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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended March 31, 2007
Commission File No. 000-33373
COMMUNITY CENTRAL BANK CORPORATION
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(Exact name of small business issuer as specified in its charter)
Michigan 38-3291744
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(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 and zip code)
(586) 783-4500
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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[]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act . (Check
One):
Large accelerated filer [] Accelerated filer [] Non-accelerated filer [X]
Indicated by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at May 11, 2007
------------------------------------- -----------------------------------------
Common Stock 3,705,494 Shares
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COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
PART I
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2007 2006
(Unaudited)
------------- -------------
(In thousands)
Assets
Cash and due from banks $ 9,741 $ 11,026
Federal funds sold 22,100 13,700
------------- -------------
Cash and Cash Equivalents 31,841 24,726
------------- -------------
Trading securities at fair value option 26,642 --
Securities available for sale, at fair value 63,241 80,916
Securities held to maturity, at amortized cost 1,022 1,017
FHLB stock 4,540 4,540
Residential mortgage loans held for sale 3,932 3,441
Loans
Commercial real estate 239,048 236,399
Commercial and industrial 29,288 28,393
Residential real estate 68,391 72,517
Home equity lines of credit 17,760 17,614
Consumer loans 11,071 11,666
Credit card loans 629 693
------------- -------------
Total Loans 366,187 367,282
Allowance for credit losses (3,709) (3,815)
------------- -------------
Net Loans 362,478 363,467
------------- -------------
Net property and equipment 9,008 9,225
Accrued interest receivable 2,689 2,599
Other real estate 108 108
Goodwill 1,381 1,381
Intangible assets, net of amortization 135 145
Cash surrender value of Bank Owned Life insurance 10,273 10,163
Other assets 3,632 3,300
------------- -------------
Total Assets $ 520,922 $ 505,028
============= =============
(continued)
2
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2007 2006
(Unaudited)
--------------- --------------
(In thousands, except share data)
Liabilities
Deposits
Noninterest bearing demand deposits $ 34,361 $ 33,331
NOW and money market accounts 62,663 59,339
Savings deposits 13,999 10,569
Time deposits 230,391 252,617
--------------- --------------
Total deposits 341,414 355,856
--------------- --------------
Repurchase agreements and fed funds purchased 31,522 15,688
Federal Home Loan Bank advances ($15.8 million
at fair value) 80,353 83,528
Accrued interest payable 1,191 1,257
Other liabilities 1,498 1,629
ESOP note payable 79 95
Subordinated debentures (all instruments at
fair value) 28,814 10,310
--------------- --------------
Total Liabilities 484,871 468,363
--------------- --------------
Stockholders' Equity
Common stock -- 9,000,000 shares authorized;
3, 741,594 shares issued and outstanding at
3-31-2007 and 3,829,758 at 12-31-2006 32,227 33,220
Retained earnings 4,314 4,303
Unearned employee benefit (79) (95)
Accumulated other comprehensive (loss) income (411) (763)
--------------- --------------
Total Stockholders' Equity 36,051 36,665
--------------- --------------
Total Liabilities and Stockholders' Equity $ 520,922 $ 505,028
=============== ==============
3
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
2007 2006
----------------- -----------------
(In thousands, except per share data)
Interest Income
Loans (including fees) $ 6,852 $ 6,028
Taxable securities 667 771
Tax exempt securities 334 278
Federal funds sold 255 37
----------------- -----------------
Total Interest Income 8,108 7,114
----------------- -----------------
Interest Expense
Deposits 3,720 2,700
Repurchase agreements and fed funds purchased 160 93
Federal Home Loan Bank advances 921 959
ESOP loan interest expense 2 3
Subordinated debentures 394 215
----------------- -----------------
Total Interest Expense 5,197 3,970
----------------- -----------------
Net Interest Income 2,911 3,144
Provision for loan losses 50 50
----------------- -----------------
Net Interest Income after Provision 2,861 3,094
----------------- -----------------
Noninterest Income
Fiduciary income 87 67
Deposit service charges 88 82
Net realized security gain -- --
Fair Value Option - SFAS 159 228 --
Mortgage banking income 754 854
Other income 261 199
----------------- -----------------
Total Noninterest Income 1,418 1,202
----------------- -----------------
Noninterest Expense
Salaries, benefits, and payroll taxes 2,143 2,105
Premises and fixed asset expense 452 466
Other operating expense 865 845
----------------- -----------------
Total Noninterest Expense 3,460 3,416
----------------- -----------------
Income Before Taxes 819 880
Provision for income taxes 161 177
----------------- -----------------
Net Income $ 658 $ 703
================= =================
(continued)
4
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Per share data*:
Basic earnings $ 0.17 $ 0.18
Diluted earnings $ 0.16 $ 0.17
Cash Dividends $ 0.06 $ 0.06
--------------
* Per share data has been retroactively adjusted for stock dividends.
5
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
March 31,
2007 2006
---------- ----------
(In thousands)
Net Income as Reported $ 658 $ 703
Other Comprehensive Income, Net of Tax
Change in unrealized (loss) gain on securities
available for sale 57 (128)
---------- ----------
Comprehensive Income $ 715 $ 575
========== ==========
6
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Three Months Ended March 31,
2007 2006
------------ ------------
(In thousands)
Operating Activities
Net income $ 658 $ 703
Adjustments to reconcile net income to net cash flow
from operating activities:
Net amortization of security premium 48 52
Net gain on financial instrument at fair value (228) --
Provision for loan losses 50 50
Depreciation expense 178 166
Deferred income tax (benefit) expense (103) 169
ESOP compensation expense 16 13
SFAS 123R stock option expense 7 6
(Increase) decrease in accrued interest receivable (90) (227)
(Increase) decrease in other assets (557) (22)
(Increase) decrease in accrued interest payable (66) 164
Increase in other liabilities (131) (86)
Increase (decrease) in loans held for sale (491) 807
------------ ------------
Net Cash (Used in) Provided by Operating Activities (709) 1,795
Investing Activities
Maturities, calls, sales and prepayments of securities available
for sale 3,007 2,572
Purchase of securities available for sale (11,875) (10,767)
Maturities, calls, and prepayments of held to maturity securities -- 17
Purchases of held to maturity securities 10 (200)
Increase in loans 939 (17,744)
Purchases of property and equipment 39 (190)
------------ ------------
Net Cash Used in Investing Activities (7,880) (26,312)
Financing Activities
Net increase (decrease) in demand and savings deposits 7,784 12
Net increase (decrease) in time deposits (22,226) 18,812
Net increase (decrease) in borrowings 15,834 (859)
Issuance of subordinated debentures 18,557 4,001
Repayment of FHLB advances (3,000) --
Payment of ESOP debt (16) (13)
Stock options exercise 12 46
Cash dividends paid (229) (221)
Repurchase of common stock (1,012) --
------------ ------------
Net Cash Provided by Financing Activities 15,704 21,778
------------ ------------
Increase (decrease) in Cash and Cash Equivalents 7,115 (2,739)
Cash and Cash Equivalents at the Beginning of the Year 24,726 11,000
------------ ------------
Cash and Cash Equivalents at the End of the Period $ 31,841 $ 8,261
============ ============
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 5,263 $ 3,806
Federal Taxes Paid $ -- $ --
7
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The financial statements of Community Central Bank Corporation (the
"Corporation") include the consolidation of its direct and indirect
subsidiaries: Community Central Bank (the "Bank") and Community Central
Mortgage Company, LLC (the "Mortgage Company").
The Corporation's Consolidated Balance Sheets are presented as of March 31,
2007 and December 31, 2006, and Consolidated Statements of Income and
Comprehensive Income for the three month periods ended March 31, 2007 and
2006, and Consolidated Statements of Cash Flow for the three months ended
March 31, 2007 and 2006. 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-K for the fiscal year ended December
31, 2006.
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. The accounting and reporting policies of the Corporation conform to
accounting principles generally accepted in the United States of America
and general practices within the banking industry. The following describes
the critical accounting policies, which are employed in the preparation of
financial statements.
Allowance for Loan Losses: The allowance for loan losses is maintained at a
level considered by management to be adequate to absorb losses inherent in
existing loans and loan commitments. The adequacy of the allowance is based
on evaluations that take into consideration such factors as prior loss
experience, changes in the nature and volume of the portfolio, overall
portfolio quality, loan concentrations, specific impaired or problem loans
and commitments, current economic conditions that may affect the borrower's
ability to pay, and other subjective factors. The determination of the
allowance is also based on regulatory guidance. This guidance includes, but
is not limited to, generally accepted accounting principles, and guidance
issued from other regulatory bodies such as the joint policy statement
issued by the Federal Financial Institutions Examination Council.
3. Community Central Capital Trust I, a business trust subsidiary of the
Corporation sold 10,000 shares of cumulative preferred securities ("trust
preferred securities") at $1,000.00 per trust preferred security in June
2002. The proceeds from the sale of the trust preferred securities were
used by the trust to purchase an equivalent amount of subordinated
debentures from the Corporation. The trust preferred securities carry a
variable rate of interest at the three month libor plus 365 basis points,
have a stated maturity of 30 years, and, in effect, are guaranteed by the
Corporation. The securities are redeemable at par after 5 years.
Distributions on the trust preferred securities are payable quarterly on
March 30, June 30, September 30 and December 30. The first distribution was
paid on September 30, 2002 and distributions have been made quarterly ever
since. Under certain circumstances, distributions may be deferred for up to
20 calendar quarters. However, during any such deferrals, interest accrues
on any unpaid distributions at the rate of the three month libor plus 365
basis points. The trust preferred securities are carried on the
Corporation's consolidated balance sheet as a liability and the interest
expense is recorded on the Corporation's consolidated statement of income.
On February 13, 2007, Community Central Bank Corporation issued $18.0
million aggregate liquidation amount of cumulative trust preferred
securities through Community Central Capital Trust II, a statutory trust
formed by the Corporation for the purpose of issuing the securities (the
"Trust II Securities"). The Trust II securities have a fixed interest rate
of 6.71% per annum through March 6, 2017, and thereafter will have a
floating interest rate equal to 90-day LIBOR plus 1.65%. The Trust II
Securities are redeemable, at the Corporation's option, in whole or in
part, at par, beginning March 6, 2017, and if not sooner redeemed, mature
on March 6, 2037. The Trust II Securities were sold in a private
transaction exempt from registration under the Securities Act of 1933, as
amended.
8
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
The Corporation anticipates the redemption of the $10.0 million aggregate
liquidation amount of cumulative subordinated debentures issued by
Community Central Capital Trust I, which may be redeemed at par on or after
June 30, 2007. The Corporation intends to use the remaining proceeds of the
sale of the Trust II securities for general corporate purposes.
4. In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (revised 2004), Sharebased
Payment, (SFAS 123R), which requires entities to measure the cost of
employee services received in exchange for an award of equity instruments
based on the grant-date fair value of the award (with limited exceptions).
The cost is recognized as an expense over the period during which the
employee is required to provide service in exchange for the award, which is
usually the vesting period. As required by SFAS 123R, as with SFAS 123, the
Corporation is required to estimate the fair value of all stock options on
each grant date, using an appropriate valuation approach such as the
Black-Scholes option pricing model. The provisions of this statement were
effective for the Corporation beginning January 1, 2006.
The Corporation did not issue options during the first quarter of 2007 and
2006. The total amount of options outstanding at March 31, 2007 was 328,936
shares, adjusted for the announced stock dividend, at a weighted average
exercise price of $8.93 per share. During the first quarter of 2007, 1,273
options were exercised at an exercise price of $8.89 per share. During the
first quarter of 2007, using the Black Scholes option-pricing model, the
Corporation recognized compensation cost of $7,000 for the options vesting
in the first quarter of 2007 based on the fair market value of the grant
date. The net income and earnings per share for the first quarter of 2006,
on a pro forma basis, are disclosed for comparison below.
Three Months Ended
March 31,
2007 2006
---------------- ----------------
(In thousands, except per share data)
Net income, as reported $ 658 $ 703
Add: Stock-based employee compensation expense,
net of related tax effects, included in reported net
income 7 6
Deduct: Total stock-based employee and director
compensation expense under fair value based
methods of awards, net of related tax effects (7) (6)
---------------- ----------------
Pro forma net income $ 658 $ 703
================ ================
Earnings per share
Basic - as reported $ 0.17 $ 0.18
Basic - pro forma $ 0.17 $ 0.18
Diluted - as reported $ 0.16 $ 0.17
Diluted - pro forma $ 0.16 $ 0.17
The fair value of each option grant is estimated on the date of grant using the
Black Scholes option pricing model.
9
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
5. In February 2007, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 159 "The Fair Value Option for
Financial Assets and Financial Liabilities" (SFAS 159).
The statement provides for an entity to adopt early and elect the fair
value option for existing eligible items as of the beginning of a fiscal
year that begins on or before November 15, 2007. The entity must also adopt
all the requirements under SFAS 157, the Fair Value Measurement. As a
result of the Corporation's adoptions, certain financial instruments were
valued at a fair value classification. The adoption of the fair value
standards had a net positive after tax impact of approximately $150,000 on
first quarter earnings. The cumulative reduction to opening retained
earnings from adopting these standards was approximately $420,000.
Partially offsetting the total net charge to retained earnings was the
increase in capital from the reversal of other comprehensive income from
the transfer of the unrealized losses on available for sale securities
which had an affect of an increase in capital of $295,000. Therefore, the
total net after tax decrease in stockholder's equity was $125,000 from the
early adoption of SFAS 159 and concurrent adoption of SFAS 157.
The following table shows the balance sheet effect of the early adoption of
SFAS 159.
Balance Sheet Net Balance Sheet
1/1/07 prior adjustment 1/1/07 after
Description to adoption upon adoption after adoption of FVO
--------------------------------------------- --------------- --------------- -------------------------
(in thousands of dollars)
Securities 27,024 (447) 26,577
Federal Home Loan Bank Advances (16,000) 247 (15,753)
Subordinated Debentures (a) (10,055) (437) (10,492)
--------------- --------------- -------------------------
Pretax cumulative effect of SFAS 159 (637)
Increase in deferred tax asset 217
---------------
Cumulative effect of adoption of SFAS 159
(charged to retained earnings) 420
===============
----------------
(a) The carrying amount includes $255,000 in unamortized deferred issuance
costs on the subordinated debenture from the issuance of the Community
Central Capital Trust I. As a result of the early adoption of SFAS 159 the
difference between the carrying amount and the fair value was removed and
included in the cumulative effect adjustment above.
Management has elected the fair value option based on the following reasons for
each of the eligible items or group of similar eligible items.
Investment Securities and FHLB Advances:
The election of SFAS 159 and SFAS 157 treatment for existing eligible investment
securities was based on multiple factors which included the desire to utilize
the Federal Home Loan Bank advance portfolio to offset volatility with the
investment portfolio. Approximately $27.0 million of investment securities were
selected for early adoption of SFAS 159 based primarily on the relatively short
overall duration in the selected instruments. The overall effective duration of
the instruments was 1.8 years based on current market interest rates. Many of
the instruments have early call provisions, which based on current interest rate
expectations have a high degree of probability to be called. Some instruments
have been pre-refunded with certainty of maturity expected. The investments
selected are primarily comprised of agency debentures and short callable bank
qualified tax exempt municipal bonds. The selected securities will be
categorized under trading portfolio status. Management believes that it has more
options
10
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
of balance sheet management under the fair value option, including the
management of volatility caused by the embedded options within these
instruments. The short overall duration of the selected instruments, coupled
with the utilization of FHLB advances as an attempt to hedge the risk, should
mitigate large swings in fair values that will be recorded in the income
statement as part of adoption of SFAS 159 and SFAS 157. Management cannot
predict future interest rates and is reliant on forecasts and models to make
decisions regarding interest rate and fair value risk.
The election of SFAS 159 treatment for the selected FHLB advances was based on
managements' choice to provide a natural hedge against the securities selected
under SFAS 159. The FHLB advances were selected for the fair value option based
on the maturity ranges within the FHLB portfolio of advances. All maturities
within 18 months from the early adoption date of January 1, 2007 were selected
regardless of the instruments interest rates. The selected FHLB advances had a
net unrealized gain position as of January 1, 2007 and March 31, 2007 and were
selected solely as a natural balance sheet hedge for the investment portfolio
elected under SFAS 159. The decrease in the unrealized loss position of the
selected investments and the income recognized under SFAS 159 for the first
three months of 2007 was completely offset by a corresponding decrease in
unrealized gains within the selected FHLB advances. Management will review the
selected instruments and should changes with overall market interest rates, the
treasury yield curve, or the structure of the investments including the embedded
call options change, it may require management to acquire additional hedges
which may necessitate an off balance sheet interest rate swap or similar hedge
or require the election of a new balance sheet instrument and would be accounted
for under SFAS 159. Additionally, should management and the ALCO committee,
believe other balance sheet strategies will better position the Bank and
Corporation, other transactions could be considered including the sale of
investments classified under trading status. Management has no intent to
extinguish any FHLB advances as they represent interest rates which are lower
than current equivalent market rates. It is the intent of management for the
foreseeable future to utilize fair value option on selected investment
securities, or like kind dollars on disposal.
Subordinated Debentures:
Management elected the fair value option for both its subordinated debentures.
Management considers the subordinated debentures a critical component for future
growth and wishes to utilize interest rate swaps to hedge the risk of this
longer term liability and critical form of regulatory capital. Under SFAS 159,
hedge accounting has become less complex and therefore available to a community
bank with limited resources. The subordinated debenture for $10.3 million that
was issued in June 2002 and maturing June 2032, callable June 30, 2007, was an
eligible instrument for the early adoption of the fair value option as of
January 1, 2007. The pretax accumulated adjustment from the recognition of fair
value on this instrument was $447,000. The carrying amount of the instrument
included $255,000 in unamortized deferred issuance costs on the subordinated
debenture which is included in the aforementioned pretax adjustment. Management
has elected the fair value option on the subordinated debenture which was issued
on February 13, 2007 for $18.6 million. Additionally, an interest rate swap for
a like kind notional value has been secured to reduce any volatility associated
with the recognition of the fair value option under SFAS 159. The pretax income
recognized during the first quarter of 2007 from the election of the
subordinated debentures under SFAS 159 was $235,000 with the majority of this
income resulting from the recognition of an increase in fair value on the new
$18.6 million debenture. The debenture carries an interest rate fixed for 10
years at 6.71%, and was originally based on a ten year treasury interest rate
swap of 5.06%, plus 165 basis points and was prior to the settlement of the
interest rate swap hedging market fluctuations.
Any reductions in overall carrying costs, aside from changes in fair value,
occurring on any financial asset or liability measured under SFAS 157 and SFAS
159 during the first quarter of 2007 was the result of normal pay downs,
maturities and calls of the various financial instruments. No instruments
recorded under SFAS 159 were sold during the first quarter of 2007 and through
the time of reporting the Corporation's 10-Q. Management has the intent to
utilize the fair value option on selected financial assets and liability on a go
forward basis.
The adoption of SFAS 159 resulted in recognition of $228,000 in other net gains
recorded in the noninterest income portion of the Consolidated Statement of
Income. The gains were the result of net increases in fair value of selected
financial asset and liability instruments connected with the adoption of the
fair value standards. The valuations of the instruments measured under Fair
Value Measurement SFAS 157 for the first quarter of 2007 were measured under a
market approach using matrix pricing investment for investment securities and
the income approach using observable data for the liabilities reported under the
Fair Value Option SFAS 159. The inputs were observable for the assets and
liabilities interest rate on commonly quoted intervals based on similar assets
and liabilities.
11
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
The table below contains the fair value measurement at March 31, 2007 using the
identified valuations. Additionally, the changes in fair value for the three
month period ended March 31, 2007 for items measured at fair value pursuant to
election of the fair value option.
Changes in Fair value for
three months ended
March 31, 2007 measured
At fair value pursuant to
Fair Value Measurement at Election of the fair value
March 31, 2007 Option
-------------------------------------------- ------------------------------
Fair Value Significant Other Other Gains or Losses
Measurements Observable Inputs in noninterest income
Description 03/31/2007 (Level 2) pretax income
-------------------------------------------- -------------------- -------------------- ------------------------------
(in thousands of dollars)
Trading Securities 26,577 26,577 65
Federal Home Loan Bank Advances (15,825) (15,825) (72)
Subordinated Debentures (28,814) (28,814) 235
-------------------- -------------------- ------------------------------
228
==============================
Interest income and interest expense of the respective financial instruments
have been recorded in the consolidated statement of income based on the category
of financial instrument.
The Corporation is not aware of any discernable change in instrument specific
credit risk with no change reflected in earnings related to such risk.
12
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion compares the financial condition of the Corporation and
its wholly owned subsidiaries at March 31, 2007 and December 31, 2006 and the
results of operations for the three months ended March 31, 2007 and 2006. 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 that could cause actual results to differ materially from the
results anticipated or projected include, but are not limited to, the following:
expected cost savings and synergies from our acquisition activities might not be
realized within the expected time frames, and costs or difficulties related to
integration matters might be greater than expected; expenses associated with the
implementation of our trust and wealth management services might be greater than
expected, whether due to a possible need to hire more employees than anticipated
or other costs incurred in excess of budgeted amounts; the credit risks of
lending activities, including changes in the level and direction of loan
delinquencies and write-offs and changes in estimates of the adequacy of the
allowance for loan losses; competitive pressures among depository institutions;
interest rate movements and their impact on customer behavior and net interest
margin; the impact of repricing and competitor's pricing initiatives on loan and
deposit products; the ability to adapt successfully to technological changes to
meet customers' needs and development in the market place; our ability to access
cost-effective funding; changes in financial markets; changes in economic
conditions in general and particularly as related to the automotive and related
industries in the Detroit metropolitan area; new legislation or regulatory
changes, including but not limited to changes in federal and/or state tax laws
or interpretations thereof by taxing authorities; changes in accounting
principles, policies or guidelines; and our future acquisitions of other
depository institutions or lines of business.
EXECUTIVE SUMMARY
Community Central Bank Corporation is the holding company for Community Central
Bank (the "Bank") in Mount Clemens, Michigan. The Bank opened for business in
October 1996 and serves businesses and consumers across Macomb, Oakland, St.
Clair and Wayne counties with a full range of lending, deposit, trust, wealth
management and Internet banking services. The Bank operates three full service
facilities, in Mount Clemens, Rochester Hills and Grosse Pointe, Michigan.
Community Central Mortgage Company, LLC, a subsidiary of the Corporation and
Bank, operates locations servicing the Detroit metropolitan area, northwest
Indiana, northern Illinois and Raleigh, North Carolina. River Place Trust and
Community Central Wealth Management are divisions of Community Central Bank.
Community Central Insurance Agency, LLC is a wholly owned subsidiary of
Community Central Bank. The Corporation's common shares trade on The NASDAQ
Global Market under the symbol "CCBD."
Our results of operations depend largely on net interest income. Net interest
income is the difference in interest income the Corporation earns on
interest-earning assets, which comprise primarily commercial and residential
real estate loans, and to a lesser extent commercial business and consumer
loans, and the interest the Corporation pays on our interest-bearing
liabilities, which are primarily deposits and borrowings. Management strives to
match the repricing characteristics of the interest earning assets and interest
bearing liabilities to protect net interest income from changes in market
interest rates and changes in the shape of the yield curve.
Our results of operations may also be affected by local and general economic
conditions. The largest geographic segment of our customer base is in Macomb
County, Michigan. The economic base of the County continues to diversify from
the automotive service sector. This trend should lessen the impact on the County
of future economic downturns in the automotive sector of the economy. Macomb
County's proximity to major highways and affordable
13
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
housing has continued to spur economic growth in the area. Changes in the local
economy may affect the demand for commercial loans and related small to medium
business related products. This could have a significant impact on how the
Corporation deploys earning assets. The competitive environment among other
financial institutions and financial service providers and the Bank in the
Macomb, Oakland, and Wayne and St. Clair counties of Michigan may affect the
pricing levels of various deposit products. The impact of competitive rates on
deposit products may increase the relative cost of funds for the Corporation and
thus negatively impact net interest income.
The Corporation continues to see competitive deposit rates offered from local
financial institutions within the geographic proximity of the Bank which could
have the effect of increasing the costs of funds to a level higher than
management projects. The Corporation continues to utilize wholesale forms of
funding earning assets through the FHLB and brokered certificates of deposit to
balance both interest rate risk and the overall cost of funds. Brokered and
internet certificates of deposit are based on a nationwide interest rate
structure, typically at what is considered to be a premium interest rate. The
local competition for certificates of deposit products has intensified and the
Bank has found this type of wholesale funding to often effectively compete with
the rates offered for similar term retail certificates of deposit products of
local community and regional banks.
Net interest income was $2.9 million during the first quarter of 2007, a
decrease of $233,000 from the first quarter of 2006. Net interest margin for the
first quarter of 2007 was 2.44%, or 2.59% on a tax equivalent basis, compared
with 2.87%, or 3.00% on a tax equivalent basis for the first quarter of 2006.
The increase in interest income produced by an increase in earning assets
primarily federal funds and investment securities was more than offset by an
increase in interest expense as a result of higher deposit funding costs in a
highly competitive deposit-pricing environment. Additionally, the flat treasury
yield curve produced an interest rate environment that results in lower
incremental interest rate spreads on new loan and investment growth.
Net income for the first quarter of 2007 was also affected by expansion and
operational costs related to the new wealth and trust management divisions. The
trust division of the Bank was formed on June 30, 2005, when the Corporation
completed its acquisition and merger with River Place Financial Corp. William A.
Penner, CEO of River Place, became the President of the Bank's newly created
trust division at the time of the acquisition. In early 2006, two executives
were recruited to head the trust and newly created wealth management divisions.
Mr. Penner retired from the Bank effective December 31, 2006. The Corporation
continues to focus on expanding this area of its banking operations and expects
the trust and wealth management divisions to provide increased fee income from
future operations.
In early June of 2006, the Bank opened on full service branch located in Grosse
Pointe Farms, Michigan. Grosse Pointe Farms, Michigan is an upscale, suburban
community on the shores of Lake St. Clair in southeastern Michigan. The Bank has
appointed a regional President for the Grosse Pointe region who is a veteran
banker who has ties to the local community. The branch facility is staffed with
a branch manager and customer service representatives, as well as a commercial
loan officer. The upscale demographics of the surrounding area appear to be well
suited for establishing new relationships for trust and wealth management.
The Corporation continued to experience a compression in net interest margin
during 2007 compared with 2006. This was the result of competitive pricing
pressure in both loans and deposit generation. Additionally, the continuation of
a flat treasury yield curve has resulted in overall lower interest rate spreads
than in other reporting periods.
14
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
ASSETS
At March 31, 2007, the Corporation's total assets were $521.2 million, an
increase of $15.9 million, or 3.1%, from December 31, 2006. The largest segment
of asset growth for the three months ended March 31, 2007, occurred in federal
funds and investment securities available for sale, as loans decreased $1.1
million for the first quarter of 2007.
Commercial loan growth of $3.5 million during the first quarter of 2007 was
adversely effected by large loan payoffs. Residential mortgage loans decreased
$4.1 million during the quarter, as a result of, the Corporation's strategic
plan to change the relative loan mix by reducing the portion of lower yielding
residential mortgages and increasing the relative mix of higher yielding
commercial loans. The residential mortgage portfolio was $68.4 million at March
31, 2007, a decrease of $4.1 million from December 31, 2006. Most of the
residential mortgage portfolio is comprised of adjustable rate mortgages, which
represented $45.4 million, or 66.4%, of the total residential portfolio. Those
residential mortgage loans the Corporation considered to be held for investment
in the residential portfolio comprise both banking relationships and other
attributes deemed to match with the Corporation's interest rate risk profile.
The home equity lines of credit ("HELOC") comprised $17.8 million at March 31,
2007, which was an increase of $146,000 from December 31, 2006. This portfolio
product is tied to Wall Street Journal prime interest rate. These loans are
fully secured by real estate and are generally originated with loan to values
(including prior liens) up to 95% of the appraised value of the real estate. The
consumer portfolio ended March 31, 2007 at $11.1 million, which was a decrease
of $595,000, primarily from pay downs in the portfolio. The largest portion of
the installment loan portfolio comprises loans for marine craft. The
Corporation's geographic proximity to Lake St. Clair and the lending experience
in this area have been contributors to this segment of the portfolio. At March
31, 2007, loans for marine craft comprised approximately $9.4 million, or 84.8%
of the installment portfolio and 2.6% of total loans. Credit card loans totaled
$629,000 at March 31, 2007, which was a decrease of $64,000 from December 31,
2006. The Corporation continues to book credit card loans as a customer
accommodation and does not actively market this product.
Additionally, the Corporation had approximately $14.1 million in outstanding
loans at March 31, 2007, to borrowers in the real estate rental and properties
management industries, representing approximately 59.0% of the total commercial
real estate portfolio.
The major components of the loan portfolio are as follows:
March 31, Percentage December 31, Percentage Net Net
2007 of total loans 2006 of total loans Change Change %
---------- --------------- ---------- --------------- ---------- ----------
(in thousands, except percentages)
Loans held for sale:
Residential real estate $ 3,932 $ 3,441 $ 491 14.3%
========== =============== ========== =============== ========== ==========
Loans held in the portfolio:
Commercial real estate $ 239,048 65.3% $ 236,399 64.4% $ 2,649 1.1%
Commercial and industrial 29,288 8.0 28,393 7.7 895 3.2
Residential real estate 68,391 18.7 72,517 19.7 (4,126) (5.7)
Home equity lines 17,760 4.8 17,614 4.8 146 0.8
Consumer loans 11,071 3.0 11,666 3.2 (595) (5.1)
Credit cards 629 0.2 693 0.2 (64) (9.2)
---------- --------------- ---------- --------------- ---------- ----------
$ 366,187 100.0% $ 367,282 100.0% ($ 1,095) (0.3%)
========== =============== ========== =============== ========== ==========
Total securities available for sale decreased $17.7 million from December 31,
2006 to $63.2 million at March 31, 2007. The decrease was attributable to the
adoption of Financial Accounting Standards Fair Value Option SFAS 159. The
Corporation reclassified a total of $27.0 million of available for sale
securities as trading securities under SFAS 159. The average effective duration
of the new trading portfolio approximated 1.8 years with a weighted average
coupon rate of 4.54%. Management decided to classify the securities under SFAS
159 because of the characteristics of the instruments, which included the
optionality and the ability of the Corporation to hedge the instruments
utilizing above market value Federal Home Loan Bank advances. Furthermore, in
adopting SFAS 159,
15
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
the Corporation will be able to, in the future, utilize the fair value option on
off balance sheet hedges and account for the hedges in a manner which is less
complex than was previously available under GAAP. Other reasons influencing
management's decision to classify the selected instruments under SFAS 159
include overall ALCO strategies and the shape of the treasury yield curve and
management expectations on short term interest rates. The trading portfolio is
primarily comprised of $16.4 million of U.S. Agency debentures with an effective
duration of 1.57 years. Other segments of the portfolio comprise $5.5 million in
callable municipal bonds with an effective duration of 2.45 years, $4.0 million
in collateralized mortgage obligations (CMOs) with an effective duration of 1.72
years. All of the CMOs held in the trading portfolio pass the FFIEC stress test
with relatively short average lives under differing rate scenarios.
The available for sale portfolio, aside from the transfer of instruments
transferred under SFAS 159 to trading portfolio status, increased $8.9 million
from purchases of bank qualified municipal bonds, U.S. agency debentures and
mortgage backed securities.
At March 31, 2007, the available for sale portfolio had net unrealized losses of
$622,000 or approximately 0.98% of the aggregate portfolio. At December 31,
2006, the net unrealized losses in the available for sale portfolio ended at
$1.2 million. The largest reason for the decline in unrealized losses for the
three months ended March 31, 2007, was related to the adoption of SFAS 159 and
the movement of $447,000 from the portion of unrealized gains as of January 1,
2007 which were recognized on an after tax basis under SFAS 115 as other
comprehensive income to retained earnings under the early adoption rules of SFAS
159. The available for sale portfolio increased $65,000 in market value during
the first quarter and was recognized as a gain under SFAS 159 fair value option
recorded in other noninterest income. Offsetting the gain was a $72,000 decline
in market value of the FHLB advances, which are being used to reduce the
volatility of the instruments carried under SFAS 159. The Corporation has the
intent and ability to hold the securities classified under available for sale
for the foreseeable future and declines in the fair value is primarily due to
increased market interest rates.
16
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
A summary of nonperforming assets is as follows:
March 31, December 31,
2007 2006
------------ ------------
(Dollars in thousands)
Nonaccrual loans:
Commercial real estate $ 2,789 $ 2,711
Commercial and industrial 848 646
Residential real estate 816 --
Home equity lines 347 --
Consumer loans 108 --
Credit cards -- --
------------ ------------
Total nonaccrual loans 4,908 3,357
Accruing loans delinquent more than 90 days:
Commercial real estate $ -- $ --
Commercial and industrial -- --
Residential real estate -- 876
Home equity lines 85 336
Consumer loans 9 160
Credit cards 5 1
------------ ------------
Total accruing loans delinquent more than 90 days 99 1,373
------------ ------------
Total nonperforming loans 5,007 4,730
Other real estate owned
Commercial real estate -- --
Residential real estate 108 108
------------ ------------
Total other real estate owned 108 108
------------ ------------
Total nonperforming assets $ 5,115 $ 4,838
============ ============
Total nonperforming loans as a
percentage of total loans 1.37% 1.29%
============ ============
Total nonperforming assets as a percentage
of total assets 0.98% 0.96%
============ ============
At March 31, 2007, nonperforming loans, which represents nonaccruing loans and
those loans past due 90 days or more and still accruing interest, totaled $ 5.0
million compared to $ 4.7 million at December 31, 2006, an increase of $
277,000. Nonaccruing loans of $ 4.9 million increased $ 1.6 million from
December 31, 2006. The increase in nonaccrual loans was primarily attributable
to the movement of loans previously classified as accruing loans delinquent more
than 90 days to nonaccrual loans in the loan categories of residential mortgages
comprising $ 816,000, home equity lines of credit totaling $ 347,000 and other
consumer loans of $ 108,000. These consumer based loans were placed into
nonaccrual status based on regular evaluations of delinquent loans. A
determination was made of the collectability of the accrued interest based on
the borrower's ability to repay and real estate values, which have been
declining in the Bank's geographic lending area as well as other collateral
determinations.
17
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
The following table shows an analysis of the allowance for loans losses:
Three Months Ended Year Ended
March 31, December 31,
2007 2006
-------------------- ------------
(Dollars in thousands)
Balance as beginning of the period $ 3,815 $ 3,580
Charge-offs:
Commercial real estate 4 --
Commercial and industrial 20 248
Residential real estate -- 21
Home equity lines 68 21
Consumer loans 64 40
Credit cards 3 13
-------------------- ------------
Total charge-offs $ 159 $ 343
-------------------- ------------
Recoveries:
Commercial real estate 1 --
Commercial and industrial -- 14
Residential real estate -- 8
Home equity lines 1 --
Consumer loans 1 5
Credit cards -- 1
-------------------- ------------
Total recoveries $ 3 $ 28
-------------------- ------------
Net charge-offs (recoveries) 156 315
-------------------- ------------
Provision charged to earnings 50 550
-------------------- ------------
Balance at end of the period $ 3,709 $ 3,815
==================== ============
Net charge-offs (net recoveries) during the period
to average loans outstanding during the period
on an annualized basis 0.17% 0.09%
Allowance as a percentage of total portfolio loans 1.01% 1.04%
The allowance for loan losses as a percentage of total loans remained relatively
unchanged at March 31, 2007, compared to December 31, 2006. The Corporation
performs a detailed quarterly review of the allowance for loan losses. The
Corporation evaluates those loans classified as substandard, under its internal
risk rating system, on an individual basis for impairment under SFAS 114. The
level and allocation of the allowance is determined primarily on management's
evaluation of collateral value, less the cost of disposal, for loans reviewed in
this category. The remainder of the total loan portfolio is segmented into
homogeneous loan pools with similar risk characteristics for evaluation under
SFAS 5. The primary risk element considered by management regarding each
consumer 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 and industrial loans and commercial
real estate 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 annual financial statements from its commercial loan customers and
periodically reviews existence of collateral and its value.
18
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
LIABILITIES
Total deposits of $ 341.4 million decreased $ 14.4 million during the first
quarter. The decrease was entirely due to a $ 22.2 million decrease in time
deposits. The decrease in time deposits was due to maturities of higher cost
brokered time deposits. Partially offsetting the decrease in time deposits was
an increase of $ 7.8 million from December 31, 2006, in core deposits,
representing checking, NOW, money market and savings accounts. Noninterest
bearing demand deposits increased $ 1.0 million for the first three months of
2007. NOW accounts increased $ 534,000 during the same time period. Money market
savings deposits totaled $ 48.0 million and increased $ 12.8 million from
December 31, 2006. The growth in money market accounts was attributable to a new
indexed money market product with a competitive interest rate tied to the six
month treasury bill. Total savings accounts increased $ 3.4 million from
seasonal fluctuations. Total time deposits under $ 100,000 decreased $ 1.0
million. The competitive rate environment amongst local financial institutions
has made the Corporation decide in some cases not to raise the interest rate on
the deposit product at the same frequency or level to match or exceed interest
rates given by local financial institutions. The Corporation continues to see
competitive deposit rates offered by local financial institutions within the
geographic proximity of the Bank, which could have the affect of increasing the
cost of funds to a level higher than management projects. The Corporation
continues to utilize wholesale forms of funding earning assets through the
Federal Home Loan Bank and brokered CDs to balance both interest rate risk and
the overall cost of funds. Brokered and internet CDs are based on nationwide
interest rate structure, typically at what is considered to be a premium
interest rate. The local competition for CD products has intensified and the
Bank has found this type of whole funding to often effectively compete with the
rates offered for similar term retail CD products of local community and
regional banks.
The major components of deposits are as follows:
March 31, Percentage December 31, Percentage Net Net
2007 of total deposits 2006 of total deposits Change Change %
---------- ------------------ -------------- ------------------ ---------- ----------
(Dollars in Thousands)
Noninterest bearing demand $ 34,361 10.1% $ 33,331 9.4% $ 1,030 3.1%
NOW accounts 14,618 4.3 14,084 4.0 534 3.8
Money market accounts 48,045 14.1 45,255 12.7 2,790 6.2
Savings deposits 13,999 4.1 10,569 3.0 3,430 32.5
Time deposits under $ 100,000 44,569 13.1 45,608 12.8 (1,039) (2.3)
Time deposits $ 100,000 and
over 185,822 54.3 207,009 58.1 (21,187) (10.2)
---------- ------------------ -------------- ------------------ ---------- ----------
Total deposits 341,414 100.0 355,856 100.0% (14,442) (4.1%)
========== ================== ============== ================== ========== ==========
19
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
Short term borrowings at March 31, 2007 consisted of short term FHLB advances of
$ 10.9 million at fair value and securities sold with an agreement to repurchase
them the following day of $ 12.5 million. Following are details of our short
term borrowings for the dates indicated:
March 31, December 31,
2007 2006
------------ ------------
(Dollars in thousands)
Amount outstanding at end of period
Short-term repurchase agreements $ 12,522 $ 15,688
Short-term FHLB advances $ 10,909 $ 14,000
Weighted average interest rate on ending balance
Short-term repurchase agreements 3.15% 3.15%
Short-term FHLB advances 3.54% 3.92%
Maximum amount outstanding at any month end
during the period
Short-term repurchase agreements $ 13,660 $ 21,832
Short-term FHLB advances $ 11,000 $ 26,700
During the first quarter of 2007, the Corporation borrowed $ 19 million in a
wholesale structured repurchase agreement with an interest rate tied to the
three month Libor rate, less 250 basis points adjusted quarterly, until March 3,
2008 when the borrowing changes to a fixed interest rate of 4.95% until March 2,
2017. The repurchase agreement is callable quarterly after March 2, 2008.
In June 2001, the Corporation started to borrow long-term advances from the FHLB
to fund fixed rate instruments and to minimize the interest rate risk associated
with certain fixed rate mortgage instruments and investment securities. These
advances are secured under a blanket security agreement by first mortgage loans
and the pledging of certain securities. Long-term advances comprised 31 advances
with maturities from April 2008 to June 2016.
FHLB advances outstanding at March 31, 2007 were as follows:
Fair Value Face Value Average rate
at end of period of obligation at end of period
------------------ --------------- ------------------
(Dollars in thousands)
Short-term FHLB advances $ 10,909 $ 11,000 3.54%
Long-term FHLB advances 69,444 69,528 4.74%
------------------ --------------- ------------------
$ 80,353 $ 80,528 4.57%
The Corporation has elected early adoption of SFAS 159 for all FHLB advances
maturing in 18 months from January 1, 2007, which represented $ 16 million in
total. At March 31, 2007, the fair value adjustment of the selected advances was
$ 175,000. The overall weighted yield of the FHLB advance was 3.60% at March 31,
2007. Management believes that the selected instruments will serve as a hedge
for those securities recorded as trading from the transfer from available for
sale under SFAS 159.
20
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
LIQUIDITY AND CAPITAL RESOURCES
The liquidity of a bank allows it to provide funds to meet loan requests, to
accommodate possible outflows of 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
attempt to match the maturities and repricing 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. The major sources of liquidity for the Bank 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 $ 50.9
million in available unsecured federal funds borrowing facilities, and a $ 150.0
million secured line of credit with the FHLB. 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. We anticipate
that we will have sufficient funds available to meet our future commitments. As
of March 31, 2007, unused commitments comprised $ 94.2 million. The Bank has $
164.7 million in time deposits coming due within the next twelve months from
March 31, 2007, which includes brokered, internet and municipal time deposits.
At March 31, 2007, the Bank had $ 95.9 million in brokered certificates of
deposit, of which $ 46.1 million is due within one year or less. Additionally,
at March 31, 2007, municipal time deposits and internet time deposits were $
43.7 million and $ 3.5 million, respectively. Municipal time deposits typically
have maturities less than three months. $ 1.5 million of internet certificates
of deposit mature in one year or less.
On February 20, 2007, the Corporation's Board of Directors declared the
Corporation's twentieth consecutive quarterly cash dividend of $ 0.06 per common
share, payable April 2, 2007, to shareholders of record March 1, 2007.
Following are selected capital ratios for the Corporation and the Bank as of the
dates indicated, along with the minimum regulatory capital 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.
March 31, December 31, Minimum Ratio
2007 2006 for Capital
---------------------- ---------------------- Adequacy Ratio to be
Capital Ratio Capital Ratio Purposes "Well Capitalized"
---------- ---------- ---------- ---------- ----------------- -----------------
Total capital to risk-weighted assets
Consolidated $ 67,499 16.79% $ 49,693 12.65% 4% NA
Bank only 47,723 11.91% 47,486 12.11% 4% 10%
Tier I capital to risk-weighted assets
Consolidated $ 46,564 11.58% $ 45,878 11.68% 8% NA
Bank only 44,015 10.98% 43,677 11.14% 8% 6%
Tier I capital to average assets
Consolidated $ 46,564 9.14% $ 45,878 9.01% 4% NA
Bank only 44,015 8.66% 43,671 8.60% 4% 5%
Management believes that the current capital position as well as net income from
operations, loan repayments and other sources of funds will be adequate to meet
our short and long term liquidity needs.
21
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
The following table shows the changes in stockholders' equity for the three
months ended March 31, 2007:
Unearned Accumulated Other
Common Retained Employee Comprehensive Total
Stock Earnings Benefits Income/(Loss) Equity
---------- ---------- ---------- ----------------- ----------
Beginning balance, January 1, 2007 $ 33,220 $ 4,303 ($ 95) ($ 763) $ 36,665
Cumulative effect of adoption of SFAS 159 -- (420) -- -- (420)
Cash dividend -- (227) -- -- (227)
Stock option exercise 12 -- -- -- 12
SFAS 123R expensing of options 7 -- -- -- 7
Net income -- 658 -- -- 658
Release of ESOP shares -- -- 16 -- 16
Repurchase of common stock (1,012) -- -- -- (1,012)
Other comprehensive income -- -- -- 352 352
---------- ---------- ---------- ----------------- ----------
Balance March 31, 2007 $ 32,227 $ 4,314 ($ 79) ($ 411) $ 36,051
========== ========== ========== ================= ==========
Stockholder's equity was $ 36.1 million as of March 31, 2007. This was a
decrease of $ 614,000 from December 31, 2006. The change in stockholder's equity
was primarily attributable to the repurchase of common stock totaling $ 1.0
million. Also decreasing retained earnings was a cash dividend of $ 227,000.
Additional decreases in stockholder's equity of $ 125,000 occurred from the $
420,000 charge to retained earnings from the adoption of Financial Accounting
Standards "Fair Value Option" SFAS 159. The charge to retained earnings
represented the after tax net unrealized losses associated with the election of
certain financial assets and liabilities recorded at fair value. Offsetting the
total net charge to retained earnings was the increase in capital from the
reversal of other comprehensive income from the transfer of the unrealized
losses on available for sale securities which had an affect of an increase in
capital of $ 295,000. This partial reason for the increase in accumulated other
comprehensive income. Net income of $ 658,000 for the first quarter completely
offset the decrease in retained earnings from the adoption of SFAS 159 and the
first quarter cash dividend.
NET INTEREST INCOME
Net interest income for the first quarter of 2007 was $ 2.9 million, a decrease
of 7.4% from the first quarter of 2006. The decrease was reflective of a 41
basis point decline in net interest margin to 2.59% over the same time period
and a 7 basis point decrease from the fourth quarter of 2006. The net interest
margin in the first quarter of 2007 was temporarily affected by excess
liquidity, which was due in part to the Corporation's acquisition of the
previously announced $ 18 million trust preferred issuance. Additionally, net
interest margin for the first quarter of 2007, would have remained unchanged
from the prior quarter except for the effect of recognition of interest income
reversal on nonaccrual loans. The decrease in net interest margin was primarily
the result of higher deposit funding costs in a highly competitive deposit
pricing environment. Additionally, the flat treasury yield curve produced an
interest rate environment that results in lower incremental interest rate
spreads on new loan and investment growth. The increase in interest income for
the first quarter of 2007 compared to the first quarter of 2006 was primarily
due to higher average outstanding balances in the loan portfolio and higher
yields in the investment portfolio. Increases in various categories of interest
expense were primarily driven by increases in interest rates paid on deposits
and other borrowings. The largest increase in interest expense was associated
with time deposits. Increases in interest expense on time deposits contributed
71.4% of the overall increase in interest expense due to an increase in rate.
Conversely, the increase in interest expense due to other borrowings was
primarily due to increases in volume and secondarily due to increases in rates,
as the duration of the FHLB advances is much longer than other categories of
deposits and borrowed funds.
22
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
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.
Three Months Ended
March 31, 2007 vs. 2006
------------------------------------
Increase (Decrease)
Due to Changes In
-----------------------
Total Volume Rate
and Both
---------- ---------- ----------
(In thousands)
Earning Assets - Interest Income
Loans $ 218 $ 213 $ 5
Securities, including trading (48) (80) 32
Federal funds sold 824 534 290
---------- ---------- ----------
Total 994 667 327
---------- ---------- ----------
Deposits and Borrowed Funds - Interest Expense
NOW and money market accounts 405 217 188
Savings deposits 22 8 14
Time deposits 593 65 528
FHLB advances and repurchase agreements 29 9 20
ESOP loan interest expense (1) (1) --
Subordinated debentures 179 189 (10)
---------- ---------- ----------
Total 1,227 487 740
---------- ---------- ----------
Net Interest Income ($ 233) $ 180 ($ 413)
========== ========== ==========
The average yield earned on interest earning assets for the first quarter of
2007 was 6.83% compared to 6.51% for the first quarter of 2006. The average
yield earned on the total loan portfolio, which contains both loans held for
sale and investment for 2007 was 7.44% compared to 7.10% during the first
quarter of 2006. The overall increase in the loan portfolio yield was partially
due to the repricing of maturing fixed rate loans during the respective period.
The commercial, commercial real estate and home equity line loans that repriced
with prime interest rate changes totaled approximately $ 142 million at March
31, 2007.
The average rate paid on interest bearing liabilities for the first quarter of
2007 was 4.80% compared to 4.03% in the first quarter of 2006. The increase in
average rate was due to the overall rate paid on interest bearing liabilities,
primarily as a result of the increase in overall market interest rates. The rate
paid on the total time deposit portfolio increased to 5.08% for the first
quarter of 2007, from 4.18% for the same time period in 2006 and was driven by
highly competitive interest rates paid among local financial institutions. The
increase in the average rate for NOW and money market accounts for 2007 was
primarily attributable to the introduction of a premium rate based NOW account,
with the average rate moving to 3.94% during the first quarter of 2007 versus
1.99% in the first quarter of 2006. The average rate paid on savings also
increased, moving to 2.63% for the first quarter of 2007 from 2.19% in the first
quarter of 2006. The rate paid on FHLB advances and repurchase agreements
increased only slightly to 4.31% in the first quarter of 2007 from 4.23% in the
first quarter of 2006 and had the least yield movement of interest bearing
liabilities. At March 31, 2007, the FHLB portfolio had a weighted average
maturity of one year and an overall weighted average interest rate of 4.57%,
which was 68 basis points below the current overnight federal funds rate. The
average rate paid on the subordinated debenture increased in the first quarter
of 2007 to 8.06% from 8.46%. The overall decrease in yield occurred from the
addition of an $ 18.6 million new subordinated debenture in
23
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
February of 2007 with a lower interest rate at 6.71% fixed, than the other
instrument which had a yield approximating 9.00% as its yield was 365 basis
points over the three month Libor. The combined yield was lower than the yield
of the Libor based debenture alone.
24
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (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 month periods ended March 31, 2007 and 2006. Average loans
are presented net of unearned income, gross of the allowance for loan losses.
Interest on loans includes loan fees. Effective January 1, 2006, the Corporation
began calculating yields earned on interest earning assets and rates paid on
interest bearing liabilities based on the actual number of days in the quarter.
Previously, the Corporation calculated these yields using four equal quarterly
periods. While these different methods of calculating yields and rates may have
a slight effect on yields, rates, net interest margins and net interest rate
spreads reported during the quarterly or year to date periods, it has no effect
on yields, rates, net interest margins and net interest rate spreads reported on
an annual basis. This change in methodology does not have a material impact on
the yields, rates, net interest margin or net interest rate spreads in reported
in prior periods; accordingly, this change was implemented prospectively and as
such, prior periods have not been restated.
Three Months Ended March 31,
------------------------------------------------------------------------
2007 2006
------------------------------------ ----------------------------------
Average Average
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
----------- ----------- ---------- --------- ---------- -----------
(In thousands)
Assets
Loans $ 373,426 6,852 7.44% $ 344,471 6,028 7.10%
Securities 87,474 1,001 4.58 94,448 1,049 4.44
Federal funds sold 20,076 255 5.15 3,342 37 4.49
----------- ----------- ---------- --------- ---------- -----------
Total Interest Earning Assets/
Total Interest Income/Average Yield Earned 480,976 8,108 6.83 442,261 7,114 6.51
----------- ----------- ---------- --------- ---------- -----------
Cash and due from banks 7,246 7,639
All other assets 22,966 20,487
----------- ---------
Total Assets $ 511,188 $ 470,387
=========== =========
Liabilities and Equity
NOW and money market accounts $ 61,359 596 3.94 $ 39,018 191 1.99
Savings deposits 13,863 90 2.63 12,597 68 2.19
Time deposits 242,056 3,034 5.08 237,000 2,441 4.18
FHLB advances, repurchase agreements
and fed funds purchased 101,710 1,081 4.31 100,919 1,052 4.23
ESOP note payable 89 2 9.11 143 3 8.51
Subordinated debentures 19,834 394 8.06 10,310 215 8.46
----------- ----------- ---------- --------- ---------- -----------
Total Interest Bearing Liabilities/
Total Interest Expense / Average Rate Paid 438,911 5,197 4.80 399,987 3,970 4.03
----------- ----------- ---------- --------- ---------- -----------
Noninterest bearing demand deposits 33,000 32,657
All other liabilities 2,783 2,078
Stockholders' equity 36,494 35,665
----------- ---------
Total Liabilities and Stockholder's Equity $ 511,188 $ 470,387
=========== =========
Net Interest Income $ 2,911 $ 3,144
=========== ==========
Net Interest Spread 2.02% 2.49%
========== ===========
Net Interest Margin (Net Interest
Income/Total Earning Assets) 2.44% 2.87%
========== ===========
Net Interest Margin
(fully taxable equivalent) 2.59% 3.00%
========== ===========
25
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
PROVISION FOR LOAN LOSSES
A $ 50,000 provision was made to the allowance for loan losses in the first
quarter of 2007, based upon management's review of the risks inherent in the
loan portfolio and the level of our allowance for loan losses. Net loan
charge-offs for the first quarter of 2007 totaled $ 156,000, or 17 basis points
on an annualized basis. Total nonperforming assets as a percentage of total
assets was 1.37% at March 31, 2007, compared to 1.29% at December 31, 2006. The
allowance for loan losses was $ 3.7 million at March 31, 2007, or 1.01% of total
loans and 74.1% of nonperforming loans, versus $ 3.8 million, or 1.04% and 80.7%
at December 31, 2006, respectively.
NONINTEREST INCOME
Noninterest income in the first quarter of 2007 was $ 1.4 million, an increase
of $ 216,000, or 18.0%, compared to the first quarter of 2006. The increase was
largely due to noninterest income of $ 228,000 recognized from net increases in
fair value of selected financial asset and liability instruments connected with
the adoption of fair value standards. The valuations of the instruments measured
under Fair Value Measurement SFAS 157 for the first quarter of 2007 were
measured under a market approach using matrix pricing investment for investment
securities and the income approach using observable data for the liabilities
reported under the Fair Value Option SFAS 159. The inputs were observable for
the assets and liabilities interest rate on commonly quoted intervals based on
similar assets and liabilities. Fiduciary income from trust services represented
$ 87,000 for the first quarter of 2007, which was an increase of $ 20,000, or
29.9% from the first quarter of 2006 as the Corporation continued to increase
the level of assets under management from the expanding trust operations.
Mortgage banking income totaled $ 754,000, which represented gains from the sale
of residential mortgage loans in the secondary market, decreased $ 100,000, or
11.7% from the same period last year. The decrease in mortgage banking income
was the result of lower gains on the sale of residential mortgage loans due to
lower origination of residential mortgages sold in the secondary market. The
slow down in new home purchases contributed to this decline. The category of
other interest income totaled $ 261,000 and increased $ 62,000, or 31.2%
primarily from wealth management services totaling $ 49,000 for the first three
months of 2007. This compares to no fee income from wealth management services
for the first three months of 2006, as the division was being organized during
this period.
NONINTEREST EXPENSE
Noninterest expense was $ 3.6 million for the first quarter of 2007 and was
relatively unchanged from the first quarter of 2006, increasing $ 44,000, or
1.29% as the Corporation continues to place emphasis on cost controls. Total
salary and benefit expense of $ 2.1 million for the first three months of 2007
increased $ 38,000, or 1.8% compared to the same time period last year. The
moderate increase in salary and benefit expense was due in part to increases in
benefit related costs primarily in healthcare, which was partially offset by
reductions in commission expense from mortgage originations. Total net occupancy
expense of $ 452,000 decreased $ 14,000, or 3.0% for the first three months of
2007 compared to the first three months of 2006. The decrease was due in part to
the closure of several residential loan production offices from a slow down in
production. Other operating expense of $ 865,000 increased $ 20,000, or 2.4%
during the first three months of 2007 compared to 2006. Moderate increases in
most expense categories were offset partially from a reduction in advertising
and promotional expenses and overall cost control efforts.
PROVISION FOR INCOME TAXES
The provision for federal income taxes of $ 161,000 for the first quarter of
2007 decreased $ 16,000, or 9.0%, from the federal income tax provision for the
first quarter of 2006. The decrease was primarily attributable to a higher level
of tax exempt municipal bonds over the same respective time period, coupled with
a lower level of pretax income. The difference between the effective tax rate
and the statutory tax rate is largely due to the Corporation's investment in tax
exempt municipal portfolio and bank owned life insurance (BOLI). The effective
tax rate for the first quarter of 2007 and 2006 was 19.7% and 20.1%,
respectively. The statutory tax rate of the Corporation is 34%. Pre-tax income
for the first quarter decreased $ 61,000, or 6.9%.
26
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
ASSET/LIABILITY MANAGEMENT
The Asset Liability Management Committee ("ALCO"), which meets at least
quarterly, is responsible for reviewing interest rate sensitivity position 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.
Interest sensitivity gap analysis measures the difference between the assets and
liabilities repricing or maturing within specific time periods. An
asset-sensitive position indicates that there are more rate-sensitive assets
than rate-sensitive liabilities repricing or maturing within specific time
periods, which would generally imply a favorable impact on net interest income
in periods of rising interest rates and a negative impact in periods of falling
rates. A liability-sensitive position would generally imply a negative impact on
net interest income in periods of rising rates and a positive impact in periods
of falling rates.
Gap analysis has limitations because it cannot measure precisely the effect of
interest rate movements and competitive pressures on the repricing and maturity
characteristics of interest-earning assets and interest-bearing liabilities. In
addition, a significant portion of our adjustable-rate assets have limits on
their minimum and maximum yield, whereas most of our interest-bearing
liabilities are not subject to these limitations. As a result, certain assets
and liabilities indicated as repricing within a stated period may in fact
reprice at different times and at different volumes, and certain adjustable-rate
assets may reach their yield limits and not reprice.
27
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
The following table presents an analysis of our interest-sensitivity static gap
position at March 31, 2007. All interest-earning assets and interest-bearing
liabilities are shown based on the earlier of their contractual maturity or
repricing date adjusted by forecasted repayment and decay rates. Asset
prepayment and liability decay rates are selected after considering the current
rate environment, industry prepayment and decay rates and our historical
experience. At March 31, 2007, we are considered asset sensitive in the time
interval of the first three months. We are also considered to be slightly
liability sensitive at the one year accumulated gap position.
After Three After One
Within Months But Year But After
Three Within One Within Five
Months Year Five Years Years Total
------------ ------------ ------------ ------------ ------------
(Dollars in thousands)
Interest earning assets:
Federal funds sold and
interest bearing cash $ 22,100 $ -- $ -- $ -- $ 22,100
Securities 4,111 11,878 29,351 45,564 90,904
FHLB stock -- -- -- 4,540 4,540
Portfolio loans and
held for resale 142,332 60,948 53,933 112,907 370,120
------------ ------------ ------------ ------------ ------------
Total 168,543 72,826 83,284 163,011 $ 487,664
------------ ------------ ------------ ------------ ============
Interest bearing liabilities:
NOW and money market
accounts 2,856 6,590 24,964 -- $ 34,410
Indexed money market
accounts 28,253 -- -- -- 28,253
Savings deposits 1,400 2,800 9,799 -- 13,999
Jumbo time deposits 81,226 48,694 39,339 16,563 185,822
Time deposits < $ 100,000 6,797 27,663 8,932 1,177 44,569
Repurchase agreements 31,522 -- -- -- 31,522
FHLB advances 3,000 11,000 33,328 33,200 80,528
ESOP payable 79 -- -- -- 79
Subordinated debentures 10,310 -- -- 8,557 28,867
------------ ------------ ------------ ------------ ------------
Total 165,443 96,747 116,362 69,497 $ 448,049
------------ ------------ ------------ ------------ ============
Interest rate sensitivity gap $ 3,100 ($ 23,921) ($ 33,078) $ 93,514
Cumulative interest rate
sensitivity gap ($ 20,821) ($ 53,899) $ 39,615
Interest rate sensitivity gap
Ratio 1.02 0.75 0.72 2.35
Cumulative interest rate
sensitivity gap ratio 0.92 0.86 1.09
The Bank also evaluates interest rate risk using a simulation model. The use of
simulation models to assess interest rate risk is an accepted industry practice,
and the results of the analysis are useful in assessing the vulnerability of the
Bank's net interest income to changes in interest rates. However, the
assumptions used in the model are oversimplifications and not necessarily
representative of the actual impact of interest rate changes. The simulation
model assesses the direction and magnitude of variations in net interest income
resulting from potential changes in market interest rates. Key assumptions in
the model include prepayment speeds of various loan and investment assets; cash
flows and maturities of interest-sensitive assets and liabilities, and changes
in market conditions impacting loan and deposit volumes and pricing. These
assumptions are inherently uncertain, and subject to fluctuation and revision in
a dynamic environment. Therefore, the model cannot precisely estimate future net
interest income or exactly predict the impact of higher or lower interest rates.
Actual results may differ from simulated results due to, among other factors,
the timing, magnitude, and frequency of interest rate changes, changes in market
conditions and management's pricing decisions, and customer reactions to those
decisions.
28
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
On a quarterly basis, the net interest income simulation model is used to
quantify the effects of hypothetical changes in interest rates on the Bank'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, 2007, the table below reflects the impact the various
instantaneous parallel shifts in the yield curve would have on net interest
income over a twelve month period of time from the base forecast. Interest
rate risk is a potential loss of income and/or potential loss of economic value
of equity. Rate sensitivity is the measure of the effect of changing interest
rates on the Bank's net interest income or the net interest spread. The policy
of the Bank shall be to risk no more than 10% of its net interest income in a
changing interest rate scenario of +/- 200 basis points over a one-year
simulation period. Furthermore, no more than 15% of net interest income can be
projected at risk in a scenario of +/- 300 basis points over a one-year
simulation period.
Percentage Change
Interest Rate Scenario In Net Interest Income
-------------------------------------------------- --------------------------
Interest rates up 300 basis points (1.24%)
Interest rates up 200 basis points 0.02%
Interest rates up 100 basis points 0.38%
Base case --
Interest rates down 100 basis points 0.96%
Interest rates down 200 basis points 2.41%
Interest rates down 300 basis points 4.01%
ITEM 3. CONTROLS AND PROCEDURES
An evaluation of the Corporation's disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Securities and Exchange Act of 1934 ("Act")) as
of March 31, 2007, was carried out under the supervision and with the
participation of the Corporation's Chief Executive Officer, Chief Financial
Officer and several other members of the Corporation's senior management. The
Corporation's Chief Executive Officer and Chief Financial Officer concluded that
the Corporation's disclosure controls and procedures as currently in effect are
effective in ensuring that the information required to be disclosed by the
Corporation in the reports it files or submits under the Act is (i) accumulated
and communicated to the Corporation's management (including the Chief Executive
Officer and Chief Financial Officer) in a timely manner, and (ii) recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms.
There have been no changes in our internal control over financial reporting (as
defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended
March 31, 2007, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
The Corporation intends to continually review and evaluate the design and
effectiveness of its disclosure controls and procedures and to improve its
controls and procedures over time and to correct any deficiencies that it may
discover in the future. The goal is to ensure that senior management has timely
access to all material non-financial information concerning the Corporation's
business. While the Corporation believes the present design of its disclosure
controls and procedures is effective to achieve its goal, future events
affecting its business may cause the Corporation to modify its disclosures and
procedures.
29
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
PART II
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Stock Repurchases - The following table sets forth information about the
Corporation's purchases of its outstanding Common Stock during the quarter ended
March 31, 2007.
MAXIMUM NUMBER
(OR APPROXIMATE
TOTAL NUMBER OF DOLLAR VALUE) OF
SHARES (OR UNITS) SHARES (OR UNITS)
PURCHASED AS PART THAT MAY YET BE
TOTAL NUMBER OF AVERAGE PRICE OF PUBLICLY PURCHASED UNDER
SHARES (OR UNITS) PAID PER SHARE ANNOUNCED PLANS OR THE PLANS OR
PERIOD PURCHASED (1) (OR UNIT) PROGRAMS(2) PROGRAMS(2)
------------------------------------------ -------------------- -------------------- -------------------- --------------------
January 1, 2007 - January 31, 2007 -- -- -- 162,787
February 1, 2007 - February 28, 2007 10,000 $ 11.30 10,000 152,787
March 1, 2007 - March 31, 2007 79,437 $ 11.33 79,437 73,350
---------------
(1) Of these shares, no shares were purchased other than through a publicly
announced program.
(2) On September 20, 2006, the Corporation announced its attention to
repurchase up to 5%, totaling 192,887 shares, of its outstanding shares in
the open market or privately negotiated transactions for a twelve month
period. No stock repurchase plans or programs expired or were terminated by
the Corporation during the quarter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Cash Dividend - On February 20, 2007, the Corporation's Board of Directors
declared the Corporation's 20th quarterly cash dividend of $ 0.06 per common
share, payable April 2, 2007, to shareholders of record March 1, 2007.
Stock Dividend - On April 16, 2007, the Corporation's Board of Directors
declared a 5% stock dividend payable June 1, 2007, to shareholder of record May
1, 2007.
ITEM 6. EXHIBITS.
See Exhibit Index attached.
30
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (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 May 14, 2007.
COMMUNITY CENTRAL BANK CORPORATION
By: S/ DAVID A. WIDLAK
------------------------------------
David A. Widlak;
President and CEO
(Principal Executive Officer)
By: S/ RAY T. COLONIUS
------------------------------------
Ray T. Colonius;
Treasurer
(Principal Financial and Accounting
Officer)
31
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
---------- ----------------------------------------------------------
3.1 Articles of Incorporation are incorporated by reference to
Exhibit 3.1 of the Corporation's Registration Statement on
Form SB-2 (SEC File No. 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 Quarterly Report on Form
10-QSB filed with the SEC for the quarter ended June 30, 2004
(SEC File No. 000-33373)
4.1 Specimen of Stock Certificate of Community Central Bank
Corporation is incorporated by reference to Exhibit 4.2 of the
Corporation's Registration Statement on Form SB-2 (SEC File
No. 333-04113) which became effective on September 23, 1996
10.1 1996 Employee Stock Option Plan is incorporated by reference
to Exhibit 10.1 of the Corporation's Registration Statement on
Form SB-2 (SEC File No. 333-04113) which became effective
September 23, 1996
10.2 1996 Stock Option Plan for Nonemployee Directors is
incorporated by reference to Exhibit 10.2 of the Corporation's
Registration Statement on Form SB-2 (SEC File No. 333-04113)
which became effective September 23, 1996
10.3 1999 Stock Option Plan for Directors in incorporated by
reference to Exhibit 10.5 of the Corporation's Annual Report
filed with the SEC on Form 10-KSB for the year ended December
31, 1999 (SEC File No. 000-33373)
10.4 2000 Employee Stock Option Plan is incorporated by reference
to Exhibit 10.6 of the Corporation's Annual Report filed with
the SEC on Form 10-KSB for the year ended December 31, 2000
(SEC File No. 000-33373)
10.5 2002 Incentive Plan is incorporated by reference to Exhibit
10.7 of the Corporation's Annual Report filed with the SEC on
Form 10-KSB for the year ended December 31, 2001 (SEC File No.
000-33373)
10.6 Community Central Bank Supplemental Executive Retirement Plan
is incorporated by reference to Exhibit 10.6 of the
Corporation's Annual Report on Form 10-K filed with the SEC
for the year ended December 31, 2006. (SEC File No. 000-33373)
10.7 Community Central Bank Death Benefit Plan is incorporated by
reference to Exhibit 10.7 of the Corporation's Annual Report
on Form 10-K filed with the SEC for the year ended December
31, 2006. (SEC File No. 000-33373)
10.8 Form of Incentive Stock Option Agreement incorporated by
reference to Exhibit 99.1 of the Corporation's Current Report
on Form 8-K filed with the SEC on March 25, 2005. (SEC File
No. 000-33373)
10.9 Form of Non-qualified Stock Option Agreement is incorporated
by reference to the Corporation's Current Report on Form 8-K
filed on January 17, 2006. (SEC File No. 000-33373)
10.10 Summary of Current Director Fee Arrangements is incorporated
by reference to Exhibit 10.10 of the Corporation's Annual
Report filed with the SEC on Form 10-KSB for the year ended
December 31, 2004. (SEC File No. 000-33373)
32
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-Q (continued)
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------------ ------------------------------------------------------
11 Computation of Per Share Earnings
31.1 Rule 13a - 14(a) Certification (Chief Executive Officer)
31.2 Rule 13a - 14(a) Certification (Chief Financial Officer)
32 Rule 1350 Certifications
33