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 $127.2 million; its shares were traded at around $23.01 with a P/E ratio of 12.9 and P/S ratio of 1.3. The dividend yield of Century Bancorp Inc. stocks is 2%. Century Bancorp Inc. had an annual average earning growth of 2.3% over the past 10 years. Highlight of Business Operations:Earnings for the third quarter ended September 30, 2009 were $3,182,000, or $0.58 per share diluted, compared to net income of $2,559,000, or $0.46 per share diluted, for the third quarter ended September 30, 2008. For the first nine months of 2009, net income totaled $7,075,000, or $1.28 per share diluted, an increase of 13.5% when compared to net income of $6,235,000, or $1.12 per share diluted, for the same period a year ago.
For the three months ended September 30, 2009, the loan loss provision was $1.3 million compared to a provision of $1.4 million for the same period last year for a decrease of $100,000. For the nine months ended September 30, 2009, the loan loss provision was $4.2 million compared to a provision of $3.0 million for the same period last year for an increase of $1.2 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 $17.0 million at September 30, 2009 from $3.7 million on December 31, 2008.
Commercial and industrial loans decreased to $133.5 million at September 30, 2009 from $141.4 million on December 31, 2008. Construction loans increased to $62.4 million at September 30, 2009 from $59.5 million on December 31, 2008.
The allowance for loan loss at September 30, 2009 was $14.2 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 nine months ended September 30, 2009 as shown in the table below. The provision for loan losses increased by $1.2 million from $3.0 million to $4.2 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 1.62% at September 30, 2009. This increase in the ratio is primarily a result of an increase in non-performing loans to $17.0 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 $2.0 million, one primarily commercial real estate and two construction. In evaluating the allowance for loan losses the Company considered the following categories to be higher risk:
Included in Obligations Issued by States and Political Subdivisions as of September 30, 2009, are $22.1 million of ARSs and $14.7 million of VRDNs with unrealized losses of $2.9 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 $36.8 million of ARSs and VRDNs, $15.0 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 obligors. Based on the creditworthiness of the underlying obligors, management does not believe that any of these securities are other-than-temporarily impaired. As of September 30, 2009 the weighted average taxable equivalent yield on these securities was 0.77%. 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.
In the case of a failed auction, the Company may not have access to funds as only a limited market exists for failed ARSs. As of September 30, 2009, three of the Companys ARSs were purchased subsequent to their failure with a fair value of $10.7 million and an amortized cost of $13.3 million. These securities were issued by governmental entities, and are the debt of non-profit organizations which the Company believes to be creditworthy. Securities issued by governmental entities were purchased prior to their failure with a fair value of $4.8 million and amortized cost of $5.0 million. The securities purchased prior to their failure are not considered to have other than temporary impairment.
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