Century Bancorp, Inc. Announces Earnings for Q2 2021, Up 7.6%; Record Loans; Quarterly Dividend Declared

Century Bancorp, Inc. (NASDAQ:CNBKA) (www.centurybank.com) ("the Company") today announced net income of $21,593,000 for the six months ended June 30, 2021, or $3.88 per Class A share diluted, an increase of 9.5% compared to net income of $19,722,000, or $3.54 per Class A share diluted, for the same period a year ago. Total assets increased 14.2% from $6.36 billion at December 31, 2020 to $7.26 billion at June 30, 2021. For the quarter ended June 30, 2021, net income totaled $10,823,000, or $1.94 per Class A share diluted, an increase of 7.6% compared to net income of $10,056,000, or $1.81 per Class A share diluted, for the same period a year ago.

The Company's Board of Directors voted a regular quarterly dividend of 18.00 cents ($0.18) per share on the Company's Class A common stock, and 9.00 cents ($0.09) per share on the Company's Class B common stock. The dividends were declared payable August 16, 2021 to shareholders of record on August 2, 2021.

Net interest income totaled $58.6 million for the six months ended June 30, 2021 compared to $51.0 million for the same period in 2020. The 14.8% increase in net interest income for the period is primarily due to a decrease in interest expense as a result of falling interest rates. The net interest margin decreased from 2.04% on a fully tax-equivalent basis for the first six months of 2020 compared to 1.81% for the same period in 2021. This was primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve. The average balances of interest-earning assets increased for 2021 compared to the same period last year, by $1.49 billion or 27.5%, combined with an average yield decrease of 0.79%, resulting in a decrease in interest income of $4.7 million. The average balance of interest-bearing liabilities increased for 2021 compared to the same period last year, by $1.14 billion or 26.0%, combined with an average interest-bearing liabilities interest cost decrease of 0.68%, resulting in a decrease in interest expense of $12.3 million.

The provision for loan losses decreased by $3.3 million from $2.8 million for the six months ended June 30, 2020 compared to a credit of $550,000 for the same period in 2021. The provision for the first six months of 2020 was primarily a result of provisions related to the onset of the COVID-19 pandemic. The credit provision for the first six months of 2021 was primarily attributable to a reduction in specific allocations to the allowance for loan losses and a reduction in the historical experience reserve allocation.

Total operating expenses totaled $41.9 million for the first six months of 2021 compared to $35.2 million for the same period last year, an increase of $6.7 million or 19.0%. The increase was primarily attributable to a $2.9 million increase in salaries and employee benefits and a $3.4 million increase in other expenses.

Salaries and employee benefits increased for the first six months of 2021 mainly as a result of merit increases, lower bonus accruals during the same period in 2020 as a result of uncertainties from the COVID-19 pandemic, decreased deferred origination cost credits, and increased employee benefits including health insurance costs. Other expenses increased for the first six months of 2021 mainly as a result of merger related expenses, increased FDIC insurance expense as a result of increased deposits and assessment rates, and increased COVID-19 related expenses.

The Company's effective tax rate increased from 7.8% for the six months ended June 30, 2020 to 15.4% for the same period in 2021. This was primarily as a result of an increase in taxable income relative to total income and nondeductible merger related expenses.

At June 30, 2021, total stockholders' equity was $392.6 million compared to $370.4 million at December 31, 2020. Total stockholders' equity increased primarily as a result of an increase in earnings and a decrease in total accumulated other comprehensive loss, offset somewhat by dividends paid.

The Company's leverage ratio stood at 6.13% at June 30, 2021, compared to 6.64% at December 31, 2020. The decrease in the leverage ratio was due to an increase in quarterly average assets, offset somewhat by an increase in total stockholders' equity. Book value per share as of June 30, 2021 was $70.50 compared to $66.53 at December 31, 2020.

The Company's allowance for loan losses was $34.9 million or 1.17% of loans outstanding at June 30, 2021, compared to $35.5 million or 1.18% of loans outstanding at December 31, 2020, and $32.5 million or 1.16% of loans outstanding at June 30, 2020. The ratio of the allowance for loan losses to loans outstanding has remained relatively stable for the time periods presented. Nonperforming assets totaled $1.3 million at June 30, 2021, compared to $4.0 million at December 31, 2020, and $1.5 million at June 30, 2020.

As of June 30, 2021, the Company had COVID-19 modifications of 4 loans aggregating $16.5 million, primarily consisting of short-term payment deferrals. Of these modifications, $16.5 million, or 100%, were performing in accordance with their modified terms.

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) 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 elected to delay FASB ASU 2016-13. This ASU was 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. On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 was signed into law. The law changed the delayed implementation date to the earlier of the first day of the Company's fiscal year that begins after the date on which the national emergency terminates or January 1, 2022.

Proposed Transaction with Eastern Bankshares, Inc.

On April 7, 2021, the Company and Eastern Bankshares, Inc. ("Eastern" ) (NASDAQ:EBC) entered into an Agreement and Plan of Merger pursuant to which, through a series of transactions, Eastern will acquire the Company in a cash transaction for total consideration valued at approximately $642 million. Under the terms of the Agreement and Plan of Merger, (i) each holder of Class A common stock will receive a cash payment of $115.28 per share of Class A common stock and (ii) each holder of Class B common stock will receive a cash payment of $115.28 per share of Class B common stock. The transaction is expected to close in the fourth quarter of 2021 and is subject to customary closing conditions, including approval by the shareholders of the Company and required regulatory approvals. The Company's shareholders approved the Agreement and Plan of Merger at the Special Meeting of the Shareholders held on July 7, 2021.

Additional information about the transaction can be found in the joint press release issued on April 7, 2021, which is available on the Investor Relations section of the Company's website at www.centurybank.com.

About Century Bancorp, Inc.

The Company, through its subsidiary bank, Century Bank and Trust Company, a state chartered full service commercial bank, operating twenty-eight full-service branches in the Greater Boston area and Southern New Hampshire, 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.

Cautionary Note Regarding Forward-Looking Statements

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, which includes among other things, the ability of the Company and Eastern to satisfy the conditions set forth in the Agreement and Plan of Merger (as discussed above) and disruptions to the Company's business during the pendency of the proposed merger (as discussed above). Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, which are included in more detail in the Annual Report on Form 10-K, as updated by Quarterly Reports on Form 10-Q and other filings submitted to the SEC. 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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