Could we see in the near future international banks operating everywhere via blockchain?

Office of the Comptroller of the Currency Issues Interpretation of 12 U.S.C. § 25b

Press Release

WASHINGTON—The Office of the Comptroller of the Currency (OCC) today issued an interpretation of 12 U.S.C. 25b, which codifies preemption standards and establishes procedural requirements for certain preemption actions by the agency.

Federal preemption derives from the Supremacy Clause of the U.S. Constitution and has been recognized as fundamental to the federal government and the operation of the federal banking system. In the landmark case of McCulloch v. Maryland, the U.S. Supreme Court held that under the Supremacy Clause, states “have no power, by taxation or otherwise, to retard, impede, burden, or in any manner control, the operations” of an entity created under federal law.

Federal preemption permits national banks and federal savings associations, many of which operate across state lines, to operate under a uniform set of rules to support nationwide banking. The agency has concluded that the federal banking system, and its customers, would benefit from a comprehensive interpretation of these provisions, which sets out a consistent framework for compliance.

Source: Office of the Comptroller of the Currency

In a 5G world, can an individual be their own bank?

A thought ….

That Covid-19 has sped up the exposure of workers to the possibility of automation replacing them is a saying that is becoming almost cliché. Television commercials remind us that we are “all in this together” and that we should wear masks and safely social distance. Meanwhile, telecommunications companies are promoting 5G technology that when fully deployed will help alleviate the downsides of working from home with a technology that moves data faster and can help connect all your devices and appliances so that you can better manage the data flowing through your home. But what if, in addition to connecting your mobile phone to your refrigerator which may allow you to determine whether to buy more milk, that 5G also helps to turn you into a micro bank by taking a real-time audit of the assets in your possession and using them as a basis for issuing your own coin?

The thought came to me today while conversing with two friends about the probability of Facebook becoming its own “nation.” Facebook, the world’s largest social media platform, is backing a group that plans to issue a cryptocurrency next month called Diem. Diem will hopefully help people send money around the world almost instantaneously. Unlike other cryptocurrencies, Diem will be a “stable coin” meaning it will be backed by reliable fiat currencies like the U.S. dollar or the euro.

But what if we could take the Facebook macro-model and make it micro to you? For example, with 5G-driven internet of things and block chain technology, why couldn’t a real time audit of a person’s possessions be taken and instead of the individual issuing digital fiat currency or even stable coin, the individual could issue their own personal currency. Tom Steyer, for example, could digitally tally up his cash, land, securities, and other holdings and issue a digital certificate that could be used in the digital marketplace. A man of his wealth could take a position in a number of different currencies but should he choose to engage exclusively in the digital world on his own dime, he could do so without any rules or regulations that come along with currency issued by a nation-state, a social media platform, or a corporation.

The advantages to such a scheme compound when more people with the material means decide to go digital and trade either the social media platform’s coin or, if affluent enough, their own coin. This would be true personal banking.

Federal Reserve Bank of Atlanta creates commercial real estate index to assist risk assessment.

The Federal Reserve Bank of Atlanta yesterday announced the development of a new commercial real estate index designed to provide banks with a better assessment of momentum and risks in the commercial real estate market. The press release has been reproduced below.

Source: Federal Reserve Bank of Atlanta

9 November 2020

The Federal Reserve Bank of Atlanta announces the release of the U.S. Commercial Real Estate (CRE) Momentum Index which combines economic and real estate market data for more than 300 metro areas to provide insight into the momentum of change in CRE markets across the country.

A new interactive market analysis tool will enable users to track the CRE Momentum Index over time to identify CRE trends and assess market risks for the four major property sectors—apartment, office, retail, and industrial—as well as view the underlying variables that affect the index’s movement. One of the intended uses of the tool is to help small and medium-sized banks more quickly identify and accurately gauge risk as they are actively engaged in commercial real estate lending.

The CRE Momentum Index combines publicly available economic data such as employment, e-commerce, retail sales and others, with third-party, market-specific data such as occupancy trends and construction forecasts. The tool also provides a running quarter-to-date analysis as data are released in order to improve tracking in between quarterly data releases.

“Exploring both economic and commercial real estate dynamics in tandem helps users understand the movements in commercial real estate markets, and it is particularly helpful to look at these dynamics by property type,” said Lauren Terschan, senior data analytics and real estate specialist in the Atlanta Fed’s Supervision, Regulation, and Credit division, who helped develop the tool. “By looking at changes in overall market momentum, this tool will help users track market undulations and help identify potential risks.”

According to NAIOP Research Foundation, commercial real estate contributed more than $1.1 trillion to the U.S. GDP and supported nine million American jobs in 2019.

“Commercial real estate is a hugely important sector to the overall economy and contributes significantly to job creation, investment and lending,” said Brian Bailey, CRE subject matter expert in the Atlanta Fed’s Supervision, Regulation and Credit division, who developed the index’s methodology. “It is critical that industry participants, lenders and regulators have an excellent understanding of economic drivers and risks, and we believe the CRE Momentum Index will help with that understanding.”

The CRE Momentum Index is available in the Data and Tools section of the Atlanta Fed website.

Contact: Karen Mracek | 470-249-8348

No, the banks are not the bad guys …

Alton Drew

The Board of Governors of the Federal Reserve System begin their two-day meeting next Wednesday, one day after the general election. No changes in inter-bank rates are expected, but what will be of interest is a likely repeat of the plea that Congress and the Executive implement a fiscal policy that keeps the economy on life support during the pandemic. Depending on who wins the Electoral College, Chairman Jerome Powell’s post-meeting comments will be either soothing or raise more hairs on the back of the public’s necks.

Mr Powell will reiterate the need for fiscal policy because monetary policy can only do so much. Monetary policy has as one of its goals the backstopping of its member banks, providing needed liquidity when the credit pipes become clogged by opening the flow of credit to businesses via the banks whose inability to lend could stem from not having enough capital to support additional lending.

Fiscal policy, the Fed chairman will likely remind us next Thursday, does a better job of getting cash into the hands of consumers resulting in increased personal expenditures. Consumer spending has historically driven around seventy percent of national income, and that the kind of spending that is needed now.

But this relief is going to be temporary. The more sustaining stimulus will come from an economy that opens back up. If the polls continue to hold and Joe Biden takes office in January 2021, he could take actions to keep needed capital in the United States that probably props up the economy. Would Mr Biden want to tax this capital as part of his promise to bring about an equitable tax environment where the affluent pay their fair share of taxes or will he back pedal on taxing captured capital in order to quell any attempts at tax avoidance while ensuring the availability of stimulative spending?

Mr Biden may also be reminded that in an economy that is credit driven, where banks are the information search agents that help capital seek out higher returns by identifying worthwhile investments, he could also leave banks, their investors, and their depositors off of his tax hit list thus helping the Federal Reserve further unclog the credit pipes.

Century Bancorp announces its earnings …

Source: Century Bancorp.

MEDFORD, Mass.–(BUSINESS WIRE)–Century Bancorp, Inc. (NASDAQ:CNBKA) ( (“the Company”) today announced net income of $30,609,000 for the nine months ended September 30, 2020, or $5.50 per Class A share diluted, an increase of 5.7% compared to net income of $28,967,000, or $5.20 per Class A share diluted, for the same period a year ago. Total assets increased 14.6% from $5.49 billion at December 31, 2019 to $6.3 billion at September 30, 2020. For the quarter ended September 30, 2020, net income totaled $10,887,000 or $1.96 per Class A share diluted, an increase of 8.0% compared to net income of $10,084,000, or $1.81 per Class A share diluted, for the same period a year ago.

“Effect of Sequestration on the Alternative Minimum Tax Credit for Corporations”Tweet this

The Company’s Board of Directors voted to increase its regular quarterly dividend from 14.00 cents ($0.14) per share to 16.00 cents ($0.16) per share on the Company’s Class A common stock, and from 7.00 cents ($0.07) per share to 8.00 cents ($0.08) per share on the Company’s Class B common stock. The dividends were declared payable November 16, 2020 to stockholders of record on November 2, 2020.

Net interest income totaled $78.4 million for the nine months ended September 30, 2020 compared to $70.5 million for the same period in 2019. The 11.2% increase in net interest income for the period is primarily due to a decrease in interest expense as a result of falling interest rates. Prepayment penalties collected amounted to approximately $946,000 for the first nine months of 2020 compared to $18,000 for the same period last year. The net interest margin decreased from 2.08% on a fully tax-equivalent basis for the first nine months of 2019 to 2.01% for the same period in 2020. This was primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve. The average balances of earning assets increased for the first nine months of 2020 compared to the same period last year, by $609.0 million or 12.3%, combined with an average yield decrease of 0.55%, resulting in a decrease in interest income of $6.2 million. The average balance of interest-bearing liabilities increased for the first nine months of 2020 compared to the same period last year, by $486.9 million or 12.1%, combined with an average interest-bearing liabilities interest cost decrease of 0.59%, resulting in a decrease in interest expense of $14.1 million.

The provision for loan losses increased by $2,975,000 from $700,000 for the nine months ended September 30, 2019 to $3,675,000 for the same period in 2020, primarily as a result of the economic uncertainties associated with the novel coronavirus disease (COVID–19) pandemic and increased loan balances.

The Company’s effective tax rate increased from 2.0% for the nine months ended September 30, 2019 to 9.5% for the same period in 2020. This was primarily as a result of an increase in taxable income relative to total income and a reduction in tax accruals, during 2019, related to sequestration of the refundable portion of our alternative minimum tax (AMT) credit carryforward. On January 14, 2019, the IRS updated its announcement “Effect of Sequestration on the Alternative Minimum Tax Credit for Corporations” to clarify that refundable AMT credits under Section 53(e) of the Internal Revenue Code are not subject to sequestration for taxable years beginning after December 31, 2017. On March 27, 2020, the Coronavirus, Aid, Relief and Economic Security (CARES) Act was signed into law. As a result of the CARES Act, the full balance of the AMT credit was refunded in 2020.

At September 30, 2020, total equity was $363.4 million compared to $332.6 million at December 31, 2019. The Company’s equity increased primarily as a result of earnings, offset somewhat by dividends paid.

The Company’s leverage ratio stood at 6.79% at September 30, 2020, compared to 7.25% at December 31, 2019. The decrease in the leverage ratio was due to an increase in quarterly average assets, offset somewhat by an increase in stockholders’ equity. Book value as of September 30, 2020 was $65.27 per share compared to $59.73 at December 31, 2019.

The Company’s allowance for loan losses was $33.4 million or 1.12% of loans outstanding at September 30, 2020 compared to $29.6 million or 1.22% of loans outstanding at December 31, 2019, and $29.1 million or 1.22% of loans outstanding at September 30, 2019. The ratio of the allowance for loan losses to loans outstanding has decreased from December 31, 2019, primarily from approximately $232 million of Payroll Protection Program (PPP) loans that are guaranteed by the U.S. Small Business Administration (SBA), which require no allowance for loan losses. Nonperforming assets totaled $1.4 million at September 30, 2020, compared to $2.0 million at December 31, 2019, and $1.1 million at September 30, 2019.

As of September 30, 2020, the Company has COVID-19 modifications of 33 loans aggregating $37,987,000, primarily consisting of short-term payment deferrals. Of these modifications, $37,987,000, or 100%, were performing in accordance with their modified terms.

The CARES Act also allows companies to delay Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments (CECL), including the current expected credit losses methodology for estimating allowances for credit losses. The Company has elected to delay FASB ASU 2016-13. This ASU will be delayed until the earlier of the date on which the national emergency concerning the COVID–19 outbreak declared by the President on March 15, 2020 terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020.

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

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

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

Century Bancorp, Inc. and Subsidiaries
Consolidated Comparative Statements of Condition (unaudited)
(in thousands)
September 30,December 31,
Cash and Due From Banks$101,679$44,420
Federal Funds Sold and Interest-bearing Deposits In Other Banks 310,901 214,273
Securities Available-for-Sale (AFS) 293,277 262,190
Securities Held-to-Maturity 2,407,176 2,351,120
Federal Home Loan Bank of Boston stock, at cost 13,361 19,471
Commercial & Industrial 1,315,407 812,417
Municipal 130,047 120,455
Construction & Land Development 9,116 8,992
Commercial Real Estate 784,895 786,102
Residential Real Estate 443,703 371,897
Consumer and Other 19,866 21,893
Home Equity 287,099 304,363
Total Loans 2,990,133 2,426,119
Less: Allowance for Loan Losses 33,394 29,585
Net Loans 2,956,739 2,396,534
Bank Premises and Equipment, net 37,340 33,952
Accrued Interest Receivable 13,223 13,110
Goodwill 2,714 2,714
Other Assets 159,016 154,640
Total Assets$6,295,426$5,492,424
Demand Deposits$991,590$712,842
Interest Bearing Deposits:
Savings and NOW Deposits 1,932,339 1,678,250
Money Market Accounts 1,906,676 1,453,572
Time Deposits 581,866 555,447
Total Interest Bearing Deposits 4,420,881 3,687,269
Total Deposits 5,412,471 4,400,111
Borrowed Funds:
Securities Sold Under Agreements to Repurchase 231,030 266,045
Other Borrowed Funds 152,248 370,955
Total Borrowed Funds 383,278 637,000
Other Liabilities 100,160 86,649
Subordinated Debentures 36,083 36,083
Total Liabilities 5,931,992 5,159,843
Total Stockholders’ Equity 363,434 332,581
Total Liabilities & Stockholders’ Equity$6,295,426$5,492,424
Century Bancorp, Inc. and Subsidiaries
Consolidated Comparative Statements of Income (unaudited)
For the quarter and nine months ended September 30, 2020 and 2019
(in thousands)
Quarter ended September 30,Nine months ended September 30,
Interest Income:
Securities Held-to-Maturity 14,186 14,623 44,701 43,006
Securities Available-for-Sale 818 2,184 3,493 7,305
Federal Funds Sold and Interest-bearing Deposits In Other Banks 69 928 747 3,204
Total Interest Income 36,504 39,852 112,419 118,621
Interest Expense:
Savings and NOW Deposits 1,726 5,445 7,569 16,788
Money Market Accounts 3,056 5,050 12,090 15,805
Time Deposits 2,858 3,038 9,141 8,724
Securities Sold Under Agreements to Repurchase 241 697 1,176 1,572
Other Borrowed Funds and Subordinated Debentures 1,292 1,852 4,093 5,274
Total Interest Expense 9,173 16,082 34,069 48,163
Net Interest Income 27,331 23,770 78,350 70,458
Provision For Loan Losses 900 75 3,675 700
Net Interest Income After
Provision for Loan Losses 26,431 23,695 74,675 69,758
Other Operating Income:
Service Charges on Deposit Accounts 2,239 2,310 6,558 6,801
Lockbox Fees 996 937 2,850 3,018
Net Gain on Sales of Loans    154
Other Income 934 1,039 3,112 3,737
Total Other Operating Income 4,169 4,286 12,520 13,710
Operating Expenses:
Salaries and Employee Benefits 11,362 10,670 33,020 32,621
Occupancy 1,477 1,463 4,448 4,686
Equipment 809 862 2,608 2,440
Other 4,519 4,467 13,306 14,170
Total Operating Expenses 18,167 17,462 53,382 53,917
Income Before Income Taxes 12,433 10,519 33,813 29,551
Income Tax Expense 1,546 435 3,204 584
Net Income$10,887$10,084$30,609$28,967
Century Bancorp, Inc. and Subsidiaries
Consolidated Year-to-Date Average Comparative Statements of Condition (unaudited)
(in thousands)
September 30,September 30,
Cash and Due From Banks$80,686 $74,413 
Federal Funds Sold and Interest-Bearing Deposits in Other Banks 238,525  184,035 
Securities Available-For-Sale (AFS) 293,301  325,036 
Securities Held-to-Maturity (HTM) 2,346,502  2,128,082 
Total Loans 2,693,000  2,325,136 
Less: Allowance for Loan Losses 31,359  28,936 
Net Loans 2,661,641  2,296,200 
Unrealized (Loss)Gain on Securities AFS and HTM Transfers (2,861) (3,352)
Bank Premises and Equipment 36,253  26,273 
Accrued Interest Receivable 12,630  13,942 
Goodwill 2,714  2,714 
Other Assets 164,804  133,754 
Total Assets$5,834,195 $5,181,097 
Demand Deposits$889,237 $764,852 
Interest Bearing Deposits:
Savings and NOW Deposits 1,881,897  1,818,017 
Money Market Accounts 1,603,367  1,249,531 
Time Deposits 597,589  512,228 
Total Interest Bearing Deposits 4,082,853  3,579,776 
Total Deposits 4,972,090  4,344,628 
Borrowed Funds:
Securities Sold Under Agreements to Repurchase 220,796  205,185 
Other Borrowed Funds 169,972  201,804 
Total Borrowed Funds 390,768  406,989 
Other Liabilities 88,028  79,327 
Subordinated Debentures 36,083  36,083 
Total Liabilities 5,486,969  4,867,027 
Total Stockholders’ Equity 347,226  314,070 
Total Liabilities & Stockholders’ Equity$5,834,195 $5,181,097 
Total Average Earning Assets – QTD$5,881,860 $4,971,831 
Total Average Earning Assets – YTD$5,571,328 $4,962,289 
Century Bancorp, Inc. and Subsidiaries
Consolidated Selected Key Financial Information (unaudited)
(in thousands, except share data)September 30,September 30,
Performance Measures:
Earnings per average Class A share, diluted, quarter$1.96 $1.81 
Earnings per average Class A share, diluted, year-to-date$5.50 $5.20 
Return on average assets, year-to-date 0.70% 0.75%
Return on average stockholders’ equity, year-to-date 11.78% 12.33%
Net interest margin (taxable equivalent), quarter 1.96% 2.08%
Net interest margin (taxable equivalent), year-to-date 2.01% 2.08%
Efficiency ratio, Non-GAAP (1) 55.4% 59.1%
Book value per share$65.27 $59.08 
Tangible book value per share – Non-GAAP (1)$64.79 $58.59 
Capital / assets 5.77% 6.21%
Tangible capital / tangible assets – Non-GAAP (1) 5.73% 6.16%
Common Share Data:
Average Class A shares outstanding, diluted, quarter and year-to-date 5,567,909  5,567,909 
Shares outstanding Class A 3,655,469  3,650,449 
Shares outstanding Class B 1,912,440  1,917,460 
Total shares outstanding at period end 5,567,909  5,567,909 
Asset Quality and Other Data:
Allowance for loan losses / loans 1.12% 1.22%
Nonaccrual loans$1,419 $1,066 
Nonperforming assets$1,419 $1,066 
Loans 90 days past due and still accruing$49 $ 
Accruing troubled debt restructures$2,240 $2,404 
Net charge-offs (recoveries), year-to-date$(134)$146 
Leverage ratio 6.79% 7.25%
Common equity tier 1 risk weighted capital ratio 11.36% 11.90%
Tier 1 risk weighted capital ratio 12.40% 13.12%
Total risk weighted capital ratio 13.39% 14.13%
Total risk weighted assets$3,370,541 $2,867,422 
(1) Non-GAAP Financial Measures are reconciled in the following tables:
Calculation of Efficiency ratio:
Total operating expenses(numerator)$53,382 $53,917 
Less: other real estate owned expenses   (139)
Total adjusted operating expenses(numerator)$53,382 $53,778 
Net interest income$78,350 $70,458 
Total other operating income 12,520  13,710 
Tax equivalent adjustment 5,558  6,875 
Total income(denominator)$96,428 $91,043 
Efficiency ratio – Non-GAAP 55.4% 59.1%
Calculation of tangible book value per share:
Total stockholders’ equity$363,434 $328,960 
Less: goodwill 2,714  2,714 
Tangible stockholders’ equity(numerator)$360,720 $326,246 
Total shares outstanding at period end(denominator) 5,567,909  5,567,909 
Tangible book value per share – Non-GAAP$64.79 $58.59 
Book value per share – GAAP$65.27 $59.08 
Calculation of tangible capital / tangible assets:
Total stockholders’ equity$363,434 $328,960 
Less: goodwill 2,714  2,714 
Tangible stockholders’ equity(numerator)$360,720 $326,246 
Total assets$6,295,426 $5,299,181 
Less: goodwill 2,714  2,714 
Tangible assets(denominator)$6,292,712 $5,296,467 
Tangible capital / tangible assets – Non-GAAP 5.73% 6.16%
Capital / assets – GAAP 5.77% 6.21%


William P. Hornby, CPA
Phone: 781-393-4630
Fax: 781-393-4071