Century Bancorp Inc. is a bank holding company. They offer a wide range of services to commercial enterprises state and local governments and agencies and individuals. They make commercial loans real estate and construction loans consumer loans and accepts savings time and demand deposits. In addition they offer to their corporate customers automated lock box collection services cash management services and account reconciliation services and actively promotes the marketing of these services to the municipal market. Century BanCorp Inc. has a market cap of $117.2 million; its shares were traded at around $21.21 with a P/E ratio of 12.7 and P/S ratio of 1.3. The dividend yield of Century BanCorp Inc. stocks is 2.3%. Century BanCorp Inc. had an annual average earning growth of 2.3% over the past 10 years.
Highlight of Business Operations:second quarter ended June 30, 2008. For the first six months of 2009, net income totaled $3,893,000, or $0.70 per share diluted, an increase of 5.9% when compared to net income of $3,676,000, or $0.66 per share diluted, for the same period a year ago.
For the three months ended June 30, 2009, the loan loss provision was $1.1 million compared to a provision of $925,000 for the same period last year for an increase of $125,000. For the six months ended June 30, 2009, the loan loss provision was $2.9 million compared to a provision of $1.6 million for the same period last year for an increase of $1.3 million. The increase in the provision was due to an increase in nonperforming loans as well as deterioration in the economy in Companys market area. Nonperforming loans increased to $17.1 million at June 30, 2009 from $3.7 million on December 31, 2008.
Commercial and industrial loans decreased to $130.1 million at June 30, 2009 from $141.4 million on December 31, 2008. Construction loans increased to $63.4 million at June 30, 2009 from $59.5 million on December 31, 2008.
The allowance for loan loss at June 30, 2009 was $13.4 million as compared to $11.1 million at December 31, 2008. This increase was due to the provision for loan losses exceeding net loan charge offs for the six months ended June 30, 2009 as shown in the table below. The provision for loan losses increased by $1.3 million from $1.6 million to $2.9 million; this increase in the provision was due to an increase in nonperforming loans as well as deterioration in the economy in Companys market area. Also, the level of the allowance for loan losses to total loans increased from 1.33% at December 31, 2008 to 1.60% at June 30, 2009. This increase in the ratio is primarily a result of an increase in non-performing loans to $17.1 million from $3.7 million on December 31, 2008. The increase in nonperforming loans was primarily as a result of three loan relationships totaling $11.0 million with specific reserves of $1.3 million, one primarily commercial real estate and two construction.
Included in Obligations Issued by States and Political Subdivisions as of June 30, 2009, are $27.1 million of ARSs and $14.7 million of VRDNs with unrealized losses of $3.1 million for ARSs. VRDNs fair value is estimated to equal the cost. These debt securities were issued by governmental entities, but are not necessarily debt obligations of the issuing entity. Of the total of $41.8 million of ARSs and VRDNs, $20.0 million are obligations of governmental entities and the remainder are obligations of large non-profit entities. These obligations are variable rate securities with long-term maturities whose interest rates are set periodically through an auction process for ARSs and by prevailing market rates for VRDNs. Should the auction not attract sufficient bidders, the interest rate adjusts to the default rate defined in each obligations underlying documents. The Company increased its holdings in these types of securities during the second and third quarters of 2008 to take advantage of yields available at that time due to market disruption. Although many of these issuers have bond insurance, the Company purchased the securities based on the creditworthiness of the underlying obligor. Based on the creditworthiness of the underlying obligors, management does not believe that any of these securities are other-than-temporarily impaired. As of June 30, 2009 the weighted average taxable equivalent yield on these securities was 1.52%. At the time of purchase, these securities generally had higher yields. The overall yield has declined due to an overall decline in prevailing short-term interest rates as well as declining spreads to market rates.
Company is required to invest in stock of the FHLBB in an amount equal to 4.5% of its outstanding advances from the FHLBB. Stock is purchased at par value. As and when such stock is redeemed, the Company would receive from the FHLBB an amount equal to the par value of the stock. At its discretion, the FHLBB may declare dividends on the stock. On April 10, 2009, the FHLBB reiterated to its members that, while it currently meets all its regulatory capital requirements, it is focusing on preserving capital in response to ongoing market volatility, and accordingly, has suspended its quarterly dividend and has extended the moratorium on excess stock repurchases. It also announced that it had taken a write-down of $381.7 million in other-than-temporary impairment charges on its private-label mortgage-backed securities. This resulted in a net loss of $115.8 million for the year ended December 31, 2008. For the three months ended March 31, 2009, the FHLBB reported a net loss of $83.9 million resulting from the recognition of $126.9 million of impairment losses which were recognized through income. In the future, if additional unrealized losses are deemed to be other-than-temporary, the associated impairment charges could exceed the FHLBBs current level of retained earnings and possibly put into question whether the fair value of the FHLBB stock owned by the Company is less than par value. The FHLBB has stated that it expects and intends to hold its private-label mortgage-backed securities to maturity. Despite these negative trends, the FHLBB exceeded the regulatory capital requirements promulgated by the Federal Home Loan Banks Act and the Federal Housing Financing Agency. The FHLBB has the capacity to issue additional debt if necessary to raise cash. If needed, the FHLBB also has the ability to secure funding available to U.S. Government Sponsored Enterprises through the U.S. Treasury. Based on the capital adequacy and the liquidity position of the FHLBB, management believes there is no other-than- temporary impairment related to the carrying amount of the Companys FHLBB stock as of June 30, 2009. The Company will continue to monitor its investment in FHLBB stock.
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