Century Bancorp, Inc. Announces Record Earnings of $36.2 MM for 2018, Core Earnings up 17.8%; Asset Growth to Record $5.2 BB; Regular Dividend Declared

Century Bancorp, Inc. (NASDAQ:CNBKA) (www.centurybank.com) (“the Company”) today announced net income of $36.2 million for the year ended December 31, 2018, or $6.50 per Class A share diluted, an increase of 62.4% compared to net income of $22.3 million, or $4.01 per Class A share diluted, for the same period a year ago. The Company’s core earnings⁽¹⁾ increased by $5.5 million or 17.8% from $30.7 million in 2017 to a record $36.2 million in 2018.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted, which lowered the Company’s federal tax rate from 34% to 21%. As a result of the rate reduction, the Company recorded a reduction in the value of its net deferred tax asset resulting in a charge of $8.4 million to 2017 income tax expense. This $8.4 million charge is excluded from core earnings.

Total assets increased 7.9% from $4.79 billion at December 31, 2017 to $5.16 billion at December 31, 2018. For the quarter ended December 31, 2018, net income totaled $9.9 million or $1.78 per Class A share diluted, compared to $25,000, or $0.00 per Class A share diluted, for the same period a year ago.

Net interest income totaled $92.6 million for the year ended December 31, 2018 compared to $85.6 million for the same period in 2017. The 8.1% increase in net interest income for the period is primarily due to an increase in average earning assets. The net interest margin decreased from 2.25% on a fully taxable equivalent basis in 2017 to 2.18% for the same period in 2018. This was primarily the result of a decrease in the federal corporate tax rate from 34% to 21% as well as lower prepayment penalties collected during 2018. The decrease in the tax rate results in a lower tax equivalent yield on tax-exempt assets. The average balances of earning assets increased by 5.1% combined with an average yield increase of 0.26%, resulting in an increase in interest income of $23.6 million. The average balance of interest bearing liabilities increased 3.7% combined with an average yield increase of 0.41%, resulting in an increase in interest expense of $16.7 million.

The provision for loan losses decreased by $440,000 from $1,790,000 for the year ended December 31, 2017 to $1,350,000 for the same period in 2018, primarily as a result of net recoveries of $938,000 offset by changes in qualitative factors.

The Company’s effective tax rate decreased from 32.9% for 2017 to 4.2% for the same period in 2018. This was primarily as a result of a reduction in the value of its net deferred tax asset resulting in a charge of $8.4 million to 2017 income tax expense as a result of the Tax Act as previously discussed. Also, the federal tax rate decreased from 34% to 21% as a result of the Tax Act, offset somewhat by an increase in taxable income.

At December 31, 2018, total equity was $300.4 million compared to $260.3 million at December 31, 2017. The Company’s equity increased primarily as a result of earnings, offset somewhat by dividends paid.

The Company’s leverage ratio stood at 6.91% at December 31, 2018, compared to 6.78% at December 31, 2017. The increase in the leverage ratio was due to an increase in stockholders’ equity, offset somewhat by an increase in quarterly average assets. Book value as of December 31, 2018 was $53.96 per share compared to $46.75 at December 31, 2017.

The Company’s allowance for loan losses was $28.5 million or 1.25% of loans outstanding at December 31, 2018, compared to $26.3 million or 1.21% of loans outstanding at December 31, 2017. The ratio of the allowance for loan losses to loans outstanding has increased, primarily as a result of changes in qualitative factors related to general economic factors pertaining to certain industries. Non-performing assets totaled $3.5 million at December 31, 2018, compared to $1.7 million at December 31, 2017. Nonperforming assets increased mainly as a result of one residential real estate property classified as other real estate owned.

The Company's Board of Directors voted a regular quarterly dividend of 12.00 cents ($0.12) per share on the Company's Class A common stock, and 6.00 cents ($0.06) per share on the Company's Class B common stock. The dividends were declared payable February 15, 2019 to stockholders of record on February 1, 2019.

The Company, through its subsidiary bank, Century Bank and Trust Company, a state chartered full service commercial bank, operating twenty-seven full-service branches in the Greater Boston area, offers a full range of Business, Personal and Institutional Services.

Century Bank and Trust Company is a member of the FDIC and is an Equal Housing Lender.

This press release contains certain “forward-looking statements” with respect to the financial condition, results of operations and business of the Company. Actual results may differ from those contemplated by these statements. The Company wishes to caution readers not to place undue reliance on any forward-looking statements. The Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether in response to new information, future events or otherwise.

Century Bancorp, Inc. and Subsidiaries
Consolidated Comparative Statements of Condition (unaudited)
(in thousands)
			December 31,				December 31,
Assets			2018				2017
Cash and Due From Banks			$	89,540			$	77,199
Federal Funds Sold and Interest-bearing Deposits In Other Banks				252,963				279,231
Securities Available-for-Sale (AFS)				338,327				397,475
Securities Held-to-Maturity				2,046,647				1,701,233
Federal Home Loan Bank of Boston stock, at cost				17,974				21,779
Loans:
Commercial & Industrial				761,775				763,807
Municipal				97,140				106,599
Construction & Land Development				13,628				18,931
Commercial Real Estate				750,362				732,491
Residential Real Estate				348,250				287,731
Consumer and Other				22,083				19,040
Home Equity				292,340				247,345
Total Loans				2,285,578				2,175,944
Less: Allowance for Loan Losses				28,543				26,255
Net Loans				2,257,035				2,149,689
Bank Premises and Equipment, net				23,921				23,527
Accrued Interest Receivable				14,406				11,179
Goodwill				2,714				2,714
Other Assets				120,408				121,546
Total Assets			$	5,163,935			$	4,785,572
Liabilities
Demand Deposits			$	813,478			$	736,020
Interest Bearing Deposits:
Savings and NOW Deposits				1,707,019				1,367,358
Money Market Accounts				1,325,888				1,188,228
Time Deposits				560,579				625,361
Total Interest Bearing Deposits				3,593,486				3,180,947
Total Deposits				4,406,964				3,916,967
Borrowed Funds:
Securities Sold Under Agreements to Repurchase				154,240				158,990
Other Borrowed Funds				202,378				347,778
Total Borrowed Funds				356,618				506,768
Other Liabilities				63,831				65,457
Subordinated Debentures				36,083				36,083
Total Liabilities				4,863,496				4,525,275
Total Stockholders' Equity				300,439				260,297
Total Liabilities & Stockholders' Equity			$	5,163,935			$	4,785,572

Century Bancorp, Inc. and Subsidiaries
Consolidated Comparative Statements of Income (unaudited)
For the quarter and year ended December 31, 2018 and 2017
(in thousands)
			Quarter ended December 31,								Year ended December 31,
			2018				2017				2018				2017
Interest Income:
Loans			$	20,938			$	17,345			$	78,551			$	66,013
Securities Held-to-Maturity				12,626				9,542				45,556				38,348
Securities Available-for-Sale				2,630				1,835				9,451				6,978
Federal Funds Sold and Interest-bearing Deposits In Other Banks				1,259				748				3,498				2,097
Total Interest Income				37,453				29,470				137,056				113,436
Interest Expense:
Savings and NOW Deposits				3,979				1,842				11,757				6,296
Money Market Accounts				4,883				1,723				13,922				5,626
Time Deposits				2,743				2,271				10,208				7,919
Securities Sold Under Agreements to Repurchase				319				144				976				496
Other Borrowed Funds and Subordinated Debentures				1,824				1,788				7,617				7,483
Total Interest Expense				13,748				7,768				44,480				27,820
Net Interest Income				23,705				21,702				92,576				85,616
Provision For Loan Losses				450				450				1,350				1,790
Net Interest Income After
Provision for Loan Losses				23,255				21,252				91,226				83,826
Other Operating Income
Service Charges on Deposit Accounts				2,292				2,407				8,560				8,586
Lockbox Fees				970				923				3,274				3,290
Net Gain on Sales of Loans				-				-				-				370
Net Gain on Sales of Securities				-				-				302				47
Other Income				902				1,080				4,112				4,259
Total Other Operating Income				4,164				4,410				16,248				16,552
Operating Expenses
Salaries and Employee Benefits				10,379				9,420				42,710				40,517
Occupancy				1,513				1,477				6,092				6,140
Equipment				777				647				3,132				2,892
FDIC Assessment				361				363				1,471				1,581
Other				4,155				4,085				16,288				15,989
Total Operating Expenses				17,185				15,992				69,693				67,119
Income Before Income Taxes				10,234				9,670				37,781				33,259
Income Tax Expense				309				9,645				1,568				10,958
Net Income			$	9,925			$	25			$	36,213			$	22,301

Century Bancorp, Inc. and Subsidiaries
Consolidated Year-to-Date Average Comparative Statements of Condition (unaudited)
(in thousands)
			December 31,					December 31,
Assets			2018					2017
Cash and Due From Banks			$	71,943				$	72,455
Federal Funds Sold and Interest-Bearing Deposits in Other Banks				183,903					189,193
Securities Available-For-Sale (AFS)				400,098					461,635
Securities Held-to-Maturity (HTM)				1,854,328					1,725,280
Total Loans				2,222,946					2,059,797
Less: Allowance for Loan Losses				27,531					25,329
Net Loans				2,195,415					2,034,468
Unrealized (Loss)Gain on Securities AFS and HTM Transfers				(4,017	)				(6,394	)
Bank Premises and Equipment				23,642					23,504
Accrued Interest Receivable				12,014					10,300
Goodwill				2,714					2,714
Other Assets				122,948					119,049
Total Assets			$	4,862,988				$	4,632,204
Liabilities
Demand Deposits			$	753,604				$	687,853
Interest Bearing Deposits:
Savings and NOW Deposits				1,514,259					1,457,872
Money Market Accounts				1,230,010					1,105,071
Time Deposits				577,975					566,941
Total Interest Bearing Deposits				3,322,244					3,129,884
Total Deposits				4,075,848					3,817,737
Borrowed Funds:
Securities Sold Under Agreements to Repurchase				147,944					189,684
Other Borrowed Funds				255,591					273,019
Total Borrowed Funds				403,535					462,703
Other Liabilities				70,020					60,925
Subordinated Debentures				36,083					36,083
Total Liabilities				4,585,486					4,377,448
Total Stockholders' Equity				277,502					254,756
Total Liabilities & Stockholders' Equity			$	4,862,988				$	4,632,204
Total Average Earning Assets - QTD			$	4,840,923				$	4,441,053
Total Average Earning Assets - YTD			$	4,661,275				$	4,435,905

Century Bancorp, Inc. and Subsidiaries
Consolidated Selected Key Financial Information (unaudited)
(in thousands, except share data)				December 31,					December 31,
				2018					2017
Performance Measures:
Earnings per average Class A share, diluted, quarter				$	1.78				$	0.00
Earnings per average Class A share, diluted, year				$	6.50				$	4.01
Return on average assets, year					0.74	%				0.48	%
Return on average stockholders' equity, year					13.05	%				8.75	%
Net interest margin (taxable equivalent), quarter					2.13	%				2.26	%
Net interest margin (taxable equivalent), year					2.18	%				2.25	%
Efficiency ratio, year- Non-GAAP (1)					59.2	%				57.8	%
Book value per share				$	53.96				$	46.75
Tangible book value per share - Non-GAAP (1)				$	53.47				$	46.26
Capital / assets					5.82	%				5.44	%
Tangible capital / tangible assets - Non-GAAP (1)					5.77	%				5.39	%
Common Share Data:
Average Class A shares outstanding, diluted, quarter and year					5,567,909					5,567,909
Shares outstanding Class A					3,608,329					3,605,829
Shares outstanding Class B					1,959,580					1,962,080
Total shares outstanding at period end					5,567,909					5,567,909
Asset Quality and Other Data:
Allowance for loan losses / loans					1.25	%				1.21	%
Nonaccrual loans				$	1,313				$	1,684
Nonperforming assets				$	3,538				$	1,684
Loans 90 days past due and still accruing				$	-				$	-
Accruing troubled debt restructures				$	2,559				$	2,749
Net charge-offs(recoveries), year				$	(938	)			$	(59	)
Leverage ratio					6.91	%				6.78	%
Common equity tier 1 risk weighted capital ratio					11.32	%				10.71	%
Tier 1 risk weighted capital ratio					12.59	%				12.05	%
Total risk weighted capital ratio					13.62	%				13.05	%
Total risk weighted assets				$	2,771,129				$	2,613,116
(1) Non-GAAP Financial Measures are reconciled in the following tables:
Calculation of Efficiency ratio:
Total operating expenses(numerator)				$	69,693				$	67,119
Net interest income				$	92,576				$	85,616
Total other operating income					16,248					16,552
Tax equivalent adjustment					8,853					13,979
Total income(denominator)				$	117,677				$	116,147
Efficiency ratio, year - Non-GAAP					59.2	%				57.8	%
Calculation of tangible book value per share:
Total stockholders' equity				$	300,439				$	260,297
Less: goodwill					2,714					2,714
Tangible stockholders' equity(numerator)				$	297,725				$	257,583
Total shares outstanding at period end(denominator)					5,567,909					5,567,909
Tangible book value per share - Non-GAAP				$	53.47				$	46.26
Book value per share - GAAP				$	53.96				$	46.75
Calculation of tangible capital / tangible assets:
Total stockholders' equity				$	300,439				$	260,297
Less: goodwill					2,714					2,714
Tangible stockholders' equity(numerator)				$	297,725				$	257,583
Total assets				$	5,163,935				$	4,785,572
Less: goodwill					2,714					2,714
Tangible assets(denominator)				$	5,161,221				$	4,782,858
Tangible capital / tangible assets - Non-GAAP					5.77	%				5.39	%
Capital / assets - GAAP					5.82	%				5.44	%
Calculation of core earnings:
Net income				$	36,213				$	22,301
Add: deferred tax remeasurement charge					-					8,448
Core earnings				$	36,213				$	30,749

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