Century Bancorp, Inc. Announces Increased Earnings for Q2 2020, up 6.2%; Asset Growth to Record $5.9 BB; Increase in Quarterly Dividend Declared
Century Bancorp, Inc. (NASDAQ:CNBKA) (www.centurybank.com) ("the Company") today announced net income of $19,722,000 for the six months ended June 30, 2020, or $3.54 per Class A share diluted, an increase of 4.4% compared to net income of $18,884,000, or $3.39 per Class A share diluted, for the same period a year ago. Total assets increased 8.3% from $5.49 billion at December 31, 2019 to $5.95 billion at June 30, 2020. For the quarter ended June 30, 2020, net income totaled $10,056,000 or $1.81 per Class A share diluted, an increase of 6.2% compared to net income of $9,466,000, or $1.70 per Class A share diluted, for the same period a year ago.
The Company's Board of Directors voted to increase its regular quarterly dividend from 12.00 cents ($0.12) per share to 14.00 cents ($0.14) per share on the Company's Class A common stock, and from 6.00 cents ($0.06) per share to 7.00 cents ($0.07) per share on the Company's Class B common stock. The dividends were declared payable August 17, 2020 to stockholders of record on August 3, 2020. This represents the first dividend increase since 2003.
Net interest income totaled $51.0 million for the six months ended June 30, 2020 compared to $46.7 million for the same period in 2019. The 9.3% increase in net interest income for the period is primarily due to a decrease in interest expense as a result of falling interest rates. Prepayment penalties collected amounted to approximately $874,000 for the first six months of 2020 compared to $13,000 for the same period last year. The net interest margin decreased from 2.09% on a fully tax-equivalent basis for the first six months of 2019 to 2.04% for the same period in 2020. This was primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve. The average balances of earning assets increased for the first six months of 2020 compared to the same period last year, by $456.9 million or 9.2%, combined with an average yield decrease of 0.42%, resulting in a decrease in interest income of $2.9 million. The average balance of interest-bearing liabilities increased for the first six months of 2020 compared to the same period last year, by $373.1 million or 9.3%, combined with an average interest-bearing liabilities interest cost decrease of 0.47%, resulting in a decrease in interest expense of $7.2 million.
The provision for loan losses increased by $2,150,000 from $625,000 for the six months ended June 30, 2019 to $2,775,000 for the same period in 2020, primarily as a result of the economic uncertainties associated with the novel coronavirus disease (COVID-19) pandemic and increased loan balances.
The Company's effective tax rate increased from 0.8% for the six months ended June 30, 2019 to 7.8% for the same period in 2020. This was primarily as a result of an increase in taxable income relative to total income and a reduction in tax accruals, during 2019, related to sequestration of the refundable portion of our alternative minimum tax (AMT) credit carryforward. On January 14, 2019, the IRS updated its announcement "Effect of Sequestration on the Alternative Minimum Tax Credit for Corporations" to clarify that refundable AMT credits under Section 53(e) of the Internal Revenue Code are not subject to sequestration for taxable years beginning after December 31, 2017. On March 27, 2020, the Coronavirus, Aid, Relief and Economic Security (CARES) Act was signed into law. As a result of the CARES Act, the full balance of the AMT credit will be refunded in 2020.
At June 30, 2020, total equity was $352.2 million compared to $332.6 million at December 31, 2019. The Company's equity increased primarily as a result of earnings, offset somewhat by dividends paid.
The Company's leverage ratio stood at 6.92% at June 30, 2020, compared to 7.25% at December 31, 2019. The decrease in the leverage ratio was due to an increase in quarterly average assets, offset somewhat by an increase in stockholders' equity. Book value as of June 30, 2020 was $63.26 per share compared to $59.73 at December 31, 2019.
The Company's allowance for loan losses was $32.5 million or 1.16% of loans outstanding at June 30, 2020 compared to $29.6 million or 1.22% of loans outstanding at December 31, 2019, and $29.1 million or 1.26% of loans outstanding at June 30, 2019. The ratio of the allowance for loan losses to loans outstanding has decreased from December 31, 2019, primarily from approximately $230 million of Payroll Protection Program (PPP) loans that are guaranteed by the U.S. Small Business Administration (SBA), which require no allowance for loan losses. This was offset, somewhat, by increased allocations for economic factors associated with the COVID-19 pandemic. Nonperforming assets totaled $1.5 million at June 30, 2020, compared to $2.0 million at December 31, 2019, and $5.0 million at June 30, 2019. Nonperforming assets decreased from the same period last year, mainly as a result of the resolution of one residential real estate property during the third quarter of 2019.
The CARES Act also allows companies to delay Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments (CECL), including the current expected credit losses methodology for estimating allowances for credit losses. The Company has elected to delay FASB ASU 2016-13. This ASU will be delayed until the earlier of the date on which the national emergency concerning the COVID-19 outbreak declared by the President on March 15, 2020 terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020.
The Company, through its subsidiary bank, Century Bank and Trust Company, a state chartered full service commercial bank, operating twenty-seven full-service branches in the Greater Boston area, offers a full range of Business, Personal and Institutional Services.
Century Bank and Trust Company is a member of the FDIC and is an Equal Housing Lender.
This press release contains certain "forward-looking statements" with respect to the financial condition, results of operations and business of the Company. Actual results may differ from those contemplated by these statements. The Company wishes to caution readers not to place undue reliance on any forward-looking statements. The Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether in response to new information, future events or otherwise.
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