cash flows. The discount rate
used is estimated based on the rates currently for other
subordinated debentures of similar remaining maturities.
OFF-BALANCE
SHEET INSTRUMENTS
The fair values of the Companys unused lines of credit and
unadvanced portions of construction loans, commitments to
originate and sell loans and standby letters of credit are
estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the
agreements and the counterparties credit standing.
The carrying amounts and fair values of the Companys
financial instruments at December 31, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
Carrying
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
Amounts
|
|
|
Fair Value
|
|
|
Amounts
|
|
|
Fair Value
|
|
|
|
(Dollars in thousands)
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
152,679
|
|
|
$
|
152,679
|
|
|
$
|
238,235
|
|
|
$
|
238,235
|
|
Securities
available-for-sale
|
|
|
532,982
|
|
|
|
532,982
|
|
|
|
609,806
|
|
|
|
609,806
|
|
Securities
held-to-maturity
|
|
|
286,578
|
|
|
|
277,769
|
|
|
|
345,369
|
|
|
|
343,399
|
|
Net loans
|
|
|
680,305
|
|
|
|
665,515
|
|
|
|
571,002
|
|
|
|
565,539
|
|
Accrued interest receivable
|
|
|
7,127
|
|
|
|
7,127
|
|
|
|
6,800
|
|
|
|
6,800
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,217,040
|
|
|
|
1,216,610
|
|
|
|
1,394,010
|
|
|
|
1,397,901
|
|
Repurchase agreement and other
borrowed funds
|
|
|
354,732
|
|
|
|
358,263
|
|
|
|
253,556
|
|
|
|
255,036
|
|
Subordinated debentures
|
|
|
36,083
|
|
|
|
35,769
|
|
|
|
65,722
|
|
|
|
65,801
|
|
Accrued interest payable
|
|
|
1,891
|
|
|
|
1,891
|
|
|
|
2,305
|
|
|
|
2,305
|
|
Standby letters of credit
|
|
|
|
|
|
|
118
|
|
|
|
|
|
|
|
136
|
|
51
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
LIMITATIONS
Fair value estimates are made at a specific point in time, based
on relevant market information and information about the type of
financial instrument. These estimates do not reflect any premium
or discount that could result from offering for sale at one time
the Banks entire holdings of a particular financial
instrument. Because no active market exists for some of the
Banks financial instruments, fair value estimates are
based on judgements regarding future expected loss experience,
cash flows, current economic conditions, risk characteristics
and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgement and
therefore cannot be determined with precision. Changes in
assumptions and changes in the loan, debt and interest rate
markets could significantly affect the estimates. Further, the
income tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on the
fair value estimates and have not been considered.
|
|
18.
|
Quarterly
Results of Operations (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Quarters
|
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
|
(In thousands, except share
data)
|
|
|
Interest income
|
|
$
|
18,788
|
|
|
$
|
18,289
|
|
|
$
|
18,082
|
|
|
$
|
17,652
|
|
Interest expense
|
|
|
9,421
|
|
|
|
8,533
|
|
|
|
7,745
|
|
|
|
7,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
9,367
|
|
|
|
9,756
|
|
|
|
10,337
|
|
|
|
10,531
|
|
Provision for loan
losses
|
|
|
150
|
|
|
|
150
|
|
|
|
150
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
9,217
|
|
|
|
9,606
|
|
|
|
10,187
|
|
|
|
10,381
|
|
Other operating
income
|
|
|
2,633
|
|
|
|
2,720
|
|
|
|
2,937
|
|
|
|
2,683
|
|
Operating expenses
|
|
|
10,100
|
|
|
|
10,067
|
|
|
|
10,116
|
|
|
|
10,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
|
1,750
|
|
|
|
2,259
|
|
|
|
3,008
|
|
|
|
3,029
|
|
Provision for income
taxes
|
|
|
478
|
|
|
|
727
|
|
|
|
973
|
|
|
|
988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,272
|
|
|
$
|
1,532
|
|
|
$
|
2,035
|
|
|
$
|
2,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding,
basic
|
|
|
5,535,442
|
|
|
|
5,535,388
|
|
|
|
5,535,317
|
|
|
|
5,534,651
|
|
Average shares outstanding,
diluted
|
|
|
5,548,548
|
|
|
|
5,559,425
|
|
|
|
5,540,598
|
|
|
|
5,543,783
|
|
Earnings per share,
basic
|
|
$
|
0.23
|
|
|
$
|
0.28
|
|
|
$
|
0.37
|
|
|
$
|
0.37
|
|
Earnings per share,
diluted
|
|
$
|
0.23
|
|
|
$
|
0.28
|
|
|
$
|
0.37
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 Quarters
|
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
|
(In thousands, except share
data)
|
|
|
Interest income
|
|
$
|
16,892
|
|
|
$
|
16,077
|
|
|
$
|
16,102
|
|
|
$
|
15,962
|
|
Interest expense
|
|
|
6,578
|
|
|
|
5,561
|
|
|
|
5,502
|
|
|
|
6,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
10,314
|
|
|
|
10,516
|
|
|
|
10,600
|
|
|
|
9,957
|
|
Provision for loan losses
|
|
|
150
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
10,164
|
|
|
|
10,366
|
|
|
|
10,600
|
|
|
|
9,957
|
|
Other operating income
|
|
|
2,432
|
|
|
|
2,501
|
|
|
|
2,745
|
|
|
|
2,753
|
|
Operating expenses
|
|
|
9,452
|
|
|
|
9,587
|
|
|
|
9,560
|
|
|
|
9,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
3,144
|
|
|
|
3,280
|
|
|
|
3,785
|
|
|
|
3,646
|
|
Provision for income taxes
|
|
|
1,117
|
|
|
|
1,147
|
|
|
|
1,382
|
|
|
|
1,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,027
|
|
|
$
|
2,133
|
|
|
$
|
2,403
|
|
|
$
|
2,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding, basic
|
|
|
5,528,008
|
|
|
|
5,526,438
|
|
|
|
5,525,665
|
|
|
|
5,524,659
|
|
Average shares outstanding, diluted
|
|
|
5,547,913
|
|
|
|
5,552,202
|
|
|
|
5,553,500
|
|
|
|
5,557,984
|
|
Earnings per share, basic
|
|
$
|
0.37
|
|
|
$
|
0.39
|
|
|
$
|
0.44
|
|
|
$
|
0.42
|
|
Earnings per share, diluted
|
|
$
|
0.37
|
|
|
$
|
0.38
|
|
|
$
|
0.43
|
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.
|
Parent
Company Financial Statements
|
The balance sheets of Century Bancorp, Inc. (Parent
Company) as of December 31, 2005 and 2004 and the
statements of income and cash flows for each of the years in the
three-year period ended December 31, 2005 and presented
below. The statements of changes in stockholders equity
are identical to the consolidated statements of changes in
stockholders equity and are therefore not presented here.
Balance
Sheets
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in thousands)
|
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
30,458
|
|
|
$
|
58,704
|
|
Investment in subsidiary, at equity
|
|
|
107,388
|
|
|
|
110,189
|
|
Other assets
|
|
|
1,550
|
|
|
|
2,465
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
139,396
|
|
|
$
|
171,358
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS
EQUITY:
|
Liabilities
|
|
$
|
112
|
|
|
$
|
863
|
|
Subordinated debentures
|
|
|
36,083
|
|
|
|
65,722
|
|
Stockholders equity
|
|
|
103,201
|
|
|
|
104,773
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
139,396
|
|
|
$
|
171,358
|
|
|
|
|
|
|
|
|
|
|
53
CENTURY
BANCORP, INC.
Notes to
Consolidated Financial
Statements (Continued)
Statements
of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands)
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from subsidiary
|
|
$
|
4,505
|
|
|
$
|
5,786
|
|
|
$
|
2,825
|
|
Interest income from deposits in
bank
|
|
|
798
|
|
|
|
313
|
|
|
|
377
|
|
Other income
|
|
|
72
|
|
|
|
80
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income
|
|
|
5,375
|
|
|
|
6,179
|
|
|
|
3,276
|
|
Interest expense
|
|
|
2,468
|
|
|
|
2,653
|
|
|
|
2,460
|
|
Operating expenses
|
|
|
186
|
|
|
|
216
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and
equity in undistributed income of subsidiary
|
|
|
2,721
|
|
|
|
3,310
|
|
|
|
566
|
|
Provision for income taxes
|
|
|
(638
|
)
|
|
|
(873
|
)
|
|
|
(790
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before equity in
undistributed income of subsidiary
|
|
|
3,359
|
|
|
|
4,183
|
|
|
|
1,356
|
|
Equity in undistributed income of
subsidiary
|
|
|
3,521
|
|
|
|
4,698
|
|
|
|
10,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,880
|
|
|
$
|
8,881
|
|
|
$
|
11,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in thousands)
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,880
|
|
|
$
|
8,881
|
|
|
$
|
11,680
|
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed income of subsidiary
|
|
|
(3,521
|
)
|
|
|
(4,698
|
)
|
|
|
(10,324
|
)
|
Depreciation and amortization
|
|
|
9
|
|
|
|
|
|
|
|
138
|
|
Decrease (increase) in other assets
|
|
|
906
|
|
|
|
(1,098
|
)
|
|
|
(61
|
)
|
(Decrease) increase in liabilities
|
|
|
(751
|
)
|
|
|
444
|
|
|
|
(1,245
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
3,523
|
|
|
|
3,529
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated debt issuance
(retirement)
|
|
|
(29,639
|
)
|
|
|
36,083
|
|
|
|
889
|
|
Capital payment to bank subsidiary
|
|
|
|
|
|
|
|
|
|
|
(13,000
|
)
|
Stock options exercised
|
|
|
23
|
|
|
|
177
|
|
|
|
111
|
|
Cash dividends paid
|
|
|
(2,153
|
)
|
|
|
(2,147
|
)
|
|
|
(2,008
|
)
|
Treasury stock repurchases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
financing activities
|
|
|
(31,769
|
)
|
|
|
34,113
|
|
|
|
(14,008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
|
|
|
(28,246
|
)
|
|
|
37,642
|
|
|
|
(13,820
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of year
|
|
|
58,704
|
|
|
|
21,062
|
|
|
|
34,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
30,458
|
|
|
$
|
58,704
|
|
|
$
|
21,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
Report of
Independent Registered Public Accounting Firm
KPMG
LLP
Independent Registered Public Accounting Firm
99 High Street
Boston, Massachusetts 02110
The Board of Directors and Stockholders
Century Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of
Century Bancorp, Inc. and subsidiary as of December 31,
2005 and 2004, and the related consolidated statements of
income, changes in stockholders equity, and cash flows for
each of the years in the three-year period ended
December 31, 2005. These consolidated financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Century Bancorp, Inc. and subsidiary as of
December 31, 2005 and 2004, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2005, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2005, based on
criteria established in
Internal
Control
Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated February 27, 2006
expressed an unqualified opinion on managements assessment
of, and the effective operation of, internal control over
financial reporting.
Boston, Massachusetts
February 27, 2006
55
Report of
Independent Registered Public Accounting Firm
KPMG
LLP
Independent Registered Public Accounting Firm
99 High Street
Boston, Massachusetts 02110
The Board of Directors and Stockholders
Century Bancorp, Inc.:
We have audited managements assessment, included in the
accompanying Managements Report on
Internal Control
Over Financial Reporting
, that Century Bancorp, Inc. and
subsidiary maintained effective internal control over financial
reporting as of December 31, 2005, based on criteria
established in
Internal
Control
Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Companys management is responsible
for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is
to express an opinion on managements assessment and an
opinion on the effectiveness of the Companys internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that Century
Bancorp, Inc. and subsidiary maintained effective internal
control over financial reporting as of December 31, 2005,
is fairly stated, in all material respects, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Also, in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of December 31,2005,
based on criteria established in
Internal
Control
Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Century Bancorp, Inc. and
subsidiary as of December 31, 2005 and 2004, and the
related consolidated statements of income, changes in
stockholders equity, and cash flows for each of the years
in the three-year period ended December 31, 2005, and our
report dated February 27, 2006 expressed an unqualified
opinion on those consolidated financial statements.
Boston, Massachusetts
February 27, 2006
56
Managements
Report on Internal Control Over Financial Reporting
CENTURY
BANCORP, INC.
400 Mystic Avenue
Medford, Massachusetts 02155
We, together with the other members of Century Bancorp, Inc. and
subsidiary (the Company), are responsible for
establishing and maintaining adequate internal control over
financial reporting. The Companys internal control system
was designed to provide reasonable assurance to the
Companys management and board of directors regarding the
preparation and fair presentation of published financial
statements.
All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
The Companys management assessed the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2005. In making this assessment, it used the
criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in
Internal
Control
Integrated
Framework.
Based on our assessment we believe
that, as of December 31, 2005, the Companys internal
control over financial reporting is effective based on those
criteria.
The Companys independent registered public accounting firm
has issued an audit report on our assessment of the
Companys internal control over financial reporting. Their
report appears on page 56.
|
|
|
|
|
|
|
|
|
Marshall M. Sloane
Chairman and CEO
|
|
Paul V. Cusick, Jr.
Vice President and Treasurer
|
February 27, 2006
57
PART III
|
|
ITEM 10.
|
DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT
|
The directors of the Company and their ages as of
December 31, 2005 are as follows:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
George R. Baldwin
|
|
|
62
|
|
|
Director, Century Bancorp, Inc.,
and Century Bank and Trust Company
|
Roger S. Berkowitz
|
|
|
53
|
|
|
Director, Century Bancorp, Inc.,
and Century Bank and Trust Company
|
Karl E. Case, Ph.D.
|
|
|
59
|
|
|
Director, Century Bancorp, Inc.,
and Century Bank and Trust Company
|
Henry L. Foster, D.V.M.
|
|
|
80
|
|
|
Director Emeritus, Century
Bancorp, Inc., and Century Bank and Trust Company
|
Marshall I.
Goldman, Ph.D.
|
|
|
75
|
|
|
Director, Century Bancorp, Inc.,
and Century Bank and Trust Company
|
Russell B. Higley, Esquire
|
|
|
66
|
|
|
Director, Century Bancorp, Inc.,
and Century Bank and Trust Company
|
Linda Sloane Kay
|
|
|
44
|
|
|
Director, Century Bancorp, Inc.;
Director and Vice President, Century Bank and Trust Company
|
Fraser Lemley
|
|
|
65
|
|
|
Director, Century Bancorp, Inc.,
and Century Bank and Trust Company
|
Joseph J. Senna, Esquire
|
|
|
66
|
|
|
Director, Century Bancorp, Inc.,
and Century Bank and Trust Company
|
Barry R. Sloane
|
|
|
50
|
|
|
Director, Co-President and
Co-Chief Operating Officer, Century Bancorp, Inc.; Director,
Co-President and Co-Chief Executive Officer, Century Bank and
Trust Company
|
Jonathan G. Sloane
|
|
|
47
|
|
|
Director, Co-President and
Co-Chief Operating Officer, Century Bancorp, Inc.; Director, Co-
President and Co-Chief Executive Officer, Century Bank and Trust
Company
|
Marshall M. Sloane
|
|
|
79
|
|
|
Chairman, Chief Executive Officer,
Century Bancorp, Inc.; Chairman , Century Bank and Trust Company
|
Stephanie Sonnabend
|
|
|
52
|
|
|
Director, Century Bancorp, Inc.,
and Century Bank and Trust Company
|
George F. Swansburg
|
|
|
63
|
|
|
Director, Century Bancorp, Inc.,
and Century Bank and Trust Company
|
Jon Westling
|
|
|
63
|
|
|
Director, Century Bancorp, Inc.,
and Century Bank and Trust Company
|
Mr. Baldwin
became a director of the Company in
1996. He has been a director of Century Bank and Trust Company
since 1995. Mr. Baldwin is President and CEO of
Baldwin & Co., which is a financial services firm. He
was formerly President and Chief Executive Officer of Kaler
Carney Liffler & Co.
Mr. Berkowitz
became a director of the Company in
1996. He was elected a director of Century Bank/Suffolk in 1989
and has been a director of Century Bank and Trust Company since
the banks merged in 1992. Mr. Berkowitz is President and
CEO of Legal Seafoods, Inc.
Dr. Case
became a director of the Company in 1996.
Dr. Case has been a director of Century Bank and Trust
Company since 1995. He is a Professor of Economics at Wellesley
College and a Visiting Scholar at the Federal Reserve Bank of
Boston.
58
Dr. Foster
has been a director of the Company since
its organization in 1972. He was a founding director of Century
Bank and Trust Company in 1969. He is currently Director
Emeritus. He is Founder and Chairman Emeritus of Charles River
Laboratories, Inc. Formerly, he was Chairman of the Board of
Charles River Laboratories, Inc.
Dr. Goldman
has been a director of the Company since
its organization in 1972. He was also a founding director of
Century Bank and Trust Company in 1969. He is a Professor
Emeritus of Economics at Wellesley College and Associate
Director of the Davis Center for Russian Studies at Harvard
University.
Mr. Higley
became a director of the Company in 1996.
He has been a director of Century Bank and Trust Company since
1986. Mr. Higley is an attorney in private practice.
Ms. Kay
became a director of the Company in 2005.
Ms. Kay joined Century Bank and Trust Company in 1983 as
Assistant Vice President of Marketing and currently serves as
Vice President for Business Development in Chestnut Hill.
Mr. Lemley
became a director of the Company in 1996.
He has been a director of Century Bank and Trust Company since
1988. Mr. Lemley is Chairman of the Board and CEO of Sentry
Auto Group.
Mr. Senna
became a director of the Company in 1986.
He has been a director of Century Bank and Trust Company since
1979. Mr. Senna is an attorney and managing partner of
C&S Capital Properties, LLC, a real estate management and
development firm. Formerly, he was CEO and Treasurer of
Sunnyhurst Farms Convenience Stores.
Mr. Barry R. Sloane
became a director of the Company
in 1997. He has been a director of Century Bank and Trust
Company since 1997. Mr. Sloane is Co-President and Co-Chief
Operating Officer of Century Bancorp and Co-President and
Co-Chief Executive Officer of Century Bank and Trust Company.
Formerly, he was Managing Director of Steinberg,
Priest & Sloane Capital Management, LLC, which is an
investment advisory firm.
Mr. Jonathan G. Sloane
became a director of the
Company in 1986. He has been a director of Century Bank and
Trust Company since 1992. Mr. Sloane is currently
Co-President and Co-Chief Operating Officer of Century Bancorp
Inc. and Co-President and Co-Chief Executive Officer of Century
Bank and Trust Company.
Mr. Marshall M. Sloane
is the founder of the Company
and has been Chairman and Chief Executive Officer since its
organization in 1972. He founded Century Bank and Trust Company
in 1968 and is currently its Chairman.
Ms. Sonnabend
became a director of the Company in
1997. She has been a director of Century Bank and Trust Company
since 1997. Ms. Sonnabend is CEO and President of Sonesta
International Hotels Corporation.
Mr. Swansburg
became a director of the Company in
1986. He has been a director of Century Bank and Trust since
1992. From 1992 to 1998 he was President and Chief Operating
Officer of Century Bank and Trust Company. He is now retired
from Century Bank and Trust Company.
Mr. Westling
became a director of the Company in
1996. He has been a director of Century Bank and Trust Company
since 1995. Mr. Westling is President Emeritus of Boston
University.
All of the Companys directors are elected annually and
hold office until their successors are duly elected and
qualified. A majority of the members of the Companys Board
of Directors have been determined by the Companys Board of
Directors to be independent within the meaning of
Rule 4200(a)(15) of the National Association of Security
Dealers listing standards. There are no family
relationships between any of the directors or executive
officers, except that Barry R. Sloane and Jonathan G. Sloane are
the sons of Marshall M. Sloane and Linda Sloane Kay is the
daughter of Marshall M. Sloane.
59
Executive officers are elected annually by the Board prior to
the Annual Meeting of Shareholders to serve for a one year term
and until their successors are elected and qualified. The
following table sets forth the name of each executive officer of
the Company and the principal positions and offices he holds
with the Company.
|
|
|
Marshall M. Sloane
|
|
Chairman and Chief Executive
Officer; Chairman, Century Bank and Trust Company.
Mr. Sloane is 79 years old.
|
Jonathan G. Sloane
|
|
Director, Co-President and
Co-Chief Operating Officer; Director, Co-President and Co-Chief
Executive Officer, Century Bank and Trust Company.
Mr. Sloane is 47 years old.
|
Barry R. Sloane
|
|
Director and Co-President and
Co-Chief Operating Officer; Director, Co- President and Co-Chief
Executive Officer, Century Bank and Trust Company. Mr. Sloane is
50 years old.
|
Paul V. Cusick, Jr.
|
|
Vice President and Treasurer;
Executive Vice President, Chief Financial Officer and Treasurer,
Century Bank and Trust Company. Mr. Cusick is 61 years old.
|
Paul A. Evangelista
|
|
Executive Vice President, Century
Bank and Trust Company with responsibility for retail, cash
management, operations and marketing. Mr. Evangelista is
42 years old. He joined the Company in 1999.
|
David B. Woonton
|
|
Executive Vice President, Century
Bank and Trust Company with responsibility for lending.
Mr. Woonton is 50 years old. He joined the Company in
1999.
|
The Audit
Committee
The Audit Committee meets with KPMG LLP, the independent
registered public accounting firm, in connection with the annual
audit of the Companys financial statements. The Audit
Committee is composed of four directors, Joseph J. Senna, Chair,
George R.Baldwin, Stephanie Sonnabend, and Jon Westling, each of
whom is independent as defined by the National Association of
Securities Dealers current listing standards. The Company
did not rely on certain exemptions in Exchange Act
Rule 10A-3
from the audit committee independence requirements. The Audit
Committee includes an audit committee financial
expert, Joseph J. Senna, as that term is defined in
Item 401(h) of
Regulation S-K.
The Audit Committee reviews the findings and recommendations of
the FRB, FDIC, and Massachusetts Bank Commissioners staff
in connection with their examinations and the internal audit
reports and procedures for the Company and its subsidiaries. The
Audit Committee met five times during 2005.
Audit
Committee Report
The Audit Committee of the Companys Board of Directors is
responsible for providing independent, objective oversight of
the Companys accounting functions and internal controls.
The Audit Committee operates under a written charter first
adopted and approved by the Board of Directors in 2000. The
Audit Committee has reviewed and reassessed its Charter. A copy
of the Audit Committee Charter was last published in the
10-K
for the
period ending December 31, 2003.
Management is responsible for the Companys internal
controls and financial reporting process. The independent
registered public accounting firm is responsible for performing
an independent audit of the Companys consolidated
financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States) and to
issue their reports thereon. The Audit Committees
responsibility is to monitor and oversee these processes.
60
The Audit Committee has reviewed and discussed the audited
financial statements with management and the independent
registered public accounting firm. The Audit Committee has also
discussed with KPMG LLP, the independent registered public
accounting firm for the Company, the matters required to be
discussed by Codification of Statements on Auditing Standards
No. 61 (Communication with Audit Committees). The Audit
Committee has received the written disclosures and the letter
from the independent registered public accounting firm as
required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees). Additionally,
the Audit Committee has discussed with KPMG LLP the firms
independence.
Based on the review and discussions referred to in the paragraph
above, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the
Companys Annual Report on
Form 10-K
for the last fiscal year for filing with the Securities and
Exchange Commission.
Joseph J.
Senna, Chair, George R. Baldwin, Stephanie Sonnabend, Jon
Westling
Nominating
Committee
The Companys Nominating Committee has three director
members, each of whom has been determined to be independent by
the Companys Board of Directors. The Nominating Committee
operates pursuant to a written policy. The Committee developed
criteria for the selection of new directors to the Board,
including but not limited to, diversity, age, skills,
experience, time availability (including the number of other
boards a director candidate sits on), NASDAQ listing standards,
applicable federal and state laws and regulations, in the
context of the needs of the Board and the Company and such other
criteria as the Committee shall determine to be relevant. The
Committee did meet during 2005.
Code of
Ethics
The Company has adopted a code of ethics that applies to its
principal executive officer, principal financial officer,
principal accounting officer or persons performing similar
functions. A copy of the Companys code of ethics may be
obtained upon written request to Investor Relations, Century
Bancorp, Inc., 400 Mystic Avenue, Medford, Massachusetts.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
Director
Compensation
Directors not employed by the Company receive an $8,000 retainer
per year, $250 per Century Bancorp, Inc. Board meeting attended,
$750 per Century Bank and Trust Company Board and
$500 per committee meeting attended.
Compensation
Committee Report on Executive Compensation
The Compensation Committee is a committee of the Board of
Directors composed of Jon Westling as Chairman, Fraser Lemley
and Roger S. Berkowitz, each of whom is independent as defined
by the National Association of Securities Dealers current
listing standards. It reviews the salaries of the Companys
officers and administers the Companys Supplemental
Executive Insurance/Retirement Income Plan and Incentive
Compensation Plan.
Decisions on compensation of the Companys executives are
generally made by the Compensation Committee of the Board of
Directors. Each member of the Compensation Committee is a
non-employee director. The goal of the Committee is to provide
competitive levels of compensation in order to attract and
retain qualified executive personnel. The Compensation Committee
believes that the actions of each executive officer have the
potential to affect the short and long term profitability of the
Company. Accordingly, the Compensation Committee places
considerable importance on the design and administration of the
executive compensation program.
The Company has an executive compensation program that is driven
by the overall performance of the Company, the increase in
shareholder value, the performance of the business unit directly
affected by the executive
61
and by the performance of the individual executive. The three
primary components of the executive compensation program are
base salary, cash incentive plan and stock based incentive plans.
Base
Salary
Base salary levels are set so that the Company has the
management talent to meet the challenges in the financial
services industry. Several factors are included in setting base
salaries including the responsibilities of the executive
officer, the scope of the executives position, individual
performance and salary levels at peer banks. Historically, the
Companys executive compensation practices have been
designed to provide total compensation in the middle range of
compensation levels at similar banking institutions. Salary
increases for the senior management group have averaged 3% to 8%
during the last several years.
Cash
Incentive Plans
The Company has a cash incentive compensation plan which
provides for the award of bonuses up to a percentage of base
salary to officers of the Company or its subsidiaries.
Recipients of incentive compensation are selected by the
Compensation Committee, upon the recommendation of management,
as eligible to participate in the plan. Awards are based upon
the attainments of established objectives including
profitability, expense control, sales volume and overall job
performance. Upon recommendation of the Compensation Committee,
the Board of Directors determines the amounts, if any, to be
awarded. Earned bonuses for 2005, 2004 and 2003 are shown in the
Summary Compensation Table.
Executive
Benefits
The Companys executive compensation package includes a
special benefits component in addition to base salary and cash
and stock incentive plans. These special benefits are viewed as
less important than the above. Where such benefits are provided,
they are intended to support other business purposes including
facilitating business development efforts.
Employment
Agreements
The Company has entered into an employment agreement with
Mr. David Woonton. The agreement grants two years of
severance pay upon a change of control of the Company.
Chief
Executive Officer Compensation
Mr. Marshall Sloane is eligible to participate in the same
executive compensation plans available to other executive
officers described above. The 2005 cash compensation for
Mr. Sloane was $840,140 which was base salary.
Conclusion
The Compensation Committee believes that the executive
compensation package will motivate the management team to
enhance the performance of the company.
62
Summary
of Cash and Certain Other Compensation
The following table shows, for fiscal years ending
December 31, 2003, 2004 and 2005, the cash compensation
paid by the Company and its subsidiaries, as well as certain
other compensation paid, accrued or granted for those years to
the five most highly compensated executive officers of the
Company.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
Securities
|
|
|
|
|
|
|
|
Name
|
|
|
|
|
Annual Compensation
|
|
|
Stock
|
|
|
Underlying
|
|
|
LTIP
|
|
|
All Other
|
|
And
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Other
|
|
|
Awards
|
|
|
Options
|
|
|
Payouts
|
|
|
Compensation
|
|
Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
($)(1)
|
|
|
Marshall M. Sloane
|
|
|
2005
|
|
|
|
840,140
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
120,560
|
|
Chairman and CEO,
|
|
|
2004
|
|
|
|
788,578
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,000
|
|
|
|
0
|
|
|
|
106,478
|
|
Century Bancorp, Inc.
|
|
|
2003
|
|
|
|
760,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,000
|
|
|
|
0
|
|
|
|
87,860
|
|
Chairman of the Board, Century
Bank and Trust Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan G. Sloane
|
|
|
2005
|
|
|
|
417,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
11,346
|
|
Co-President and Co-COO,
|
|
|
2004
|
|
|
|
397,000
|
|
|
|
4,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,000
|
|
|
|
0
|
|
|
|
11,830
|
|
Century Bancorp, Inc.
|
|
|
2003
|
|
|
|
385,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,000
|
|
|
|
0
|
|
|
|
9,476
|
|
Co-President and Co-CEO, Century
Bank and Trust Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry R. Sloane(2)
|
|
|
2005
|
|
|
|
417,000
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
1,214
|
|
Co-President and Co-COO,
|
|
|
2004
|
|
|
|
295,929
|
|
|
|
4,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,000
|
|
|
|
0
|
|
|
|
713
|
|
Century Bancorp, Inc.
Co-President
and Co-CEO, Century Bank and Trust Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul V. Cusick, Jr.
|
|
|
2005
|
|
|
|
286,598
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,654
|
|
Vice President and Treasurer,
|
|
|
2004
|
|
|
|
272,950
|
|
|
|
4,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,000
|
|
|
|
0
|
|
|
|
17,380
|
|
Century Bancorp, Inc.
|
|
|
2003
|
|
|
|
265,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,000
|
|
|
|
0
|
|
|
|
16,713
|
|
Executive Vice President, CFO and
Treasurer, Century Bank and Trust Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David B. Woonton
|
|
|
2005
|
|
|
|
251,990
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
13,512
|
|
Executive Vice President,
|
|
|
2004
|
|
|
|
239,990
|
|
|
|
4,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,500
|
|
|
|
0
|
|
|
|
5,550
|
|
Century Bank and Trust Company
|
|
|
2003
|
|
|
|
233,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,000
|
|
|
|
0
|
|
|
|
3,996
|
|
|
|
|
(1)
|
|
Term insurance premiums paid for Supplemental Executive
Insurance/Retirement Income Plan and matching contribution for
the 401(k) plan.
|
|
(2)
|
|
Mr. Barry R. Sloane joined the Company during April of
2004; his salary reflects payment for the partial year.
|
63
Aggregated
Option Exercises in 2005 and Year-end Option Values
The following table provides information relating to option/SAR
exercises in 2005 by our named executive officers and the value
of such officers unexercised options/SARs at
December 31,2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Unexercised
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
In-The-Money
|
|
|
|
2005
|
|
|
|
|
|
Underlying Options
|
|
|
Options at
|
|
|
|
Shares Acquired
|
|
|
Value
|
|
|
at Year End (#)
|
|
|
Year End (#)(1)
|
|
|
|
On Exercise (#)
|
|
|
Realized ($)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Marshall M. Sloane
|
|
|
354
|
|
|
$
|
0
|
|
|
|
36,000
|
|
|
|
0
|
|
|
$
|
135,480
|
|
|
|
0
|
|
Jonathan G. Sloane
|
|
|
|
|
|
|
0
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
137,082
|
|
|
|
0
|
|
Barry R. Sloane
|
|
|
|
|
|
|
0
|
|
|
|
7,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Paul V. Cusick, Jr.
|
|
|
|
|
|
|
0
|
|
|
|
11,500
|
|
|
|
0
|
|
|
|
46,886
|
|
|
|
0
|
|
David B. Woonton
|
|
|
|
|
|
|
0
|
|
|
|
8,500
|
|
|
|
0
|
|
|
|
45,694
|
|
|
|
0
|
|
|
|
|
(1)
|
|
Based on a per share market price of $29.50
|
COMPARISON
OF FIVE-YEAR
Cumulative Total Return*
Value of $100 Invested on December 31, 2000 at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/01
|
|
|
12/31/02
|
|
|
12/31/03
|
|
|
12/31/03
|
|
|
12/31/03
|
Century
|
|
|
|
138.72
|
|
|
|
|
186.95
|
|
|
|
|
253.58
|
|
|
|
|
214.17
|
|
|
|
|
215.94
|
|
Nasdaq Banks
|
|
|
|
108.27
|
|
|
|
|
110.84
|
|
|
|
|
142.58
|
|
|
|
|
163.17
|
|
|
|
|
159.40
|
|
Nasdaq U.S.
|
|
|
|
79.32
|
|
|
|
|
54.84
|
|
|
|
|
81.99
|
|
|
|
|
89.22
|
|
|
|
|
91.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Assumes that the value of the investment in the Companys
Common Stock and each index was $100 on December 31, 2000
and that all dividends were reinvested.
|
Supplemental
Executive Insurance/Retirement Income Plan
Executive officers of the Company or its subsidiaries who have
at least one year of service may participate in the Supplemental
Executive Insurance/Retirement Income Plan (the
Supplemental Plan).
The Company maintains split dollar life insurance policies for
participants, in addition to the group term life insurance,
which provides life insurance equal to twice the
individuals salary with a maximum of $200,000, which they
receive under a policy the Company maintains for its employees
generally. The split dollar insurance provides
64
death benefits if the participant dies while in the employ of
the Company, equal to $2,925,000, $2,084,000, $1,433,000, and
$1,260,000, for Messrs. Marshall M. Sloane, Jonathan G.
Sloane, Cusick, and Woonton, respectively.
Premiums paid by the Company in 2005 amounted to $87,800,
$63,500, $27,200, and $65,000, for policies on the lives of
Messrs. Marshall M. Sloane, Jonathan G. Sloane, Cusick, and
Woonton. The policies are on an insurance bonus
basis, which means that the Company pays the full amount of all
premiums on the policies but an amount equal to the one-year
term cost of the insurance is treated for tax purposes as a
bonus to the insured. The Company is the owner of these policies
and each participating employee has received an assignment of a
portion of each policys proceeds equal to the death
benefits described above. Upon the death of a participant, the
Company will receive benefits equal to the difference between
the death benefits payable to the named beneficiary under the
Supplemental Plan and the face amount of the policy (less any
policy loans then in force).
A participant in the Supplemental Plan is also entitled to
retirement benefits. Participants, upon retirement at
age 65, after a specified number of years of service, are
entitled to receive for life, with ten years certain, 75% of
their highest 36 months compensation for certain
executives, or 66% of such compensation if the participants are
senior officers (as determined by the Compensation Committee),
less the primary social security benefits and the benefit
received from the defined benefit retirement plan. If a
participant retires or terminates employment prior to
age 65 such person is entitled to a reduced benefit. Five
years of service are required for any benefits to become vested.
Thereafter benefits vest incrementally.
The following table illustrates representative annual retirement
benefits at various compensation levels for executive management
employees under the Supplemental Plan who retire at age 65
and with 15 years of service, without reflecting the
required offset of benefits from social security and the defined
benefit retirement plan.
|
|
|
|
|
|
|
|
|
Three Year
|
|
Executive Officer
|
|
|
Senior Officer
|
|
Average Compensation
|
|
Annual Benefit
|
|
|
Annual Benefit
|
|
|
$100,000
|
|
$
|
75,000
|
|
|
$
|
66,666
|
|
150,000
|
|
|
112,500
|
|
|
|
100,000
|
|
200,000
|
|
|
150,000
|
|
|
|
133,300
|
|
250,000
|
|
|
187,500
|
|
|
|
166,700
|
|
300,000
|
|
|
225,000
|
|
|
|
200,000
|
|
400,000
|
|
|
300,000
|
|
|
|
266,700
|
|
600,000
|
|
|
450,000
|
|
|
|
400,000
|
|
800,000
|
|
|
600,000
|
|
|
|
533,300
|
|
As of January 1, 2005, Messrs. Marshall M. Sloane,
Jonathan G. Sloane, Cusick, and Woonton were 100%, 100%, 100%,
and 32.5%, vested, respectively, under the Supplemental Plan.
The Company has entered into an agreement with Mr. Marshall
Sloane to freeze his Supplemental Executive/Insurance Retirement
Income Plan benefit. The frozen benefit is $2,925,000 of
pre-retirement death benefit and $455,034 of annual retirement
income. In consideration of this frozen benefit, the Company has
acquired a life insurance policy providing a death benefit of
$25,000,000 upon the death of the survivor of Mr. Sloane or
Mrs. Sloane.
65
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
The following table sets forth certain information as to the
number and percentage of shares of Class A and Class B
Common Stock beneficially owned as of December 31, 2005
(i) by each person known by the Company to own beneficially
more than 5% of the Companys outstanding shares of
Class A or Class B Common Stock (ii) by each of
the Companys directors and certain officers; and
(iii) by all directors and officers of the Company as a
group. As of December 31, 2005, there were
3,453,202 shares of Class A Common Stock and
2,082,240 shares of Class B Common Stock outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Beneficial
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner & Address or
Number
|
|
Class A
|
|
|
% A
|
|
|
Class B
|
|
|
% B
|
|
of Persons in Group
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
Endicott Management Company(9)
|
|
|
389,300
|
|
|
|
11.27
|
%
|
|
|
|
|
|
|
|
|
237 Park Avenue, Suite 801
New York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellington Management Co., LLP(10)
|
|
|
279,143
|
|
|
|
8.08
|
%
|
|
|
|
|
|
|
|
|
237 Park Avenue, Suite 801
New York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banc Funds Co., LLC(12)
|
|
|
186,550
|
|
|
|
5.40
|
%
|
|
|
|
|
|
|
|
|
208 S. LaSalle Street
Chicago, IL 60604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JAM Managers, L.L.C.(11)
|
|
|
230,000
|
|
|
|
6.69
|
%
|
|
|
|
|
|
|
|
|
One Fifth Avenue
New York, NY 10003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marshall M. Sloane(a)(b)
|
|
|
23,830
|
(1)
|
|
|
0.69
|
%
|
|
|
1,695,930
|
(2)
|
|
|
81.45
|
%
|
400 Mystic Ave.
Medford, MA 02155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Beneficial
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner & Address or
Number
|
|
Class A
|
|
|
%A
|
|
|
Class B
|
|
|
%B
|
|
of Persons in Group
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
George R. Baldwin(a)
|
|
|
4,621
|
|
|
|
0.13
|
%
|
|
|
|
|
|
|
|
|
Roger S. Berkowitz(a)
|
|
|
3,648
|
|
|
|
0.11
|
%
|
|
|
|
|
|
|
|
|
Karl E. Case(a)
|
|
|
2,641
|
|
|
|
0.08
|
%
|
|
|
|
|
|
|
|
|
Paul V. Cusick, Jr.(b)
|
|
|
14,845
|
|
|
|
0.43
|
%
|
|
|
|
|
|
|
|
|
Paul A. Evangelista(b)
|
|
|
1,226
|
|
|
|
0.04
|
%
|
|
|
|
|
|
|
|
|
Henry L. Foster, D.V.M.(a)
|
|
|
11,152
|
|
|
|
0.32
|
%
|
|
|
1,000
|
|
|
|
0.05
|
%
|
Marshall I. Goldman(a)
|
|
|
2,550
|
(3)
|
|
|
0.07
|
%
|
|
|
30,000
|
(4)
|
|
|
1.44
|
%
|
Russell B. Higley, Esquire(a)
|
|
|
4,698
|
|
|
|
0.14
|
%
|
|
|
|
|
|
|
|
|
Linda S. Kay(a)
|
|
|
8,419
|
(6)
|
|
|
0.24
|
%
|
|
|
60,000
|
(6)
|
|
|
2.88
|
%
|
Fraser Lemley(a)
|
|
|
8,814
|
|
|
|
0.26
|
%
|
|
|
|
|
|
|
|
|
Joseph J. Senna(a)
|
|
|
47,449
|
(5)
|
|
|
1.37
|
%
|
|
|
|
|
|
|
|
|
Barry R. Sloane(a)
|
|
|
3,222
|
(8)
|
|
|
0.09
|
%
|
|
|
|
|
|
|
|
|
Jonathan G. Sloane(a) (b)
|
|
|
19,334
|
(7)
|
|
|
0.56
|
%
|
|
|
60,000
|
|
|
|
2.88
|
%
|
Stephanie Sonnabend(a)
|
|
|
2,161
|
|
|
|
0.06
|
%
|
|
|
|
|
|
|
|
|
George F. Swansburg(a)
|
|
|
30,040
|
|
|
|
0.87
|
%
|
|
|
|
|
|
|
|
|
Jon Westling(a)
|
|
|
2,987
|
|
|
|
0.09
|
%
|
|
|
|
|
|
|
|
|
David B. Woonton(b)
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
All directors and officers as a
group (18 in number)(iii)
|
|
|
191,637
|
|
|
|
5.55
|
%
|
|
|
1,846,930
|
|
|
|
88.70
|
%
|
|
|
|
(a)
|
|
Denotes director of the Company.
|
66
|
|
|
(b)
|
|
Denotes officer of the Company.
|
|
(1)
|
|
Includes 2,500 shares owned by Mr. Sloanes
spouse and also includes 14,657 shares held in trust for
Mr. Sloanes grandchildren.
|
|
(2)
|
|
Includes 1,500 shares owned by Mr. Sloanes
spouse, 1,694,430 shares held by Sloane Family Enterprises
LP, and does not include 120,000 shares owned by
Mr. Sloanes children. Mr. Sloane disclaims
beneficial ownership of such 120,000 shares and
1,694,430 shares held by Sloane Family Enterprises LP.
|
|
(3)
|
|
Does not include 9,000 shares held of record by
Mr. Goldmans children; Mr. Goldman disclaims
beneficial ownership of such shares.
|
|
(4)
|
|
Does not include 9,000 shares held of record by
Mr. Goldmans children; Mr. Goldman disclaims
beneficial ownership of such shares.
|
|
(5)
|
|
Includes 34,800 shares owned by Mr. Sennas
spouse.
|
|
(6)
|
|
Includes 8,295 shares owned by Ms. Kays spouse.
|
|
(7)
|
|
Includes 76.45 shares owned by Mr. Sloanes
spouse and includes 355 shares owned by Mr. Jonathan
Sloanes children.
|
|
(8)
|
|
Includes 40 shares owned by son and 71 shares owned by
spouse Candace Lapidus Sloane.
|
|
(9)
|
|
The Company has relied upon the information set forth in the
Form 13F filed with the SEC by The Endicott Group on
February 9, 2006.
|
|
|
|
(10)
|
|
The Company has relied upon the information set forth in the
Schedule 13G filed with the SEC by the Wellington
Management Company, LLP on February 14, 2006.
|
|
(11)
|
|
The Company has relied upon the information set forth in the
Schedule 13D filed with the SEC by Sy Jacobs,
c/o JAM
Managers, L.L.C. on February 15, 2006.
|
|
(12)
|
|
The Company has relied upon the information set forth in the
Schedule 13G filed with the SEC by the Banc Funds Co., LLC
on January 30, 2006.
|
Compliance
with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the
Companys Executive Officers and Directors, and any persons
who own more than 10% of a registered class of the
Companys equity securities, to file reports of ownership
and changes in ownership of securities with the SEC and NASDAQ.
Executive Officers, Directors, and greater than 10% stockholders
(of which, to the Companys knowledge, there currently are
none) are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely
on a review of the copies of such reports received by it or
written representations from certain reporting persons that no
other reports were required, the Company believes that, during
2005, all Section 16(a) filing requirements applicable to
its Executive Officers and Directors were complied with. A
Form 3 was filed late for Linda Sloane Kay during 2005. The
Company learned in January of 2006 that in 2002,
Mr. Marshall Sloane inadvertently failed to file a
Form 4 for two 10 share purchases he made for gifts to
grandchildren. Those purchases were reported in a Form 5
filed in January of 2006.
67
Equity
Compensation Plan Information
The following schedule provides information, with respect to the
Company equity compensation plans on equity securities (common
shares) that are authorized for issuance as of December 31,
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
|
|
|
|
|
|
Future Issuance Under
|
|
|
|
Number of Shares
|
|
|
|
|
|
Equity Compensation
|
|
|
|
to be Issued
|
|
|
Weighted-Average
|
|
|
Plans (Excluding
|
|
|
|
Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Shares Reflected in
|
|
|
|
Outstanding Options
|
|
|
Outstanding Options
|
|
|
Column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved
by security holders
|
|
|
130,133
|
|
|
$
|
26.74
|
|
|
|
149,775
|
|
Equity compensation plans not
approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
130,133
|
|
|
$
|
26.74
|
|
|
|
149,775
|
|
All compensation plans have been previously approved by
shareholders. There are 79,425 shares available for future
issuance for the Employee plan.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
Certain Directors and Officers of the Company and Bank and
members of their immediate family are at present, as in the
past, customers of the Bank and have transactions with the Bank
in the ordinary course of business. In addition, certain of the
Directors are at present, as in the past, also Directors,
Officers or Stockholders of Corporations or members of
partnerships that are customers of the Bank and have
transactions with the Bank in the ordinary course of business.
Such transactions with Directors and Officers of the Company and
the bank and their families and with such corporations and
partnerships were made in the ordinary course of business, were
made on substantially the same terms, including interest rates
and collateral on loans, as those prevailing at the time for
comparable transactions with other persons, and did not involve
more than the normal risk of collectibility or present other
features unfavorable to the Bank.
Mr. Russell Higleys law firm performed professional
services for the Bank related to real estate loan originations.
Total fees paid by the Bank to Mr. Higleys firm in
2005 were $46,175.
In consideration of Mr. Swansburg serving as Administrator
of Century Bancorp Capital Trust II, the Company has agreed
to compensate him with an annual fee of $14,500.
PART IV
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The Audit Committee separately pre-approves each of the
following services, in compliance with the requirements of
Sarbanes-Oxley and SEC regulations, before they are rendered by
the auditor: financial audit, attest, preparation of tax
returns, as well as, audit of 401(k) and pension plans. The
Audit Committees pre-approval procedures, in compliance
with the requirements of Sarbanes-Oxley and SEC regulations,
allow the Companys auditors to perform certain services
without specific permission from the Audit Committee, as long as
these services comply with the following requirements:
(a) the services consist of special projects relating to
strategic tax savings initiatives, corporate tax structure
engagements, as well as, merger and acquisition consulting;
(b) aggregate special project services can not exceed
$50,000 during the calendar year; and (c) the Audit
Committee must be informed
68
about each service at its next scheduled meeting. All other
services provided by the Companys auditor must be
separately pre-approved before they are rendered.
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2005
|
|
|
Fiscal 2004
|
|
Description of Fees
|
|
Amount
|
|
|
Amount
|
|
|
Audit fees(1)
|
|
$
|
298,000
|
|
|
$
|
283,000
|
|
Audit-related fees(2)
|
|
|
21,000
|
|
|
|
20,000
|
|
Tax fees(3)
|
|
|
31,950
|
|
|
|
36,950
|
|
Other fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
350,950
|
|
|
$
|
339,950
|
|
|
|
|
(1)
|
|
includes fees for annual audit, renewal of quarterly financial
statement, internal control attestations.
|
|
(2)
|
|
includes fees for the audit of 401K and pension plans.
|
|
(3)
|
|
includes fees for tax compliance and tax consulting.
|
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
(a) (1)
Financial
Statements.
The following financial statements of the company and its
subsidiaries are presented in Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets December 31,
2005 and 2004
Consolidated Statements of Income Years Ended
December 31, 2005, 2004 and 2003
Consolidated Statements of Changes in Stockholders Equity
-Years ended December 31, 2005, 2004 and 2003
Consolidated Statements of Cash Flows-Years Ended
December 31, 2005, 2004, and 2003
Notes to Consolidated Financial Statements
(2)
Financial
Statement Schedules
All schedules are omitted because either the required
information is shown in the financial statements or notes
incorporated by reference, or they are not applicable, or the
data is not significant.
(3)
Exhibits
|
|
|
|
|
|
3
|
.1
|
|
Certificate of Incorporation of
Century Bancorp, Inc., incorporated by reference previously
filed with registrants initial registration statement on
Form S-1
dated May 20, 1987 (Registration
No. 33-13281).
|
|
3
|
.2
|
|
Bylaws of Century Bancorp, Inc.,
incorporated by reference previously filed with
registrants initial registration statement on
Form S-1
dated May 20, 1987 (Registration
No. 33-13281).
|
|
4
|
.1
|
|
Form of Common Stock Certificate
of the Company incorporated by reference previously filed with
registrants initial registration statement on
Form S-1
dated May 20, 1987 (Registration
No. 33-13281).
|
|
4
|
.2
|
|
Century Bancorp, Inc. 401(K) Plan,
incorporated by reference on
Form S-8
filed on June 25, 1997.
|
|
4
|
.3
|
|
Registration Statement relating to
the 8.30% Junior Subordinated Debentures issued by Century
Bancorp Capital Trust, incorporated by reference on
Form S-2
filed on April 23, 1998.
|
|
10
|
.1
|
|
2000 Stock Option Plan, as amended
on December 30, 2005.
|
|
10
|
.2
|
|
Supplemental Executive Retirement
Benefit with Marshall M. Sloane, incorporated by reference on
Form 10K for the year ended December 31, 2002.
|
|
10
|
.3
|
|
Supplemental Executive Retirement
and Insurance Plan, incorporated by reference on Form 10K
for the year ended December 31, 2002.
|
|
10
|
.4
|
|
2004 Stock Option Plan, as amended
on December 30, 2005.
|
69
|
|
|
|
|
|
10
|
.5
|
|
Investment Management Agreement
dated October 28, 2004 with BlackRock Financial Management,
Inc. for Centurys
available-for-sale
portfolio between Century Bank and Trust Company and BlackRock
Financial Management, Inc. Terminated January 31, 2006,
incorporated by reference on Form 10-K for the year ended
December 31, 2004.
|
|
10
|
.6
|
|
Century Bancorp Capital
Trust II Purchase Agreement dated November 30, 2004,
between Century Bancorp Capital Trust II and the Company
and Sandler ONeill Partners, L.P., First Tennessee Bank
National Association and Keefe, Bruyette and Woods, Inc.,
incorporated by reference on Form 10-K for the year ended
December 31, 2004.
|
|
10
|
.7
|
|
Century Bancorp Capital
Trust II Indenture, dated December 2, 2004, between
the Company and Wilmington Trust Company, incorporated by
reference on Form 10-K for the year ended December 31,
2004.
|
|
10
|
.8
|
|
Century Bancorp Capital
Trust II Amended and Restated Declaration of Trust, dated
December 2, 2004, between the Trustees of Century Bancorp
Capital Trust II, the Administrator, the Company and
Sponsors, incorporated by reference on
Form 10-K
for the year ended December 31, 2004.
|
|
10
|
.9
|
|
Century Bancorp, Inc. Guarantee
Agreement, dated December 2, 2004, between the Century
Bancorp, Inc. and Wilmington Trust Company, incorporated by
reference on
Form 10-K
for the year ended December 31, 2004.
|
|
11
|
|
|
Statement Regarding Computation of
Per Share Earnings incorporated herein by
reference to Item 8 of the Notes to Consolidated Financial
Statements of the Companys 2005 Annual Report to
Stockholders.
|
|
12
|
|
|
Statement regarding Computation of
Ratios incorporated herein by reference to Item 6 of the
notes to Consolidated Financial Statements of the Companys
2005 Annual Report to Shareholders.
|
|
14
|
|
|
Code of Ethics
Policy This information is presented in Part
III, Item 10.
|
|
21
|
|
|
Subsidiaries of the
Registrant This information is presented in
Part I, Item 7, Managements Discussion and
Analysis of Results of Operations and Financial Condition.
|
|
23
|
.1
|
|
Consent of Independent Registered
Public Accounting Firm.
|
|
31
|
.2
|
|
Certification of Chief Executive
Officer of the Company Pursuant to Securities Exchange Act
Rules 13a-14
and
15d-14.
|
|
31
|
.
|
|
Certification of Chief Financial
Officer of the Company Pursuant to Securities Exchange Act
Rules 13a-14
and
15d-14.
|
|
32
|
.1
|
|
Certification of Chief Executive
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
|
|
Certification of Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
99
|
.1
|
|
Audit Committee Charter,
incorporated by reference, filed with
Form 10-K
for the year ended December 31, 2003.
|
(b)
Exhibits
required by Item 601 of
Regulation S-K.
See (a)(3) above for exhibits filed herewith.
(c)
Financial
Statement required by
Regulation S-X.
Schedules to Consolidated Financial Statements required by
Regulation S-X
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
70
SIGNATURES
Pursuant to the requirements of Section 13 or 15
(d) 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, on this 14th day of
March, 2006.
Century Bancorp, Inc.
|
|
|
|
By:
|
/s/ Marshall M. Sloane
|
Marshall M. Sloane, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated and
on the date indicated.
|
|
|
/s/ George R.
Baldwin
George
R. Baldwin, Director
|
|
/s/ George F.
Swansburg
George
F. Swansburg, Director
|
|
|
|
/s/ Roger S.
Berkowitz
Roger
S. Berkowitz, Director
|
|
/s/ Jon Westling
Jon
Westling, Director
|
|
|
|
/s/ Karl E. Case
Karl
E. Case, Ph.D., Director
|
|
/s/ Marshall M.
Sloane
Marshall
M. Sloane, Chairman
and Chief Executive Officer
|
|
|
|
/s/ Marshall I.
Goldman
Marshall
I. Goldman, Ph.D., Director
|
|
/s/ Jonathan G.
Sloane
Jonathan
G. Sloane, Director, Co-President and
Co-Chief Operating Officer
|
|
|
|
/s/ Russell B.
Higley
Russell
B. Higley, Esquire, Director
|
|
/s/ Barry R. Sloane
Barry
R. Sloane, Director, Co-President and
Co-Chief Operating Officer
|
|
|
|
/s/ Linda Sloane Kay
Linda
Sloane Kay, Director and Vice President
|
|
/s/ Paul V. Cusick
Paul
V. Cusick, Jr., Vice President and Treasurer Principal
Financial Officer
|
|
|
|
/s/ Fraser Lemley
Fraser
Lemley, Director
|
|
/s/ Anthony C.
LaRosa
Anthony
C. LaRosa, CPA, Senior Vice President Century Bank and Trust
Company, Principal Accounting Officer
|
/s/ Joseph Senna
Joseph
Senna, Director
|
|
|
|
|
|
/s/ Stephanie
Sonnabend
Stephanie
Sonnabend, Director
|
|
|
71