<PAGE> 1
CONFORMED
---------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
-------------
Commission File No. 333-04113
COMMUNITY CENTRAL BANK CORPORATION
----------------------------------
(Exact name of small business issuer as specified in its charter)
Michigan 38-3291744
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 North Main Street, PO Box 7, Mount Clemens, MI 48046-0007
-------------------------------------------------------------
(Address of principal executive offices)
(810) 783-4500
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at August 3, 2000
----- -----------------------------
Common Stock, $5 stated value 2,661,932 Shares
Transitional Small Business Disclosure Format:
Yes No X
---- ----
<PAGE> 2
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
PART I
ITEM 1. FINANCIAL STATEMENTS
The financial statements of Community Central Bank Corporation (the
"Corporation") include the consolidation of its subsidiary; Community Central
Bank (the "Bank").
Following are the Corporation's Consolidated Balance Sheet as of June 30, 2000
and 1999, and December 31, 1999, and Consolidated Statements of Operations,
Comprehensive Income, and Cash Flow for the quarter and six month periods ended
June 30, 2000 and 1999. These unaudited financial statements are for interim
periods, and do not include all disclosures normally provided with annual
financial statements. The interim statements should be read in conjunction with
the financial statements and footnotes contained in the Corporation's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1999.
In the opinion of management, the interim statements referred to above contain
all adjustments (consisting of normal, recurring items) necessary for a fair
presentation of the financial statements. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year.
2
<PAGE> 3
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
--------- --------- ---------
(in thousands, except fair value data)
<S> <C> <C> <C>
Assets
Cash and due from banks $5,991 $5,692 $5,326
Federal funds sold 18,400 20,700 22,500
--------- --------- ---------
Cash and Cash Equivalents 24,391 26,392 27,826
--------- --------- ---------
Securities available for sale, at fair value 9,882 9,546 10,432
Investment securities, at amortized cost 4,341 4,638 5,356
(Fair value of $4.3 million at 6-30-2000,
$4.6 million at 12-31-1999, and
$5.4 million at 6-30-1999)
Loans
Residential mortgage loans 29,682 29,920 31,254
Commercial loans 120,765 105,574 80,378
Installment loans 6,184 5,818 5,035
--------- --------- ---------
Total Loans 156,631 141,312 116,667
Allowance for credit losses (2,193) (1,927) (1,414)
--------- --------- ---------
Net Loans 154,438 139,385 115,253
--------- --------- ---------
Net property and equipment 1,808 1,893 1,760
Accrued interest receivable 1,004 843 714
Other assets 1,236 1,027 645
--------- --------- ---------
Total Assets $197,100 $183,724 $161,986
========= ========= =========
</TABLE>
(continued)
3
<PAGE> 4
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
--------- --------- ---------
Liabilities (in thousands, except share data)
<S> <C> <C> <C>
Deposits
Noninterest bearing demand deposits $21,041 $16,540 $15,301
NOW and money market accounts 17,105 21,366 24,168
Savings deposits 8,075 8,803 5,222
Time deposits 128,016 116,137 95,750
--------- --------- ---------
Total deposits 174,237 162,846 140,441
--------- --------- ---------
Short term borrowings 2,712 1,605 2,839
Accrued interest payable 430 442 380
Other liabilities 414 306 144
Capitalized lease obligation 1,018 1,025 1,030
ESOP note payable 446 471 497
--------- --------- ---------
Total Liabilities 179,257 166,695 145,331
--------- --------- ---------
Stockholders' Equity
Common stock -- $5 stated value; 9,000,000 shares
authorized; 2,661,932 shares issued and
outstanding at 6-30-2000, 2,420,024 shares
outstanding at 12-31-1999 and 6-30-1999 13,310 12,100 12,100
Additional paid-in capital 5,016 6,226 6,226
Accumulated surplus 95 (683) (1,109)
Unearned employee benefit (446) (470) (497)
Accumulated other comprehensive income (132) (144) (65)
--------- --------- ---------
Total Stockholders' Equity 17,843 17,029 16,655
--------- --------- ---------
Total Liabilities and Stockholders' Equity $197,100 $183,724 $161,986
========= ========= =========
</TABLE>
4
<PAGE> 5
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
----- ----- ----- -----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest Income
Loans (including fees) $3,564 $2,458 $6,938 $4,719
Securities 227 266 445 532
Federal funds sold 221 233 420 440
----- ----- ------ -----
Total Interest Income 4,012 2,957 7,803 5,691
----- ----- ------ -----
Interest Expense
Deposits 1,967 1,420 3,836 2,774
Short term borrowings 25 32 45 54
Capitalized lease obligation 46 34 90 69
----- ----- ------ -----
Total Interest Expense 2,038 1,486 3,971 2,897
----- ----- ------ -----
Net Interest Income 1,974 1,471 3,832 2,794
Provision for credit losses 165 110 300 180
----- ----- ------ -----
Net Interest Income after Provision 1,809 1,361 3,532 2,614
----- ----- ------ -----
Noninterest Income
Deposit service charges 62 66 127 123
Net realized security gain ---- ---- ---- 11
Other income 72 76 134 134
----- ----- ----- -----
Total Noninterest Income 134 142 261 268
----- ----- ----- -----
Noninterest Expense
Salaries, benefits, and payroll taxes 538 426 1,039 861
Premises and fixed asset expense 173 152 340 281
Other operating expense 637 465 1,207 876
----- ----- ----- -----
Total Noninterest Expense 1,348 1,043 2,586 2,018
----- ----- ----- -----
Income Before Taxes and Cumulative
Effect of Change in Accounting Principle 595 460 1,207 864
Provision for income taxes 212 166 429 308
----- ----- ----- -----
Income Before Cumulative Effect of Change
in Accounting Principle 383 294 778 556
Cumulative effect of change in accounting
principle ---- ---- ---- (57)
----- ----- ----- -----
Net Income $383 $294 $778 $499
===== ===== ===== =====
</TABLE>
(continued)
5
<PAGE> 6
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Per share data:
<S> <C> <C> <C> <C>
Basic earnings before cumulative effect of
change in accounting principle $0.15 $0.11 $0.30 $0.21
Basic earnings $0.15 $0.11 $0.30 $0.19
Diluted earnings before cumulative effect of
change in accounting principle $0.15 $0.11 $0.30 $0.21
Diluted earnings $0.15 $0.11 $0.30 $0.19
===== ===== ====== =====
Cash Dividends $ ---- $ ----- $ ---- $ ----
===== ===== ====== =====
</TABLE>
6
<PAGE> 7
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
----- ----- ----- -----
(in thousands)
<S> <C> <C> <C> <C>
Net Income as Reported $383 $294 $778 $499
Other Comprehensive Income, Net of Tax
Change in unrealized gain on securities
available for sale 22 (93) 12 (121)
Reclassification of previously reported gain
included in current year income ---- ---- ---- (7)
----- ----- ----- -----
Comprehensive Income $405 $201 $790 $371
===== ===== ===== =====
</TABLE>
7
<PAGE> 8
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
---------- ---------
(in thousands)
<S> <C> <C>
Operating Activities
Net income $778 $499
Adjustments to reconcile net income to net cash flow
from operating activities:
Net accretion of security discount (2) 9
Net gain on calls of securities ---- (11)
Provision for credit losses 300 180
Depreciation expense 167 156
Deferred income tax (109) 277
ESOP compensation expense 25 ----
Increase in accrued interest receivable (161) (59)
Increase in other assets (100) 75
Decrease in accrued interest payable (12) 100
Increase in other liabilities 173 18
---------- ---------
Net Cash Provided by Operating Activities 1,059 1,244
Investing Activities
Purchases of securities available for sale (1,100) (3,006)
Maturities, calls, and prepayments of securities available for sale 782 2,132
Maturities, calls, and prepayments of investment securities 297 4,101
Purchases of investment securites ---- (165)
Increase in loans (15,353) (14,359)
Purchases of property and equipment (82) (177)
---------- ---------
Net Cash Used in Investing Activities (15,456) (11,474)
Financing Activities
Decrease in demand and savings deposits (488) 9,952
Increase in time deposits 11,879 3,337
Increase in short term borrowings 1,107 (652)
Repayment of capitalized lease obligation (76) (75)
Payment of ESOP debt (25) ----
Fractional shares paid on stock dividend (1) (1)
Stock option exercise ---- 33
---------- ---------
Net Cash Provided by (Used In) Financing Activities 12,396 12,594
---------- ---------
Increase (Decrease) in Cash and Cash Equivalents (2,001) 2,364
Cash and Cash Equivalents at the Beginning
of the Year 26,392 25,462
---------- ---------
Cash and Cash Equivalents at the End
of the Period $24,391 $27,826
========== ==========
Supplemental Disclosure of Cash Flow Information:
Interest Paid $3,914 $2,728
Federal Taxes Paid 546 ----
========== ==========
</TABLE>
8
<PAGE> 9
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion compares the financial condition of the Corporation and
its wholly owned subsidiary, Community Central Bank, at June 30, 2000, December
31, 1999, and June 30, 1999 and the results of operations for the quarter and
six months ended June 30, 2000 and 1999. This discussion should be read in
conjunction with the financial statements and statistical data presented
elsewhere in this report. This report contains forward-looking statements that
are based on management's beliefs, assumptions, current expectations, estimates
and projections about the financial services industry, the economy, and about
the Corporation and the Bank. Words such as "anticipates," "believes,"
"estimates," "expects," "forecasts," "intends," "is likely," "plans,"
"projects," variations of such words and similar expressions are intended to
identify such forward-looking statements. These forward-looking statements are
intended to be covered by the safe-harbor provisions of the Private Securities
Litigation Reform Act of 1995. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions ("Future
Factors") that are difficult to predict with regard to timing, extent,
likelihood and degree of occurrence. Actual results and outcomes may materially
differ from what may be expressed or forecasted in the forward-looking
statements. The Corporation undertakes no obligation to update, amend, or
clarify forward looking statements, whether as a result of new information,
future events (whether anticipated or unanticipated), or otherwise.
Future Factors include changes in interest rate and interest rate relationships;
demand for products and services; the degree of competition by traditional and
non-traditional competitors; changes in banking regulation; changes in tax laws;
changes in prices, levies, and assessments; the impact of technological
advances; governmental and regulatory policy changes; the outcomes of
contingencies; trends in customer behavior as well as their ability to repay
loans; changes in the national and local economy; and other factors, including
risk factors, referred to from time to time in filings made by the Corporation
with the Securities and Exchange Commission. These are representative of the
Future Factors that could cause a difference between an ultimate actual outcome
and a preceding forward-looking statement.
9
<PAGE> 10
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
ASSETS
The Corporation's total assets have increased by $13.3 million, to $197.1
million at June 30, 2000, compared with $183.7 million at December 31, 1999.
The following table shows the amortized cost and estimated fair value of the
Corporation's security portfolio as of the dates indicated. On the balance
sheet, investment securities (i.e., those which the Corporation has the ability
and intent to hold to maturity) are stated at cost, adjusted for amortization of
premium or accretion of discount. Securities available for sale are shown on the
balance sheet at estimated fair value.
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999 June 30, 1999
---------------- ---------------- ----------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
------- ----- ------- ----- ------- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities Available for Sale
United States Government agencies $6,879 $6,781 $6,381 $6,280 $6,405 $6,379
Mortgage backed securities 3,096 2,994 3,383 3,265 3,756 3,684
Collateralized mortgage obligations ---- ---- 1 1 370 369
Tax-exempt municipals 106 107 ---- ---- ---- ----
----- ----- ----- ----- ----- -----
Total Securities Available for Sale 10,081 9,882 9,765 9,546 10,531 10,432
------ ----- ----- ----- ------ ------
Investment Securities
United States Treasury ---- ---- ---- ---- ---- ----
United States Government agencies 2,000 2,000 2,001 1,992 2,127 2,139
Mortgage backed securities 1,691 1,658 1,758 1,721 1,868 1,855
Collateralized mortgage obligations 204 202 433 431 915 920
Other Securities 446 446 446 446 446 446
----- ----- ----- ----- ----- -----
Total Investment Securities 4,341 4,306 4,638 4,590 5,356 5,360
----- ----- ----- ----- ----- -----
Total Securities $14,422 $14,188 $14,403 $14,136 $15,887 $15,792
======= ======= ======= ======= ======= =======
</TABLE>
10
<PAGE> 11
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
Total loans increased by $15.3 million during the six months ended June 30,
2000, as the Corporation continued building its loan base. Commercial loans grew
by $15.2 million, while installment loans increased $366,000, and residential
mortgage loans were flat.
The Corporation makes loans to customers primarily in Macomb County, Michigan.
Although the Corporation has a diversified loan portfolio, a substantial portion
of the local economy has traditionally been dependent on the automotive
industry. Additionally, the Corporation had approximately $25.8 million in
outstanding loans at June 30, 2000, to commercial borrowers in the real estate
rental and property management industries.
The following table shows an analysis of the allowance for credit losses:
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------- -------
(in thousands)
<S> <C> <C>
Allowance for credit losses at
beginning of period $1,927 $1,330
Provision charged to expense 300 180
Loans charged off (net) (34) (96)
------- -------
Allowance for credit losses at end of period $2,193 $1,414
======= =======
Allowance for credit losses as a percentage
of loans at period end 1.40% 1.21%
</TABLE>
Loans are placed in nonaccrual status when, in the opinion of management,
uncertainty exists as to the ultimate collection of principal and interest. At
June 30, 2000, there was $566,000 of loans placed in nonaccrual status.
Commercial loans and lease financing receivables are to be reported as being in
nonaccrual status if: (a) they are maintained on a cash basis because of
deterioration in the financial position of the borrower, (b) payment in full of
interest or principal is not expected, or (c) principal or interest has been in
default for a period of 90 days or more. If it can be documented that the loan
obligation is both well secured and in the process of collection, the loan may
stay on accrual status. However, if the loan is not brought current before 120
days past due, the loan should be reported as nonaccrual. Any exceptions to
automatic nonaccrual status at 90 days must be approved in writing by the Loan
Committee, Credit Administration Officer, and the Chief Financial Officer. A
nonaccrual asset may be restored to an accrual status when none of its principal
or interest is due and unpaid, when it otherwise becomes well secured, and in
the process of collection.
The Corporation considers a loan impaired when it is probable that all interest
and principal will not be collected in accordance with the contractual terms of
the loan agreement. Consistent with this definition, all nonaccrual and
reduced-rate loans (with the exception of residential mortgages and consumer
loans) are considered impaired.
11
<PAGE> 12
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
A summary of nonperforming assets is as follows:
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
------- -------
(in thousands)
<S> <C> <C>
Impaired loans:
Nonaccrual $566 $ ----
------- -------
Total impaired loans $566 ----
Other real estate 128 ----
------- -------
Total nonperforming assets $694 $ ----
======= =======
Impaired loans as a percentage of
total loans 0.36% 0.00%
======= =======
Total nonperforming assets as a percentage
of total assets 0.35% 0.00%
======= =======
</TABLE>
A summary of total loans past due 90-days and still accruing interest is as
follows:
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
------- -------
(in thousands)
<S> <C> <C>
Commercial $ ---- $ ----
Residential real estate 76 ----
Installment 46 ----
------- -------
Total loans past due 90 days or more
and still accruing interest $122 $ ----
======= =======
</TABLE>
In each accounting period, management evaluates the problems and potential
losses in the loan portfolio. Consideration is also given to off-balance sheet
items that may involve credit risk, such as commitments to extend credit and
financial guarantees. Management's evaluation of the allowance is further based
on consideration of actual loss experience, the present and prospective
financial condition of borrowers, adequacy of collateral, industry
concentrations within the portfolio, and general economic conditions. Management
believes that the present allowance is adequate, based on the broad range of
considerations listed above.
The primary risk element considered by management regarding each installment and
residential real estate loan is lack of timely payment. Management has a
reporting system that monitors past due loans and has adopted policies to pursue
its creditor's rights in order to preserve the Bank's position. The primary risk
elements concerning commercial loans are the financial condition of the
borrower, the sufficiency of collateral, and lack of timely payment. Management
has a policy of requesting and reviewing financial statements from its
commercial loan customers, and periodically reviews existence of collateral and
its value.
Although management believes that the allowance for credit losses is adequate to
absorb losses as they arise, there can be no assurance that the Bank will not
sustain losses in any given period that could be substantial in relation to the
size of the allowance for credit losses. Management is not aware of any factors
that would cause future net loan charge-offs, in total or by loan category, to
differ significantly from those experienced by institutions of similar size.
12
<PAGE> 13
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
LIABILITIES
During the six months ended June 30, 2000, total deposits increased by $11.3
million, to $179.3 million.
Short term borrowings at June 30 consist of securities sold with an agreement to
repurchase them the following day. Following are details of short term
borrowings for the dates indicated:
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
-------- --------
(in thousands, except percentages)
<S> <C> <C>
Amount outstanding at end of period $2,712 $2,839
Weighted average interest rate on ending balance 4.20% 4.19%
Maximum amount outstanding at any month end
during the period $2,712 $3,021
</TABLE>
CAPITAL
The Corporation declared a 10% stock dividend on March 7, 2000. The dividend was
paid on April 21, 2000, to stockholders of record on April 6, 2000. As a result,
approximately $1.2 million was transferred from additional paid-in capital to
common stock. The effects of the stock dividend have been retroactively applied
to applicable figures in this report. The Corporation also declared a 10% stock
dividend in the first quarter of 1999.
Following are selected capital ratios for the Corporation as of the dates
indicated, along with the minimum regulatory requirement for each item. Capital
requirements for bank holding companies are set by the Federal Reserve Board. In
many cases, bank holding companies are expected to operate at capital levels
higher than the minimum requirement.
<TABLE>
<CAPTION>
June 30, December 31, June 30, Minimum
2000 1999 1999 Requirement
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Tier I capital to risk-weighted assets 11.53% 12.30% 14.60% 4%
Total capital to risk-weighted assets 12.78% 13.55% 15.84% 8%
Primary capital to assets 10.11% 10.10% 11.10% 5.5%
Total capital to assets 10.11% 10.10% 11.10% 6%
Tier I capital to quarterly average assets (leverage) 9.56% 9.46% 10.69% 4%
</TABLE>
During the second quarter of 1999, the Corporation established an employee stock
ownership plan ("ESOP"). The ESOP subsequently borrowed $500,000 from an
unrelated bank to finance the purchase of the Corporation's stock. The ESOP loan
has been recorded as if it was long term debt of the Corporation, with a
corresponding reduction in equity. Repayment of the loan will be made solely
from contributions by the Corporation, which has guaranteed the loan.
13
<PAGE> 14
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
The following table shows the changes in stockholders' equity for the six months
ended June 30, 2000:
<TABLE>
<CAPTION>
Additional Unearned Accumulated Other
Common Paid-In Accumulated Employee Comprehensive Total
Stock Capital Deficit Benefits Income (Loss) Equity
--------- ----------- ----------- -------- ----------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1999 $12,100 $6,226 ($683) ($470) ($144) $17,029
Stock dividend 1,210 (1,210) ---- ---- ---- ----
Net income ---- ---- 778 ---- ---- 778
Release of ESOP shares ---- ---- ---- 24 ---- 24
Other comprehensive income ---- ---- ---- ---- 12 12
-------- ---------- ------- --------- ------------ --------
Balance June 30, 2000 $13,310 $5,016 $95 ($446) ($132) $17,843
======== ========== ======= ========= ============ ========
</TABLE>
NET INTEREST INCOME
The following table shows the dollar amount of changes in net interest income
for each major category of interest earning asset and interest bearing
liability, and the amount of change attributable to changes in average balances
(volume) or average rates for the periods shown. Variances that are jointly
attributable to BOTH volume and rate changes have been allocated to the volume
component.
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000 vs. 1999
-----------------------------------------
Increase (Decrease)
Due to Changes In
-------------------------
Total Volume Rate
and Both
---------- ---------- --------
(in thousands)
<S> <C> <C> <C>
Earning Assets - Interest Income
Federal funds sold ($20) ($138) $118
Securities (87) (104) 17
Loans 2,219 1,904 315
------- ------- -------
Total 2,112 1,662 450
------- ------- -------
Deposits and Borrowed Funds - Interest Expense
NOW and money market accounts (106) (30) (76)
Savings deposits 58 60 (2)
Time deposits 1,110 798 312
Short term borrowings (9) (6) (3)
Lease and ESOP 21 27 (6)
------- ------- -------
Total 1,074 849 225
------- ------- -------
Net Interest Income $1,038 $813 $225
====== ====== ======
</TABLE>
14
<PAGE> 15
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
For the six months ended June 30, 2000, net interest income increased by 37%, or
$1,038,000 over the six months ended June 30, 1999. This was due to managements
efforts to focus on variable rate loan products to better match the deposit
funding base. Increases in volume also enhanced net interest income. The large
percentage increase in both interest earning assets and interest bearing
liabilities was a function of the Corporation's significant growth during 2000.
The net interest margin improved in the quarter to 4.36%, compared with 3.93%
for the second quarter of 1999. Net interest margin was improved by continued
emphasis on loan and deposit pricing, coupled with demand deposit growth.
15
<PAGE> 16
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
AVERAGE BALANCE SHEET
The following tables show the Corporation's consolidated average balances of
assets, liabilities, and stockholders' equity; the amount of interest income or
interest expense and the average yield or rate for each major category of
interest earning asset and interest bearing liability, and the net interest
margin, for the three and six month periods ended June 30, 2000 and 1999.
Average loans are presented net of unearned income, gross of the allowance for
credit losses. Interest on loans includes loan fees. Average securities are
based on amortized cost.
<TABLE>
<CAPTION>
Three Months Ended June 30,
-----------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------
Average Average
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
--------- --------- --------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold $14,087 $221 6.28% $19,519 $233 4.77%
Securities 14,432 227 6.29 17,462 266 6.09
Loans 152,715 3,564 9.34 112,916 2,458 8.71
--------- --------- -------- ------- ------- ------
Total Earning Assets/
Total Interest Income 181,234 4,012 8.85% 149,897 2,957 7.89%
--------- -------- ------- ------
Cash and due from banks 5,106 4,680
All other assets 1,670 1,850
---------- --------
Total Assets $188,010 $156,427
========= ========
Liabilities and Equity
NOW and money market accounts $16,657 93 2.23% $19,385 149 3.07%
Savings deposits 8,307 61 2.94 4,943 37 2.99
Time deposits 120,070 1,813 6.04 95,590 1,234 5.16
Short term borrowings 2,356 25 4.24 2,919 32 4.39
Capitalized lease obligation 1,463 46 12.58 1,022 34 13.31
--------- --------- --------- --------- --------- --------
Total Interest Bearing Liabilities/
Total Interest Expense 148,853 2,038 5.48% 123,859 1,486 4.80%
--------- --------- --------- --------
Noninterest bearing demand deposits 20,553 14,935
All other liabilities 907 652
Stockholders' equity 17,697 16,981
---------- ---------
Total Liabilities and Equity $188,010 $156,427
========= =========
Net Interest Income $1,974 $1,471
======== =========
Net Interest Margin (Net Interest
Income/Total Earning Assets) 4.36% 3.93%
========= =========
</TABLE>
16
<PAGE> 17
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------
Average Average
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
--------- --------- --------- --------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold $14,047 $420 5.98% $18,647 $440 4.72%
Securities 14,225 445 6.26 17,545 532 6.06
Loans 150,673 6,938 9.21 109,319 4,719 8.63
--------- --------- --------- --------- ---------- ---------
Total Earning Assets/
Total Interest Income 178,945 7,803 8.72% 145,511 5,691 7.82%
--------- --------- --------- --------- ---------- ---------
Cash and due from banks 5,063 4,280
All other assets 1,722 1,911
--------- ---------
Total Assets $185,730 $151,702
========= =========
Liabilities and Equity
NOW and money market accounts $16,648 197 2.37% $19,224 303 3.15%
Savings deposits 8,625 129 2.99 4,601 71 3.09
Time deposits 118,898 3,510 5.90 91,864 2,400 5.23
Short term borrowings 2,157 45 4.17 2,454 54 4.40
Capitalized lease obligation 1,471 90 12.24 1,023 69 13.49
--------- --------- --------- --------- ---------- ---------
Total Interest Bearing Liabilities/
Total Interest Expense 147,799 3,971 5.37% 119,166 2,897 4.86%
--------- --------- --------- --------- ---------- ---------
Noninterest bearing demand deposits 19,598 15,032
All other liabilities 831 561
Stockholders' equity 17,502 16,943
--------- ---------
Total Liabilities and Equity $185,730 $151,702
========= =========
Net Interest Income $3,832 $2,794
========= =========
Net Interest Margin (Net Interest
Income/Total Earning Assets) 4.28% 3.84%
======== =========
</TABLE>
17
<PAGE> 18
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
NONINTEREST INCOME
Noninterest income increased by 5%, for the first six months of 2000, when
ignoring security gains and nonrecurring items for the first six months of 1999.
Credit card merchant fee income increased 27%, or $22,000 for the first six
months of 2000. The largest components of noninterest income are service charge
fee income and credit card merchant processing fees.
NONINTEREST EXPENSE
Noninterest expense increased over the first half by 28%, to $2.6 million in
2000. This was primarily the result of growth of the Corporation, and the
accompanying rise in payroll and other operating expense. Premises and fixed
asset expense increased as the Bank implemented a check imaging operations
center. The Corporation continues to become more efficient as expense growth has
been primarily driven by corresponding revenue and asset growth.
PROVISION FOR INCOME TAXES
The Corporation and the Bank file a consolidated federal income tax return.
Before 1998, no net deferred tax asset had been provided for the future benefit
of the net operating loss carryforward generated since inception, because the
Corporation did not have a history of earnings. A total tax benefit of $774,000
was recognized in 1998 when it became more likely than not that the carryforward
would be realized in the future. Beginning in 1999, the Corporation is
recognizing a federal tax provision based on "book taxable" income. Starting in
the third quarter of 1999, the Corporation paid estimated federal income taxes
having utilized the net operating loss carryforward available to the Corporation
as the result of ongoing earnings.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998 Statement of Financial Account Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133") was issued. SFAS 133
requires all derivative instruments to be recorded on the balance sheet at
estimated fair value. Changes in the fair value of derivative instruments are to
be recorded each period either in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, on the type of hedge transaction. SFAS 133 is
effective for the year 2000. The Company is currently evaluating the impact of
SFAS 133. At present, the Company does not believe it will have a material
effect on the consolidated financial position or results of operations.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The liquidity of a bank allows it to provide funds to meet loan requests, to
accommodate possible outflows in deposits, and to take advantage of other
investment opportunities. Funding of loan requests, providing for liability
outflows, and managing interest rate margins require continuous analysis to
match the maturities of specific categories of loans and investments with
specific types of deposits and borrowings. Bank liquidity depends upon the mix
of the banking institution's potential sources and uses of funds. For the
Corporation, the major sources of liquidity have been deposit growth, federal
funds sold, loans and securities which mature within one year, and sales of
residential mortgage loans. Additional liquidity is provided by a $2.0 million
unsecured federal funds borrowing facility, and a $10.0 million secured line of
credit with the Federal Home Loan Bank of Indianapolis (FHLB). The Corporation's
large deposit balances which might fluctuate in response to interest rate
changes are closely monitored. These deposits consist mainly of jumbo time
certificates of deposit.
Managing rates on earning assets and interest bearing liabilities focuses on
maintaining stability in the net interest margin, which is an important factor
in earnings growth and stability. Emphasis is placed on maintaining a controlled
rate sensitivity position, to avoid wide swings in margins and to manage risk
due to changes in interest rates.
18
<PAGE> 19
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
The Corporation's Asset Liability Management Committee ("ALCO"), which meets
monthly, is responsible for reviewing the interest rate sensitivity position of
the Corporation and establishing policies to monitor and limit exposure to
interest rate risk.
The Corporation currently utilizes two quantitative tools to measure and monitor
interest rate risk: static gap analysis and net interest income simulation
modeling. Each of these interest rate risk measurements has limitations, but
management believes when these tools are evaluated together, they provide a
balanced view of the exposure the Corporation has to interest rate risk.
The following table shows the maturity and repricing distribution of the
Corporation's interest earning assets and interest bearing liabilities as of
June 30, 2000. This table displays the interest rate sensitivity gap (interest
rate sensitive assets less interest rate sensitive liabilities), cumulative
interest rate sensitivity gap, the interest rate sensitivity gap ratio (interest
rate sensitive assets divided by interest rate sensitive liabilities), and
cumulative interest rate sensitivity gap ratio. Loans are presented net of
unearned income, gross of the allowance, while securities are shown at amortized
cost.
<TABLE>
<CAPTION>
After Three After One
Within Months But Year But After
Three Within One Within Five
Months Year Five Years Years Total
--------- ------------ ------------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Federal funds sold $18,400 $ ---- $ ---- $ ---- $18,400
Securities 502 4,607 7,282 2,031 14,422
Loans 81,369 3,547 55,186 16,529 156,631
-------- ------- ------- ------- --------
Total 100,271 8,154 62,468 18,560 $189,453
-------- ------- ------- ------- ========
Interest bearing liabilities:
NOW and money market
accounts 17,105 ---- ---- ---- $17,105
Savings deposits 8,075 ---- ---- ---- 8,075
Jumbo time deposits 43,130 12,901 8,579 ---- 64,610
Time deposits < $100,000 29,824 9,533 24,049 ---- 63,406
Short term borrowings 2,712 ---- ---- ---- 2,712
Capitalized lease obligation
and ESOP payable 449 10 188 817 1,464
-------- ------- ------- ------- --------
Total 101,295 22,444 32,816 817 $157,372
-------- ------- ------- ------- ========
Interest rate sensitivity gap ($1,024) (14,290) 29,652 17,743
Cumulative interest rat
sensitivity gap ($15,314) $14,338 $32,081
Interest rate sensitivity gap
ratio 0.99 0.36 1.90 22.72
Cumulative interest rate
sensitivity gap ratio 0.88 1.09 1.20
</TABLE>
The table above indicates the time periods in which interest earning assets and
interest bearing liabilities will mature or may be repriced, generally according
to their contractual terms. However, this table does not necessarily indicate
the impact that general interest rate movements would have on the Corporation's
net interest margin, because the repricing of various categories of assets and
liabilities is discretionary, and is subject to competitive and other pressures.
As a result, various assets and liabilities indicated as repricing within the
same period may, in fact, reprice at different times and at different rate
levels.
19
<PAGE> 20
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
At June 30, 2000, the Corporation is considered somewhat "liability sensitive"
according to the preceding table. In a rising rate environment, the Corporation
might not be able to increase prices on interest earning assets faster than the
increase in rates on interest bearing liabilities.
On a quarterly basis, the net interest income simulation model is used to
quantify the effects of hypothetical changes in interest rates on the
Corporation's net interest income over a projected twelve-month period. The
model permits management to evaluate the effects of shifts in the Treasury Yield
curve, upward and downward, on net interest income expected in a stable interest
rate environment.
As of March 31, 2000, the most recent and available analysis, the simulation
model projects net interest income would decrease by 0.54% of the base net
interest income, assuming an instantaneous parallel shift upward in the yield
curve by 200 basis points. Conversely, if the yield curve were to decrease by
200 basis points, the model projects net interest income would increase by 0.18%
of the base net interest income.
20
<PAGE> 21
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
YEAR 2000 READINESS DISCLOSURE
No material events occurred as the result of the "year 2000 problem." The
banking industry is highly dependent on computer systems due to significant
transaction volumes, and date sensitive calculations for interest accruals on
financial statements such as loans and deposits.
The Corporation began to prepare for the year 2000 project in 1997. The plan
began with an internal evaluation of equipment, software applications, and
vendor supplied products. Because the Corporation was founded during 1996, much
of its equipment and computer technology is recent; and, in many cases, were
2000 ready from the outset. A total of $55,000 was spent on the year 2000
project.
21
<PAGE> 22
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
PART II
ITEM 1. LEGAL PROCEEDINGS
As a depository of funds, the Bank is occasionally named as a defendant in
lawsuits (such as garnishment proceedings) involving claims to the ownership of
funds in particular accounts. Such litigation is incidental to the Bank's
business. Management is not aware of any threatened or pending litigation in
which the Corporation or the Bank is likely to experience loss or exposure which
would materially affect the Corporation's capital resources, results of
operations, or liquidity as presented herein.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At its Annual Meeting held April 18, 2000, the Corporation's stockholders voted
on the election of five directors. Results of the election were as follows:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C>
Joseph Catenacci 2,286,847 9,180
Raymond M. Contesti 2,236,348 59,679
Celestina Giles 2,289,347 6,680
Anthony R. Tersigni 2,250,971 45,056
David A. Widlak 2,289,347 6,680
</TABLE>
There were no abstentions and broker non-votes. As a result, each of the five
directors was elected to a three year term. The terms of office of the following
directors (who were not up for election) continued after the Annual Meeting:
Harold W. Allmacher, Salvatore Cottone, Bobby L. Hill, Joseph F. Jeannette, Dean
S. Petitpren, Carole Schwartz, and Andrew Tassopoulos.
The Corporation's stockholders also voted at the Annual Meeting on a proposal to
adopt the 2000 Employee Stock Option Plan (the Plan). Results of the voting were
as follows:
<TABLE>
<S> <C>
Votes For 1,963,440
Votes Against 302,058
Abstentions 30,529
Broker Non-Votes 0
</TABLE>
As a result, the Plan was adopted effective April 18, 2000.
22
<PAGE> 23
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
3.1 Articles of Incorporation are incorporated by reference to
exhibit 3.1 of the Corporation's Registration Statement on
Form SB-2 (Commission File Number 333-04113) which became
effective on September 23, 1996
3.2 Bylaws of the Corporation are incorporated by reference to
exhibit 3.2 of the Corporation's Registration Statement on
Form SB-2 (Commission File Number 333-04113) which became
effective on September 23, 1996
11 Computation of Per Share Earnings
27 Financial Data Schedule
23
<PAGE> 24
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on August 3, 2000.
COMMUNITY CENTRAL BANK CORPORATION
By: S/ DAVID A. WIDLAK
------------------
David A. Widlak;
Chairman of the Board and Acting Chief Executive Officer
(Principal Executive Officer)
By: S/ HAROLD W. ALLMACHER
----------------------
Harold W. Allmacher;
President and Chief Operating Officer
By: S/ RAY T. COLONIUS
------------------
Ray T. Colonius;
Treasurer
(Principal Financial and Accounting Officer)
24
<PAGE> 25
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-QSB (continued)
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
<S> <C>
3.1 Articles of Incorporation are incorporated by reference to exhibit 3.1 of the
Corporation's Registration Statement on Form SB-2 (Commission File Number
333-04113) which became effective on September 23, 1996
3.2 Bylaws of the Corporation are incorporated by reference to exhibit 3.2 of the
Corporation's Registration Statement on Form SB-2 (Commission File Number
333-04113) which became effective on September 23, 1996
11 Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
25
