COMMUNITY CENTRAL BANK CORP - FORM 10-K - EX-13

Attached files

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10-K - FORM 10-K - COMMUNITY CENTRAL BANK CORP	k49061e10vk.htm
EX-23 - EX-23 - COMMUNITY CENTRAL BANK CORP	k49061exv23.htm
EX-32 - EX-32 - COMMUNITY CENTRAL BANK CORP	k49061exv32.htm
EX-11 - EX-11 - COMMUNITY CENTRAL BANK CORP	k49061exv11.htm
EX-21 - EX-21 - COMMUNITY CENTRAL BANK CORP	k49061exv21.htm
EX-31.1 - EX-31.1 - COMMUNITY CENTRAL BANK CORP	k49061exv31w1.htm
EX-31.2 - EX-31.2 - COMMUNITY CENTRAL BANK CORP	k49061exv31w2.htm

Exhibit 13

COMMUNITY CENTRAL BANK
CORPORATION

Report of Independent Registered Public
Accounting Firm

and

Stockholder Report

December 31, 2009

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Community Central Bank Corporation
Mount Clemens, Michigan

We have audited the accompanying consolidated balance sheet of Community Central Bank Corporation as of December 31, 2009 and 2008, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years ended December 31, 2009, 2008 and 2007. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Community Central Bank Corporation as of December 31, 2009 and 2008, and the results of its operations for the years ended December 31, 2009, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the consolidated basic financial statements taken as a whole. The information contained in Notes 3, 4 and 5, pertaining to 2006 and 2005 is presented for the purposes of additional analysis and is not a required part of the consolidated basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the consolidated basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the consolidated basic financial statements taken as a whole.

Auburn Hills, Michigan
March 30, 2010

Community Central Bank Corporation
Consolidated Balance Sheet


	December 31,
	2009			2008
	(In thousands)			(In thousands)
Assets
Cash and Cash Equivalents
Cash and due from banks (Note 2)	$	33,115		$	9,162
Federal funds sold		1,048			7,000

Total Cash and Cash Equivalents		34,163			16,162

Trading securities at fair value option (Note 3)		—			17,463
Securities available for sale, at fair value (Note 3)		65,903			76,552
Securities held to maturity, at amortized cost (Note 3)		3,467			1,515
FHLB stock		5,877			5,877
Residential mortgage loans held for sale		3,497			3,302

Loans (Note 4)
Commercial real estate		273,578			284,811
Commercial and industrial		48,782			38,714
Residential real estate		51,101			54,409
Home equity lines of credit		21,889			21,230
Consumer loans		6,961			7,107
Credit card loans		856			846

Total Loans		403,167			407,117

Allowance for Credit Losses (Note 5)		(12,957	)		(7,315	)

Net Loans		390,210			399,802

Net property and equipment (Note 6)		9,106			9,361
Accrued interest receivable		1,878			2,479
Other real estate		9,300			2,913
Goodwill (Note 1)		638			638
Intangible assets, net of amortization (Note 1)		57			80
Cash surrender value of Bank Owned Life Insurance (Note 13)		11,285			10,975
Other assets (Note 16)		8,465			9,831


Total Assets	$	543,846		$	556,950

The accompanying notes are an integral part of the financial statements.

Community Central Bank Corporation
Consolidated Balance Sheet


	December 31,
	2009			2008
	(In thousands, except share data)
Liabilities

Deposits
Noninterest bearing demand deposits	$	45,716		$	34,169
NOW and money market accounts		41,872			38,154
Savings deposits		8,800			8,585
Time deposits (Note 7)		304,743			276,468

Total Deposits		401,131			357,376

Repurchase agreements (Note 8)		41,106			39,394
Federal Home Loan Bank advances (Note 9)		65,700			108,200
Accrued interest payable		618			1,050
Other liabilities (Note 13)		2,937			3,779
Subordinated debentures (at fair value option) (Note 11)		8,366			12,757

Total Liabilities		519,858			522,556

Stockholders’ Equity (Note 12)
Preferred stock (1,000,000 shares authorized and 7,265 shares and 3,050 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively)		7,146			3,050
Common stock (No par value; 9,000,000 shares authorized, and 3,737,181 and 3,734,781 issued and outstanding at December 31, 2009 and December 31, 2008, respectively)		32,214			32,125
Retained deficit		(15,536	)		(516	)
Accumulated other comprehensive gain (loss)		164			(265	)

Total Stockholders’ Equity		23,988			34,394


Total Liabilities and Stockholders’ Equity	$	543,846		$	556,950

The accompanying notes are an integral part of the financial statements.

Community Central Bank Corporation
Consolidated Statement of Operations


	Year Ended December 31,
	2009			2008			2007
	(In thousands, except per share data)
Interest Income
Loans (including fees)	$	25,570		$	25,640		$	27,904
Taxable securities		2,871			3,743			3,018
Tax exempt securities		326			653			1,402
Federal funds sold		30			386			601

Total Interest Income		28,797			30,422			32,925

Interest Expense
NOW and money market accounts		263			745			2,335
Savings deposits		57			226			308
Time deposits		9,753			11,141			11,495
Repurchase agreements and fed funds purchased		1,278			1,144			912
Federal Home Loan Bank advances		4,205			4,884			4,059
ESOP loan interest expense		—			1			6
Subordinated debentures		1,235			906			1,620

Total Interest Expense		16,791			19,047			20,735

Net Interest Income		12,006			11,375			12,190

Provision for Credit Losses (Note 5)		14,850			9,502			3,600

Net Interest Income (Loss) after Provision for Credit Losses		(2,844	)		1,873			8,590

Noninterest Income
Fiduciary income		319			370			437
Deposit service charges		411			488			419
Net realized security (loss) gain (Note 3)		726			214			(74	)
Change in fair value of assets/liabilities carried at fair value (Note 21)		3,859			7,541			1,392
Mortgage banking income		3,311			1,562			2,365
Other income		944			1,276			1,153

Total Noninterest Income		9,570			11,451			5,692

Noninterest Expense
Salaries, benefits and payroll taxes (Note 13)		8,613			7,572			7,898
Net occupancy expense (Note 14)		1,716			1,822			1,806
Other operating expense (Note 15)		9,828			7,324			4,149

Total Noninterest Expense		20,157			16,718			13,853

Income (Loss) Before Taxes		(13,431	)		(3,394	)		429
Provision for Income Tax (Benefit) Expense (Note 16)		1,207			(1,432	)		(295	)


Net Income (Loss)	$	(14,638	)	$	(1,962	)	$	724
Dividends declared on preferrred shares		(382	)		—			—

Net Income (Loss) available on common shares	$	(15,020	)	$	(1,962	)	$	724

The accompanying notes are an integral part of the financial statements.

Community Central Bank Corporation
Consolidated Statement of Operations
(continued)


	Year Ended December 31,
	2009			2008			2007
			(In thousands, except per share data)
Per share data:*
Basic earnings	$	(4.02	)	$	(0.53	)	$	0.19

Diluted earnings	$	(4.02	)	$	(0.53	)	$	0.19

Cash dividend per common share	$	—		$	0.10		$	0.24


*		Per share data has been retroactively adjusted to reflect the issuance of stock dividends.

The accompanying notes are an integral part of the financial statements.

Community Central Bank Corporation
Consolidated Statement of Comprehensive Income


	Year Ended December 31,
	2009			2008			2007
				(In thousands)
Net Income (Loss) as Reported		($14,638	)		($1,962	)	$	724

Other Comprehensive Income (Loss)
Change in unrealized net gain (loss) on securities available for sale, net of tax of $221 in 2009, $175 in 2008, and $(70) in 2007	$	429		$	339			($136	)


Comprehensive Income (Loss)		($14,209	)		($1,623	)	$	588

The accompanying notes are an integral part of the financial statements.

Community Central Bank Corporation
Consolidated Statement of Changes in Stockholders’ Equity


												Accumulated
						Retained			Unearned			Other
	Preferred		Common			Earnings			Employee			Comprehensive			Total
	Stock		Stock			(Deficit)			Benefits			Income (Loss)			Equity
	(In thousands)
Balance January 1, 2007	$	—	$	33,220		$	4,303		$	(95	)	$	(763	)	$	36,665
Cumulative effect of adoption of the fair value option		—		—			(420	)		—			—			(420	)
Cash dividend		—		—			(931	)		—			—			(931	)
Stock awards		—		21			—			—			—			21
Stock options exercised		—		320			—			—			—			320
Share based compensation		—		31			—			—			—			31
Stock dividend (Note 12)		—		1,879			(1,879	)		—			—			—
Net income for 2007		—		—			724			—			—			724
Release of ESOP shares		—		—			—			59			—			59
Repurchase of common stock		—		(3,400	)		—			—			—			(3,400	)
Other comprehensive income		—		—			—			—			159			159


Balance December 31, 2007	$	—	$	32,071		$	1,797		$	(36	)	$	(604	)	$	33,228

Issuance of Preferred Stock		3,050		—			—			—			—			3,050
Cash dividend		—		—			(351	)		—			—			(351	)
Stock awards		—		17			—			—			—			17
Share based compensation		—		57			—			—			—			57
Stock dividend (Note 12)		—		—			—			—			—			—
Net loss for 2008		—		—			(1,962	)		—			—			(1,962	)
Release of ESOP shares		—		(13	)		—			36			—			23
Repurchase of common stock		—		(7	)		—			—			—			(7	)
Other comprehensive income		—		—			—			—			339			339


Balance December 31, 2008	$	3,050	$	32,125		$	(516	)	$	—		$	(265	)	$	34,394

Issuance of Preferred Stock		4,096		—			—			—			—			4,096
Cash dividend		—		—			(382	)		—			—			(382	)
Stock awards		—		5			—			—			—			5
Share based compensation		—		84			—			—			—			84
Net loss for 2009		—		—			(14,638	)		—			—			(14,638	)
Other comprehensive income		—		—			—			—			429			429



Balance December 31, 2009	$	7,146	$	32,214		$	(15,536	)	$	—		$	164		$	23,988

The accompanying notes are an integral part of the financial statements.

Community Central Bank Corporation
Consolidated Statement of Cash Flow


	Year Ended December 31,
	2009			2008			2007
	(In thousands, except per share data)
Operating Activities
Net income (loss)	$	(14,638	)	$	(1,962	)	$	724
Adjustments to reconcile net income to net cash flow from operating activities:
Net amortization of security premium		577			67			207
Net (gain) loss on available for sale securities		(726	)		(214	)		74
Net gain on instruments at fair value		(3,859	)		(7,541	)		(1,392	)
Provision for credit losses		14,850			9,502			3,600
Depreciation expense		640			667			705
Deferred income tax (benefit)		(2,934	)		(943	)		(561	)
ESOP compensation expense		—			36			59
Fair value of employee stock option expense		84			57			31
Stock awards		5			17			21
Decrease in accrued interest receivable		601			56			64
Decrease (increase) in other assets		3,991			9,541			(2,040	)
(Decrease) increase in accrued interest payable		(432	)		32			(239	)
(Decrease) increase in other liabilities		(1,123	)		1,142			1,008
Loans originated held for sale		(136,175	)		(70,967	)		(109,956	)
Loans sold held for sale		135,980			72,513			108,548
(Increase) in other real estate		(6,837	)		(2,059	)		(746	)
Impairment of goodwill		—			743			—

Net Cash (Used in) Provided By Operating Activities		(9,996	)		10,687			107
Investing Activities
Sales, maturities, calls and prepayments of securities available for sale		96,643			70,241			55,952
Purchases of securities available for sale		(84,723	)		(84,380	)		(41,999	)
Maturities, calls, sales and prepayments of trading securities		17,463			2,646			13,606
Transfer and purchase of trading securities		—			—			(33,402	)
Maturities, calls, and prepayments of held to maturity securities		132			124			36
Purchases of held to maturity securities		(2,556	)		(1,265	)		(987	)
Increase in loans		(5,258	)		(31,572	)		(23,641	)
Purchases of property and equipment		(385	)		(1,324	)		(184	)
Proceeds from sale of property and equipment		—			—			60

Net Cash Provided by (Used in) Investing Activities		21,316			(45,530	)		(30,559	)
Financing Activities
Net (decrease) increase in demand and savings deposits		15,480			(13,532	)		(8,799	)
Net (decrease) increase in time deposits		28,275			42,273			(18,422	)
Net increase in short term borrowings		1,712			6,735			16,971
Issuance of subordinate debentures		—			—			18,557
Redemption of subordinate debentures		—			—			(10,310	)
FHLB advances		—			48,500			43,000
FHLB advance repayments		(42,500	)		(44,810	)		(22,018	)
Payment of ESOP debt		—			(36	)		(59	)
Stock options exercised		—			—			320
Preferred stock issuance		4,096			3,050			—
Cash dividends paid		(382	)		(351	)		(931	)
Repurchase of stock		—			(7	)		(3,400	)

Net Cash Provided by Financing Activities		6,681			41,822			14,909

Increase (decrease) in Cash and Cash Equivalents		18,001			6,979			(15,543	)
Cash and Cash Equivalents at the Beginning of the Period		16,162			9,183			24,726

Cash and Cash Equivalents at the End of the Period	$	34,163		$	16,162		$	9,183

Supplemental Disclosure of Cash Flow Information
Interest paid	$	17,223		$	19,015		$	20,974
Federal Taxes Paid		—			—			300
Supplemental noncash disclosure:
Loans transferred to other real estate owned		9,883			5,777			878

Community Central Bank Corporation
Notes to Consolidated Financial Statements

December 31, 2009 and 2008

(1) Summary of Significant Accounting Policies

The accounting and reporting policies of Community Central Bank Corporation (the “Corporation”) conform to accounting principles generally accepted in the United States of America. Management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and assumptions. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of certain financial instruments, investment securities, foreclosed real estate and deferred tax assets.

Principles of Consolidation: The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries, Community Central Bank (the “Bank”) and Community Central Mortgage Company, LLC (“the Mortgage Company”). All significant intercompany transactions are eliminated in consolidation. The ownership structure of the Mortgage Company consists of one member, Community Central Bank owning 100% of the Mortgage Company.

Nature of Operations: Community Central Bank Corporation is the bank holding company for Community Central 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 four full service facilities in Mount Clemens, Rochester Hills, Grosse Pointe Farms and Grosse Pointe Woods, Michigan. Community Central Mortgage Company, LLC, a subsidiary of the Bank, operates locations servicing the Detroit metropolitan area and northwest Indiana. 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.

Trading Securities: For certain investments in securities that would otherwise have been accounted for as available for sale, the Company has elected to apply fair value accounting. Those securities are carried at fair value, with changes in fair value of such investments recorded in earnings. At December 31, 2009, the Corporation did not have securities classified in this category.

Fair Value Option for Financial Assets and Financial Liabilities: Under ASC 825, Financial Instruments, an entity is permitted to immediately elect the fair value option for existing eligible items. While not required to adopt the new standard until 2008, the Corporation elected to adopt it in the first quarter of 2007. As a result of the Corporation’s adoptions, certain financial instruments were valued at fair value using the fair value option. The Corporation adopted ASC 820, Fair Value Measurements and Disclosures. See Note 1 New Accounting Pronouncements.

The Corporation utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Additionally, from time to time, the Corporation may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Fair Value Hierarchy

Under ASC 820, Fair Value Measurements, the Corporation groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

	Level 1		Valuation is based upon quoted prices for identical instruments traded in active markets.

	Level 2		Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Level 3

Valuation contains unobservable input(s) and is used to the extent observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity. Level 3 instruments typically include, in addition to unobservable or Level 3 components, observable components.

Securities: On the balance sheet, securities held to maturity are stated at cost, adjusted for amortization of premium and accretion of discount. Securities classified as available for sale are those that may be sold in the future to meet investment objectives of quality, liquidity and yield, and to avoid significant market deterioration. Securities available for sale are reported at estimated fair value. Unrealized gain or loss on securities available for sale is recorded (net of tax) as a component of other comprehensive income in the equity section of the balance sheet. Gain or loss on sales or calls of securities is computed based on the amortized cost of the specific security.

Federal Home Loan Bank Stock: Federal Home Loan Bank Stock (“FHLB Stock”) is considered a restricted investment security and is carried at cost. Purchases and sales of FHLB stock are made directly with the FHLB at par value.

Loans: Loans are generally reported at the principal amount outstanding. Non-refundable loan origination fees and certain direct loan origination costs are deferred and included in interest income over the term of the related loan as a yield adjustment. Interest on loans is accrued and credited to income based upon the principal amount outstanding. The accrual of interest on loans is discontinued when, in the opinion of management, there is an indication that the borrower may be unable to meet payments as they become due. Upon such discontinuance, all unpaid interest accrued is reversed. Interest accruals are generally resumed when all delinquent principal and/or interest has been brought current or the loan becomes both well secured and in the process of collection.

Loans Held for Sale: Loans held for sale consist of fixed rate residential mortgage loans with maturities of 15 to 30 years. Such loans are recorded at the lower of aggregate cost or estimated fair value.

Allowance for Credit Losses: The allowance for credit losses is maintained at a level considered by management to be adequate to absorb probable 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, and current economic conditions that may affect the borrower’s ability to pay.

Foreclosed Assets: Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value as of the date of the foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets.

Property and Equipment: Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation, generally computed using a declining balance method, is charged to operations over the estimated useful lives of the assets. Leasehold improvements are amortized over the terms of their respective leases or the estimated useful lives of the improvements, whichever is shorter.

Goodwill: Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of the acquired tangible assets and liabilities and identifiable intangible asset. Goodwill is assessed annually for impairment and any such impairment will be recognized in the period identified. During the 2008 annual review, the Corporation determined that the goodwill that resulted from our acquisition of North Oakland Community Bank in Rochester Hills was impaired. The impairment charge of $743,000 was recorded in 2008.

As of December 31, 2009, the remaining goodwill of $638,000, associated with the acquisition of River Place Financial Corporation, was determined to have no impairment. This was based on goodwill impairment testing conducted in the third quarter of 2009. We conduct a goodwill impairment test on our reporting units at least annually or more frequently if any adverse triggering events occur. Based on the results of our analysis, there were no impairment charges related to the trust reporting unit goodwill recognized in 2009, 2008 or 2007. The fair value of our reporting units is determined by using discounted cash flow and market comparability

Community Central Bank Corporation
Notes to Consolidated Financial Statements

methodologies. Assets and liabilities of acquired entities are recorded at estimated fair value as of the acquisition date and are subject to refinement as information relative to the fair values at the date of acquisition becomes available.

Intangible Assets: Intangible assets of $57,000 as of December 31, 2009 consist of an intangible generated from the acquisition of River Place Financial. The intangible is associated with customer relationships, which will be amortized using the straight-line method over their estimated useful lives. Amortization expense of $23,000 was recognized in 2009. Under the straight-line method, the intangible asset is expected to be fully amortized by 2012.

Stock Option Plan: The Company recognizes compensation expense for stock options and stock awards over the related service period, based on the grant date fair value of the award.

Earnings Per Share: Basic earnings per share are based on the weighted average number of shares outstanding during the period. For earnings per share, committed-to-be-released and allocated shares of the “ESOP” are considered outstanding. Diluted earnings per share are adjusted for the dilutive effects of stock options, where applicable. All share amounts have been retroactively adjusted to reflect the issuance of stock dividends.


	Year Ended December 31,
	2009		2008		2007
	(In thousands of shares)
Weighted average shares reconcilation is as follows:

Basic		3,736		3,731		3,833
Effect of stock options		—		—		42


Diluted		3,736		3,731		3,875

Comprehensive Income: Accounting principles generally require that recognized revenue, expense, gain and loss be included in net income. Certain changes in assets and liabilities, such as unrealized gain or loss on securities available for sale, are reported as a separate component of equity. Such items, along with net income, are components of comprehensive income. Accumulated other comprehensive income at December 31, 2009, 2008 and 2007 consisted solely of unrealized gains and losses on available for sale securities, net of tax.

New Accounting Pronouncements: In April 2009, the FASB issued a new standard now codified in ASC 820, Fair Value Measurements and Disclosures (formerly Staff Position (FSP) No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset and Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly). This standard emphasizes that even if there has been a significant decrease in the volume and level of activity, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants. The standard provides a number of factors to consider when evaluating whether there has been a significant decrease in the volume and level of activity for an asset or liability in relation to normal market activity. In addition, when transactions or quoted prices are not considered orderly, adjustments to those prices based on the weight of available information may be needed to determine the appropriate fair value. The standard also requires increased disclosures. This standard is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. Adoption of this standard in June of 2009 did not have a material effect on the Company’s results of operations or financial position.

In April 2009, the FASB issued a new standard now codified in ASC 825, Financial Instruments (formerly Staff Position (FSP) No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments). This statement amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies that were previously only required in annual financial statements. This statement is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Adoption of this statement at June 30, 2009 did not have an impact on the results of operations or financial position as it only required disclosures included in the footnotes.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

In May 2009, the FASB issued a new standard now codified in ASC 855, Subsequent Events (formerly SFAS No. 165, Subsequent Events), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Although there is new terminology, the standard is based on the same principles as those that currently exist in the auditing standards. The standard also includes a required disclosure of the date through which the entity has evaluated subsequent events and whether the evaluation date is the date of issuance or the date the financial statements were available to be issued. The standard is effective for interim or annual periods ending after June 15, 2009. The Company has complied with the disclosure requirements. In accordance with this statement, we have evaluated subsequent events through the date of this filing. We do not believe there are any material subsequent events which would require further disclosure.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162. The FASB Accounting Standards Codification (Codification) will become the source of authoritative U.S. Generally Accepted Accounting Principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company complied with the requirements of the Statement beginning in the third quarter of 2009.

In August 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05 (ASU 2009-05), which provides amendments to ASC Top 820, Fair Value Measurements and Disclosures, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: a valuation technique that uses the quoted price of the identical liability when traded as an asset or a quoted price for a similar liability when traded as an asset, or another valuation method that is consistent with the principles of ASC Topic 820, Fair Value Measurements and Disclosures. ASU 2009-05 also provides clarification that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustments to other inputs relating to the existence of a restriction that prevents the transfer of the liability. The effective date is the first reporting period beginning after issuance. Accordingly, the Corporation did adopt the provisions of ASU 2009-05 in the fourth quarter of 2009. The adoption of the provisions of ASU 2009-05 did not have a material effect on the Corporation’s financial condition and results of operations.

(2) Cash and Due from Banks

The Bank is required to maintain cash on hand or noninterest bearing deposits with the Federal Reserve Bank, based on a percentage of the Bank’s deposits. The requirement is met using a combination of vault cash and deposits made through a direct relationship with the Federal Reserve Bank of Chicago. As of December 31, 2009, $146,000 in reserves was required.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

(3) Securities

The following table shows the amortized cost and estimated fair value of the Corporation’s security portfolios as of the dates indicated:


	December 31, 2009
	Amortized		Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
Securities Available for Sale
United States government agencies	$	—	$	—	$	—		$	—
U.S. agency mortgage backed securities		41,847		237		(168	)		41,916
U.S. agency collateralized mortgage obligations		18,541		321		(23	)		18,839
Municipal securities		4,515		24		(105	)		4,434
Mutual fund and Trust preferred securities		750		—		(36	)		714

Total Securities Available for Sale		65,653		582		(332	)		65,903
Held to Maturity Securities
Municipal securities		560		4		(15	)		549
Trust preferred securities		250		—		—			250
U.S. agency mortgage backed securities		2,657		21		(8	)		2,670


Total Held to Maturity Securities		3,467		25		(23	)		3,469


Total Securities	$	69,120	$	607	$	(355	)	$	69,372

The following table shows those securities the Corporation has elected to report at fair value. Under the fair value option, the securities are reported as trading securities even though management did not acquire the securities principally for the purpose of selling them in the near term. The change in the fair value of these securities is recorded in current earnings. See Note 21 for additional information.


	December 31, 2009		December 31, 2008
	Fair Value		Fair Value
Trading Securities
United States government agencies	$	—	$	11,594
U.S. agency collaterized mortgage obligations		—		5,869

Total Trading Securities Held at Fair Value	$	—	$	17,463

Community Central Bank Corporation
Notes to Consolidated Financial Statements


	December 31, 2008
	Amortized		Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
Securities Available for Sale
United States government agencies	$	12,029	$	15	$	(28	)	$	12,016
U.S. agency mortgage backed securities		26,460		311		(70	)		26,701
U.S. agency collateralized mortgage obligations		25,682		191		(237	)		25,636
Municipal securities		12,032		11		(484	)		11,559
Mutual fund and trust preferred securities		750		—		(110	)		640


Total Securities Available for Sale		76,953		528		(929	)		76,552

Held to Maturity Securities
Municipal securities		610		—		(18	)		592
Trust preferred securities		—		—		—			—
U.S. agency mortgage backed securities		905		—		(3	)		902


Total Held to Maturity Securities		1,515		—		(21	)		1,494


Total Securities	$	78,468	$	528	$	(950	)	$	78,046

For the years ended December 31, 2009, 2008 and 2007, proceeds from sales of securities available for sale amounted to $81.5 million, $54.0 million and $9.4 million, respectively. Gross realized gains amounted to $991,000, $434,000, and $23,000, respectively. Gross realized losses amounted to $265,000, $220,000 and $97,000, respectively.

The following table shows information pertaining to securities with gross unrealized losses at December 31, 2009 and 2008, aggregated by investment category and length of time that the individual security has been in continuous loss position. Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality. We have the intent and ability to hold the securities for the foreseeable future and the decline in fair value is primarily due to increased market interest rates.


	December 31, 2009
	Less than 12 Months					Over 12 Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
	(In thousands)
Securities Available for Sale
United States government agencies	$	—		$	—	$	—		$	—
U.S. agency mortgage backed securities		(166	)		19,707		(2	)		76
U.S. agency collateralized mortgage obligations		(15	)		3,265		(8	)		662
Municipal securities		(20	)		1,026		(85	)		2,115
Mutual fund and other		(5	)		495		(31	)		219


Total Securities Available for Sale	$	(206	)	$	24,493	$	(126	)	$	3,072

As of December 31, 2009, the unrealized loss on held to maturity securities was $23,000. All held to maturity securities have been in an unrealized loss position for under twelve months.

Community Central Bank Corporation
Notes to Consolidated Financial Statements


	December 31, 2008
	Less than 12 Months					Over 12 Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
	(In thousands)
Securities Available for Sale
United States government agencies	$	(28	)	$	10,002	$	—		$	—
U.S. agency mortgage backed securities		(64	)		3,602		(6	)		237
U.S. agency collateralized mortgage obligations		(234	)		10,407		(3	)		59
Municipal securities		(484	)		9,890		—			—
Mutual fund		(110	)		640		—			—


Total Securities Available for Sale	$	(920	)	$	34,541	$	(9	)	$	296

As of December 31, 2008, the unrealized loss on held to maturity securities was $21,000. All held to maturity securities have been in an unrealized loss position for over twelve months.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

The following table shows the maturity distribution of the investment portfolio as of December 31, 2009, 2008 and 2007, with weighted average yields to maturity. This table does not include trading securities carried at fair value.


	2009							2008							2007
	Amortized		Fair		Yield			Amortized		Fair		Yield			Amortized		Fair		Yield
	Cost		Value		(%)			Cost		Value		(%)			Cost		Value		(%)
	(In thousands)
U.S. Government debentures

One year or less	$	—	$	—		0.00	%	$	12,029	$	12,016		5.80	%	$	2,102	$	2,123		5.40	%
Over 1 year through five years		—		—		—			—		—		—			2,606		2,643		4.88	%
Over 5 years through 10 years		—		—		—			—		—		—			961		988		5.32	%
Over ten years		—		—		—			—		—		—			—		—		—

		—		—		0.00	%		12,029		12,016		5.80	%		5,669		5,754		5.15	%

State and political subdivisions *

One year or less		30		30		4.32	%		30		30		5.85	%		697		696		4.60	%
Over 1 year through five years		762		755		3.93	%		633		636		5.82	%		2,964		2,952		4.54	%
Over 5 years through 10 years		730		727		4.17	%		3,523		3,493		6.07	%		4,323		4,292		5.79	%
Over ten years		3,553		3,471		4.46	%		8,456		7,992		6.12	%		21,743		20,955		6.26	%

		5,075		4,983		4.33	%		12,642		12,151		6.09	%		29,727		28,895		5.98	%

U.S. government mortgage-backed and collateralized mortgage obligations		63,045		63,425		3.56	%		52,797		52,989		4.76	%		32,555		32,393		5.12	%
Mutual fund (CRA qualified)		500		495		3.67	%		500		490		5.50	%		500		491		4.20	%
Trust preferred securities		500		469		6.38	%		500		400		6.25	%		250		250		8.50	%


Total securities	$	69,120	$	69,372		3.58	%	$	78,468	$	78,046		5.15	%	$	68,701	$	67,783		5.50	%


Memo:
Securities with variable interest rates included above. This includes U.S. government mortgage-backed and collateralized mortgage obligations, with all others fixed.		4,002		4,057					10,437		10,219					8,687		8,671


*		weighted yield on state and political subdivisions is calculated on a taxable equivalent basis and is based on yield to maturity of the instruments.

The preceding table shows securities generally by contractual maturity. Actual maturities may differ from contractual maturities because issuers (or underlying borrowers) may have the right to call or prepay obligations.

Investment securities of $56.2 million were pledged at December 31, 2009 to secure short-term repurchase agreements, wholesale repurchase agreements and to partially secure FHLB advances.

(4) Loans

Certain directors and executive officers of the Corporation and their associates are loan customers of the Bank. Such loans were made in the ordinary course of business and do not involve more than a normal risk of collectability. The outstanding loan balance for these persons amounted to $10,514,000 and $6,740,000 at December 31, 2009 and 2008, respectively. The total unused commitments related to these loans were $5,225,000 and $4,049,000 at December 31, 2009 and 2008, respectively. During 2009, new loans and advances to directors and executive officers of the Corporation and their associates totaled $6,454,000, while repayments totaled $2,680,000.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

The Bank grants loans to customers who reside primarily in Macomb, St. Clair, Oakland, and Wayne Counties. Although the Bank has a diversified loan portfolio, a substantial portion of the local economy has traditionally been dependent upon the automotive industry. Additionally, the Bank had approximately $168.4 million in outstanding loans at December 31, 2009, to commercial borrowers in the real estate rental and property management industry. Approximately 65% of all commercial real estate loans are owner occupied.

LOAN PORTFOLIO

The following table sets forth the composition of our loan portfolios as of the dates indicated. The loan amounts in the table reflect amounts before deductions for loans in process, deferred loan fees and discounts and allowance for credit losses.


	2009		2008		2007		2006		2005
	(In thousands)
Commercial real estate (1)	$	273,578	$	284,811	$	264,685	$	236,399	$	201,348
Commercial and industrial		48,782		38,714		33,039		28,393		26,753
Residential real estate		51,101		54,409		60,799		72,517		74,601
Home equity lines		21,889		21,230		20,906		17,614		18,545
Consumer loans		6,961		7,107		9,754		11,666		13,054
Credit cards		856		846		729		693		650


Total loans	$	403,167	$	407,117	$	389,912	$	367,282	$	334,951


(1)		Included in the category of commercial real estate in the above table are real estate construction loans totaling $11.2 million, $22.9 million, $47.8 million, $42.4 million and $18.2 million for the years ended 2009, 2008, 2007, 2006 and 2005, respectively.

Commercial and multi-family real estate loans make up the largest component of our loan portfolio. Loans secured by commercial and multi-family real estate properties are generally larger and involve a greater degree of risk than one- to four-family residential mortgage loans. Commercial and multi-family real estate loans typically involve large balances to single borrowers or groups of related borrowers. Because payments on loans secured by commercial and multi-family real estate properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed), the borrower’s ability to repay the loan may be impaired. We attempt to minimize the risks associated with these transactions by generally limiting our commercial real estate lending to well-known customers or new customers whose businesses have an established profitable history. In many cases, risk is further reduced by limiting the amount of credit to any one borrower to an amount less than our legal lending limit.

Our commercial and industrial business lending activities have encompassed loans with a variety of purposes and security, including loans to finance inventory and equipment. Commercial and industrial business loans generally involve different risks than residential and commercial mortgage loans. Commercial and industrial business loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself, rather than on the value of the real estate that typically secures residential and commercial mortgage loans.

The following tables illustrate the maturity of selected loan portfolios at December 31, 2009. Loans which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due. The tables do not reflect the effects of interest rate adjustments and possible repayments.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Commercial and industrial loans due during the years ending December 31,


	(In thousands)
2010	$	37,064
2011 to 2014		8,660
2015 and thereafter		3,058


Total loans	$	48,782

The total amount of commercial and industrial loans due after December 31, 2010 which have fixed interest rates is $6.1 million, while there are $5.6 million in loans due after such date which have floating or adjustable interest rates. Some of these loans may have floor interest rate levels which are reported as fixed interest rate loans.

Real estate construction loans due during the years ending December 31,


	(In thousands)
2010	$	10,865
2011 to 2014		299
2015 and thereafter		—


Total loans	$	11,164

The total amount of construction loans due after December 31, 2010 which have fixed interest rates is $299,000. There are no loans due after such dates which have floating or adjustable interest rates.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

(5) Allowance for Credit Losses

A summary of the activity in the allowance for credit losses for the years ended December 31 is as follows:


	December 31,
	2009			2008			2007			2006			2005
	(Dollars in thousands)
Balance at beginning of the period	$	7,315		$	6,403		$	3,815		$	3,580		$	3,377
Charge-offs:
Commercial real estate		7,257			6,895			338			—			181
Commercial and industrial		1,205			270			110			248			57
Residential real estate		486			426			106			21			103
Home equity lines		538			577			131			21			—
Consumer loans		237			669			382			40			171
Credit cards		54			33			33			13			12


Total charge-offs		9,777			8,870			1,100			343			524


Recoveries:
Commercial real estate		72			52			—			—			1
Commercial and industrial		400			218			12			14			606
Residential real estate		23			—			—			8			—
Home equity lines		3			1			—			—			—
Consumer loans		71			7			69			5			18
Credit cards		—			2			7			1			2


Total recoveries		569			280			88			28			627


Net charge-offs		9,208			8,590			1,012			315			(103	)


Provision charged to earnings		14,850			9,502			3,600			550			100


Balance at the end of the period	$	12,957		$	7,315		$	6,403		$	3,815		$	3,580

As a percentage of total portfolio loans		3.21	%		1.80	%		1.64	%		1.04	%		1.07	%

Ratio of net charge-offs (net recoveries) during the period to average loans during the period		2.22	%		2.17	%		0.27	%		0.09	%		(0.03	%)

The loan portfolio has been reviewed and analyzed for the purpose of estimating probable credit losses inherent in the loan portfolio. The Corporation performs a detailed quarterly review of the allowance for credit losses. The Corporation evaluates for impairment those loans classified as substandard, under its internal risk rating system, on an individual basis. 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. The Corporation uses factors such as historical portfolio losses, national and local economic trends and levels of delinquency to determine the appropriate level and allocation of the allowance for loans in this grouping. The Corporation’s policy dictates that specifically identified credit losses be recognized immediately by a charge to the allowance for credit losses. The allowance for credit losses contains allocations for specific loans or loan types; the entire allowance is available for charge-off of any loan based on management’s discretion. Management believes that the present allowance is adequate, based on the broad range of considerations listed above.

The Corporation considers a loan impaired when it is probable that not all of the interest and principal will be collected in accordance with the contractual terms of the loan agreement. Consistent with this definition, all nonaccrual and reduced-rate loans (with the exception of residential mortgage loans and consumer loans) are considered impaired.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Analysis of Allowance for Credit Losses

The following table contains reserve allocations for types of loans for the years presented.


	Commercial			Commercial			Residential			Home Equity			Consumer			Credit
	Real Estate			and Industrial			Real Estate			Lines			Loans			Cards			Unallocated		Total
										(Dollars in thousands)
Balances:

December 31, 2009	$	8,537		$	1,195		$	1,736		$	682		$	616		$	66		$	125	$	12,957
% of loans in category		67.87	%		12.09	%		12.67	%		5.43	%		1.73	%		0.21	%				100.00	%

December 31, 2008	$	4,221		$	936		$	869		$	669		$	502		$	85		$	33	$	7,315
% of loans in category		70.00	%		9.50	%		13.40	%		5.20	%		1.70	%		0.20	%				100.00	%

December 31, 2007	$	4,360		$	302		$	824		$	396		$	314		$	50		$	157	$	6,403
% of loans in category		67.80	%		8.50	%		15.60	%		5.40	%		2.50	%		0.20	%				100.00	%

December 31, 2006	$	1,741		$	499		$	931		$	436		$	155		$	26		$	27	$	3,815
% of loans in category		64.40	%		7.70	%		19.70	%		4.80	%		3.20	%		0.20	%				100.00	%

December 31, 2005	$	1,526		$	594		$	993		$	138		$	154		$	24		$	151	$	3,580
% of loans in category		60.10	%		8.00	%		22.30	%		5.50	%		3.90	%		0.20	%				100.00	%

LEGAL LENDING LIMIT

Pursuant to state regulations, the Bank is limited in the amount that it may lend to a single borrower or group of borrowers. As of December 31, 2009, the legal lending limit was approximately $6.7 million or 15% of capital and surplus of the Bank; however, that limit can be increased to approximately $11.1 million or 25% of capital and surplus, with two-thirds approval by the Board of Directors.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Nonperforming Assets

The table below sets forth the amounts and categories of nonperforming assets in our loan portfolio. See “Loans” and “Allowance for Credit Losses” under Notes 4 and 5 of Notes to Consolidated Financial Statements.


	December 31,
	2009			2008			2007			2006			2005
							(In thousands)
Nonaccrual loans:
Commercial real estate	$	16,020		$	12,579		$	14,379		$	2,711		$	1,637
Commercial and industrial		584			96			146			646			985
Residential real estate		5,673			3,578			2,053			—			67
Home equity lines		219			760			354			—			—
Consumer loans		378			571			30			—			—
Credit cards		—			—			—			—			—

Total		22,874			17,584			16,962			3,357			2,689


Accruing loans delinquent more than 90 days:
Commercial real estate		—			—			—			—			—
Commercial and industrial		—			—			—			—			—
Residential real estate		—			—			654			876			621
Home equity lines		—			—			44			336			—
Consumer loans		—			—			—			160			1
Credit cards		7			44			25			1			1

Total		7			44			723			1,373			623


Total nonperforming loans	$	22,881		$	17,628		$	17,685		$	4,730		$	3,312


Troubled debt restructured loans:
Commercial real estate		20,341			6,078			—			—			—
Commercial and industrial		83			1,589			—			—			—
Residential real estate		—			495			253			—			—

Total		20,424			8,162			253			—			—


Other real estate owned:
Commercial real estate		8,881			2,493			319			—			—
Residential real estate		419			420			535			108			112

Total		9,300			2,913			854			108			112


Other repossessed assets:

Boats		494			976			—			—			—


Total nonperforming loans as a percentage of total loans		5.68	%		4.33	%		4.54	%		1.29	%		0.99	%

Allowance for loan losses to nonperforming loans		56.62	%		41.50	%		21.57	%		75.69	%		101.96	%

At December 31, 2009, restructured loans within the meaning of Accounting by Debtors and Creditors for Troubled Debt Restructurings, codified in ASC 470, increased to $20.4 million from $8.2 million at December 31, 2008. A total of $3.6 million and $2.2 million of troubled debt restructurings are classified as nonaccrual loans and reported in total nonaccrual loans for December 31, 2009 and 2008, respectively. Of those loans reported as troubled debt restructured loans, $20.4 million or 99% were contractually current.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

The Corporation did not recognize any interest income in 2009, 2008 and 2007 on those loans classified as nonaccruing for the period ended December 31, 2009, 2008 and 2007. The amount of interest that would have been recognized on those loans classified as nonaccruing, if the loans were in accrual status during that same time period, was $1,676,000, $1,750,000 and $332,000 during the periods of 2009, 2008 and 2007, respectively.

Nonperforming loans without a related allowance for credit losses totaled $4.8 million and $7.3 million for the periods ended December 31, 2009 and 2008, respectively. Nonperforming loans with a related allowance for credit losses totaled $18.0 million and $18.4 million for the periods ended December 31, 2009 and 2008, respectively. At December 31, 2009, of the loans without a related specific allowance, $1.1 million of the $7.4 million had partial charge offs of the loan balance to the estimated net realizable value. The related allowance for nonperforming loans for the period ended December 31, 2009 and 2008 was $5.5 million and $3.0 million, respectively. Total nonperforming loans averaged $27.7 million in 2009, $20.3 million in 2008 and $16.7 million in 2007.

(6) Property and Equipment

A summary of property and equipment as of December 31 is as follows:


	2009		2008
	(In thousands)
Land	$	1,340	$	1,340
Buildings and improvements		5,984		5,941
Building construction in process		—		182
Leasehold improvements		1,653		1,650
Furniture and equipment		5,183		4,709
Vehicles		32		42

		14,192		13,864

Less: accumulated depreciation and amortization		5,086		4,503


Net property and equipment	$	9,106	$	9,361

(7) Time Deposits

As of December 31, 2009, scheduled maturities of all time deposits are as follows:


Year Ending December 31,	(In thousands)
2010	$	185,075
2011		56,835
2012		51,169
2013		360
2014		11,304
Subsequent years		—


Total Time Deposits	$	304,743

The following table depicts the maturity distribution of certificates of deposit with balances of $100,000 or more at December 31, 2009.


	(In thousands)
Three months or less	$	51,651
Over three months to twelve months		94,395
Over one year to three years		76,758
Over three years		4,170


Total time deposits of $100,000 or more	$	226,974

Community Central Bank Corporation
Notes to Consolidated Financial Statements

(8) Short-term Borrowings

During the first quarter of 2007, the Corporation borrowed $19.0 million in a wholesale structured repurchase agreement with an interest rate tied to the three month Libor rate. On March 3, 2008, the borrowing changed to a fixed interest rate of 4.95% until March 2, 2017.

Short-term borrowings at December 31, 2009, consisted of short-term FHLB advances of $22.0 million and short-term securities sold with an agreement to repurchase of $22.1 million. Repurchase agreements generally mature within one day. Following are details of short-term borrowings for the dates or periods indicated:


	Year Ended December 31,
	2009			2008			2007
	(Dollars in thousands)
Amount outstanding at end of year:
Short-term repurchase agreements	$	22,106		$	20,394		$	13,659
Short-term FHLB advances	$	22,000		$	25,500		$	23,795

Weighted average interest rate on ending balance:
Short-term repurchase agreements		1.49	%		1.62	%		3.00	%
Short-term FHLB advances		4.56	%		3.50	%		4.14	%

Maximum amount outstanding at any month end during the year:
Short-term repurchase agreements	$	25,771		$	20,394		$	14,932
Short-term FHLB advances	$	29,000		$	25,500		$	23,795

Average amount outstanding during the year:
Short-term repurchase agreements	$	20,863		$	13,589		$	13,330
Short-term FHLB advances	$	31,000		$	17,484		$	19,831

Weighted average interest rate:
Short-term repurchase agreements		1.55	%		1.97	%		3.10	%
Short-term FHLB advances		4.03	%		4.05	%		4.16	%

(9) FHLB Advances

In June 2001, the Corporation started to borrow long-term advances from the FHLB to fund fixed rate instruments and to attempt to minimize the interest rate risk associated with certain fixed rate commercial mortgage loans and investment securities. The advances are collateralized by residential and commercial mortgage loans under a specific collateral agreement totaling approximately $200.8 million and $235.0 million at December 31, 2009 and 2008, respectively. The advances are also secured by specific investment securities with an amortized cost of $5.4 million and $25.6 million and fair market values of $5.5 million and $25.6 million at December 31, 2009 and 2008, respectively. All advances at December 31, 2009 had prepayment penalties. All advances have final maturities without callable provisions.

FHLB advances outstanding were as follows:


	December 31, 2009					December 31, 2008
	Ending		Average rate			Ending		Average rate
	Balance		at end of period			Balance		at end of period
			(Dollars in thousands)
Short-term FHLB advances	$	22,000		4.56	%	$	25,500		3.50	%
Long-term FHLB advances		43,700		4.77	%		82,700		4.43	%


	$	65,700		4.70	%	$	108,200		4.21	%

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Long-term advances were comprised of 17 advances with maturities ranging from January 2011 to June 2016.

The principal maturities of long-term advances outstanding at December 31, 2009, are as follows:


Year Ending December 31,	(In thousands)
2010	$	22,000
2011		10,500
2012		7,000
2013		—
2014		—
Subsequent years		26,200


Total	$	65,700

(10) ESOP Note Payable

In 1999, the Bank’s employee stock ownership plan (“ESOP”) entered into a 10 year variable rate loan with an outside financial institution. In the fourth quarter of 2008, the loan was paid in full. The Corporation had guaranteed the loan with the ESOP stock pledged as collateral. In addition, the Bank issued a letter of credit supporting the loan.

(11) Subordinated Debentures

On February 13, 2007, Community Central Capital Trust II (Trust II), a statutory trust formed by the Corporation for the purpose of issuing trust preferred securities, issued $18,000,000 aggregate liquidation amount of cumulative trust preferred securities. The Trust II securities bear a fixed distribution rate of 6.71% per annum through March 6, 2017, and thereafter will bear a floating distribution 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. The gross proceeds of the offering were used to purchase junior subordinated debentures from the Corporation totaling $18,557,000, which bears the same terms and repayment provisions as the trust preferred securities. Additionally, an interest rate swap for a like kind notional value was secured, designed to convert the fixed rate on the debenture to a variable rate. In the first quarter of 2009, the Corporation elected to unwind and terminate the interest rate swap position based on management’s determination that the interest rate swap would no longer provide a benefit to the Corporation. Management elected the fair value option for the subordinated debenture (see Note 21).

On June 29, 2007, the Corporation redeemed $10.0 million of the subordinated debentures issued to Community Central Capital Trust II.

The trust preferred securities may constitute up to 25% of Tier I capital. Any amount in excess of this limit may be included as Tier 2 capital. At December 31, 2009, $6.5 million of the trust preferred issuance was included in the Corporation’s Tier 1 capital, with the remaining $11.5 million included in Tier 2 capital.

(12) Stockholders’ Equity

The Corporation and the Bank are subject to various regulatory capital requirements administered by Federal banking agencies. Failure to meet these requirements can initiate certain mandatory (and possible additional discretionary) actions by regulators. These actions, if undertaken, could have a material effect on the Corporation’s financial position. Under capital adequacy guidelines, the Corporation and the Bank must meet specific capital requirements that involve quantitative measures of assets, liabilities, and certain off-balance sheet items. Capital amounts are also subject to qualitative judgments by the regulators about individual components, risk-weightings and other factors.

Quantitative measures established by regulation require the Corporation and the Bank to maintain minimum amounts and ratios of Tier I capital and total capital (as defined in the regulations) to risk-weighted assets. The

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Corporation and the Bank are also subject to a minimum Tier I leverage ratio expressed as a percentage of quarterly average assets (as defined). The Corporation is further subject to leverage ratios consisting of primary capital and total capital as a percentage of assets at period end. Management believes, as of December 31, 2009, that the Corporation and the Bank meet all capital adequacy requirements to which they are subject and the Bank is considered “well capitalized.” The Corporation and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items. Capital amounts and classifications are also subject to qualitative judgments about components, risk weightings, and other factors in which the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent the overall financial condition. If the Bank is only adequately capitalized, regulatory approval is required to accept brokered deposits; and if the Bank is undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.

Preferred Stock Issuance

In December 2009 and January 2010, we raised a total of $4.2 million in capital through the sale of Series B cumulative convertible perpetual preferred stock. The Series B preferred stock can be converted into common stock of the Corporation at any time by the holders, or by the Corporation under certain circumstances, at an initial conversion price of $8.00 per share of common stock, subject to adjustment and certain limitations, as described below. A warrant to purchase shares of the Corporation’s common stock is attached to each share of Series B preferred stock. Each warrant represents the right of the holder to purchase 20 shares of the Corporation’s common stock at a purchase price of $5.00 per common share and is exercisable for ten years. Dividends on the Series B preferred stock are payable quarterly in arrears at a rate of 5.00% per annum, if and when declared by the Corporation’s Board of Directors. Dividends on the Series B preferred shares are cumulative. On or after August 1, 2010, the Series B preferred stock will be subject to mandatory conversion into common stock under certain circumstances, including the Corporation’s stock price trading at or above $10.00 per share, subject to adjustment.

In December 2008 and February 2009, the Corporation raised a total of $3.55 million in capital through the sale of Series A noncumulative convertible perpetual preferred stock. The Series A preferred stock can be converted into common stock of the Corporation at any time by the holders, or by the Corporation under certain circumstances, at an initial conversion price of $10.00 per share of common stock, subject to adjustment and certain limitations as described below. Dividends on the Series A preferred stock are payable quarterly in arrears at a rate of 12.00% per annum, if and when declared by the Corporation’s Board of Directors and are not cumulative. The Series A preferred stock is subject to mandatory conversion into common stock under certain circumstances, including the Corporation’s stock price trading at or above $11.00 per share, subject to adjustment.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

The following table shows the Corporation’s and the Bank’s actual capital amounts and ratios as of December 31, as well as certain minimum requirements:


	2009					2008					Minimum Ratio for Capital Adequacy			Ratio to be
	Capital		Ratio			Capital		Ratio			Purposes			“Well Capitalized”
	(Dollars in thousands)
Tier I capital to risk-weighted assets
Consolidated	$	24,584		6.31	%	$	45,054		10.41	%		4	%	NA
Bank only		31,133		7.99	%		39,928		9.28	%		4	%		6	%

Total capital to risk-weighted assets
Consolidated	$	44,619		11.44	%	$	57,199		13.22	%		8	%	NA
Bank only		36,102		9.27	%		45,338		10.54	%		8	%		10	%

Tier I capital to average assets
Consolidated	$	24,584		4.47	%	$	45,054		8.21	%		4	%	NA
Bank only		31,133		5.67	%		39,928		7.30	%		4	%		5	%

The Bank was categorized as adequately capitalized at December 31, 2009 and well capitalized at December 31, 2008. Since the Bank was adequately capitalized at December 31, 2009, regulatory approval is required to accept brokered deposits. Effective January 1, 2010, the interest rate paid for deposits by institutions that are less than well capitalized will be limited to 75 basis points above the national rate for similar products unless the institution can support to the FDIC that prevailing rates in its market area exceed the national average.

(13) Benefit Plans

Defined Contribution Plan - The Corporation has a 401(k) defined contribution savings plan for employees. Employer contributions are discretionary and are determined annually by the Board of Directors. Employer contributions of $167,000, $181,000 and $162,000 were paid or accrued for the periods ended December 31, 2009, 2008 and 2007.

Employee Stock Ownership Plan - During the second quarter of 1999, the Bank established an ESOP for the benefit of eligible employees. As of December 31, 2009, the ESOP had a total of 71,947 shares of the Corporation’s common stock, all of which were classified as committed-to-be released. Under the ESOP, the shares of stock committed-to-be released into all participants’ accounts are directly proportional to the ratio of the principal reductions to the total original principal amount. During the fourth quarter of 2008, the ESOP fully repaid the loan that originally funded the purchase of common stock held in the ESOP. Dividends paid by the Corporation on unearned shares of common stock held by the ESOP may be used to repay the loan or used to purchase the Corporation’s common stock at the discretion of the plan administrator. As of December 31, 2009, all shares in the ESOP were committed-to-be released, with no remaining unearned.

The ESOP borrowed $500,000 from a bank to purchase shares of the Corporation’s stock (see Note 10). This loan was fully repaid during the fourth quarter of 2008.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Information regarding the ESOP transactions for the years ended December 31 is as follows:


	2009		2008		2007
Amounts paid by the ESOP for:	(In thousands)
Debt repayment *	$	—	$	36	$	59
Interest	$	—	$	1	$	6
Other	$	—	$	5	$	4

Amounts received from the Corporation as:
Contributions to the ESOP	$	—	$	42	$	69


*		Includes debt repayment in 2008 and 2007 from cash contained in the ESOP from accumulated dividends.

Supplemental Executive Retirement Plan – Effective April 30, 2003, the Corporation began sponsoring a non-qualifying defined benefit plan to provide supplemental retirement benefits for certain key executives. The plan, which started in April 2003, benefiting five current and one former executive officers. Two of the participants have a minimum annual benefit upon retirement of $75,000 and a maximum benefit of 50% of the average of the three highest years of compensation for fifteen years. The remaining officers have an annual benefit payable upon retirement of $50,000 for fifteen years. The following table sets forth the plan activity and other information as of and for the year ended December 31, 2009 and 2008.


	2009			2008
	(In thousands)
Plan assets at fair value	$	—		$	—
Benefit obligation		2,512			2,072


Overfunded (underfunded) status	$	(2,512	)	$	(2,072	)


Pension liability	$	(2,512	)	$	(2,072	)


Net pension costs	$	540		$	396


Actuarial comparisons:

Weighted average discount rate		6.15	%		7.00	%
Increase in future compensation levels		3.00	%		3.00	%

To fund the supplemental retirement benefit obligation, the Corporation has purchased insurance policies on the lives of the participants with the Corporation as the owner and beneficiary of the policies. At December 31, 2009, the cash surrender value of all bank owned life insurance policies on the participants amounted to $11.3 million.

Stock Option Plans — The Corporation currently has three active stock plans. Under the 1996 and 2000 Employee Stock Option Plans (“Employee Plans”), options for 58,564 and 66,000 shares of common stock, respectively, were available for awards to key employees. No options are presently available for grant under the 1996 and 2000 Employee Stock Option Plans, although options to purchase 52,839 shares of Corporation common stock were outstanding and unexercised as of December 31, 2009. Under the 2002 Incentive Plan, as amended, up to 46,305 shares were available for grant to directors and 341,195 shares were available for grant to employees. In December 2009, 50,000 stock options were granted under the 2002 Incentive Plan to employees with terms of 10 years. Also in 2009, as part of the annual stock award provision of the 2002 Incentive Plan, 300 shares of common stock were awarded to each Director for a total of 2,400 shares. At December 31, 2009, 18,467 shares were available for award to employees and 22,500 shares were available for award to directors. Under the 2002 Incentive plan, 2009 was the last year in which director awards could be made. The shares awarded were recorded as director and employee compensation expense, respectively. The stock awards immediately vest and

Community Central Bank Corporation
Notes to Consolidated Financial Statements

are valued and expensed based on the closing price of the common stock on the day of issuance. Under all plans, the exercise price of each option equals at least the market price of the Corporation’s common stock at the date of grant.

The Corporation recognizes compensation expense for stock options awarded over the vesting period based on the fair value of the options granted, which is determined using the Black Scholes option pricing model. The volatility assumption used in the Black Scholes formula is based on the volatility of Community Central Bank Corporation common stock, which is traded on the NASDAQ Capital Market. The weighted average assumptions used in the Black Scholes model are noted in the table at the bottom of the page. The Corporation uses historic data to estimate option exercise and employee termination within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Corporation has estimated the fair value of the options issued in December 2009 at $1.34 per share. The options become exercisable on January 2, 2010 for 33% of the shares covered under the agreement and for an additional 33% of the shares annually thereafter. Compensation expense connected with these options will be recognized at an annual rate of $29,000 from December 2009 through January 2012 for a total of $60,000, net of expected forfeitures. The forfeiture rate is assumed to be 10.00% of the total compensation expense. The Corporation will recognize compensation expense evenly over the requisite service period in future years through 2012. Options issued in 2008 and 2007 had an estimated fair value of $1.18 and $2.43 per share, respectively. The Corporation recognized $57,000 in compensation expense for those options vesting after the date of adoption of ASC 718 Stock Compensation under the modified prospective method and there is no remaining compensation expense associated with this group of options in future years since they are fully vested. No tax expense was recognized as the options were incentive stock options. At December 31, 2009, the Corporation had $173,000 in unrecognized compensation expense that will be expensed over the remaining vesting period of the respective stock options.


	Year Ended December 31,
	2009		2008		2007
	(In thousands)
Stock-based employee compensation expense, net of related tax effects, included in reported net income		84		57		31

The fair value of each option grant is estimated on the date of the grant using the Black Scholes option-pricing model with the following weighted average assumptions:


	2009			2008			2007
Dividend yield or expected dividends		—			—			3.24	%
Risk free interest rate		3.84	%		2.50	%		4.20	%
Expected life	10 years			10 years			10 years
Expected volatility		88.08	%		50.27	%		34.50	%

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Following is a summary of the stock option activity for the periods indicated and the stock options outstanding at the end of such periods:


							Year Ended December 31,
	2009						2008					2007
					Weighted					Weighted					Weighted
	Number of				Average		Number of			Average		Number of			Average
	Shares				Exercise Price		Shares			Exercise Price		Shares			Exercise Price
Outstanding, beginning of period		303,475			$	7.91		286,993		$	9.10		330,272		$	8.93
Granted		50,000				1.55		49,750			1.89		47,500			7.59
Exercised		—				—		—			—		(56,638	)		5.57
Forfeited		(1,988	)			10.66		(33,268	)		9.21		(34,141	)		11.19

Outstanding, end of year		351,487		(a)	$	6.99		303,475		$	7.91		286,993		$	9.10

The following table shows summary information about stock options outstanding at December 31, 2009:


Stock Options Outstanding						Stock Options Exercisable
			Weighted Average	Weighted				Weighted
Range of	Number		Remaining	Average Exercise		Number of		Average Exercise
Exercise Prices	of Shares		Contractual Life	Price		Shares		Price
$4.30		4,534	.1 years	$	4.30		4,534	$	4.30
4.52		5,331	.8 years		4.52		5,331		4.52
4.98		8,794	1.3 years		4.98		8,794		4.98
4.71		15,516	1.4 years		4.71		15,516		4.71
6.99 — 7.34		27,439	2.4 years		6.96		27,439		6.96
8.28		6,078	3.5 years		8.28		6,078		8.28
9.82 — 10.31		21,882	3.9 years		9.84		21,882		9.82
11.15		37,982	4.9 years		11.15		37,982		11.15
13.15		3,583	5.6 years		13.15		3,583		13.15
11.98 — 13.15		41,348	7.9 years		11.98		41,348		11.98
10.76		32,000	7.0 years		10.76		12,800		10.76
7.59		47,500	7.9 years		7.59		19,000		7.59
1.89		49,500	9.0 years		1.89		16,583		1.89
1.55		50,000	10.0 years		1.55		—		—


		351,487		$	6.99		220,870	$	8.58

All share number and exercise price data have been adjusted to reflect the issuance of stock dividends.


(a)		The aggregate intrinsic value of the options outstanding and exercisable as of December 31, 2009, based on the share price of $1.40 for CCBC common stock at December 31, 2009, was $0. No stock options were exercised in 2009. The total intrinsic value of options exercised during the years ended December 31, 2008 and 2007 was $0 and $152,000, respectively.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

(14) Leases

Operating expense includes rentals on leased facilities and certain equipment in the amount of $258,000, $329,000 and $339,000 for 2009, 2008 and 2007, respectively. Following is a schedule of future minimum rental payments required under operating leases that have remaining lease terms in excess of one year as of December 31, 2009:


Year ending December 31,	(In thousands)
2010	$	256
2011		212
2012		210
2013		211
2014		174
Subsequent years		255


Total minimum rental payments	$	1,318

(15) Other Operating Expense

The following is a summary of significant components of other operating expense for the periods indicated:


	2009		2008		2007
Year Ended December 31,	(In thousands)
Advertising, business development and public relations	$	426	$	536	$	528
Data processing		773		728		625
Professional and regulatory fees		577		600		417
Legal fees		743		465		288
Director fees		262		281		283
Printing and supplies		187		206		172
Telephone		157		174		177
Other real estate owned		3,403		2,056		68
Loan closing		39		105		113
Impairment loss		—		743		—
Other insurance		114		117		127
Deposit insurance		1,367		410		283
Michigan business tax		64		12		128
Repossessed asset expense		486		31		—
Other		1,230		860		940


Total other operating expense	$	9,828	$	7,324	$	4,149

(16) Taxes on Income

The Corporation and the Bank file a consolidated federal income tax return. Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Corporation’s assets and liabilities. The income tax expense for the years ended December 31 consists of the following:


	2009			2008			2007
			(In thousands)
Current tax (benefit) expense	$	(1,770	)	$	(489	)	$	266
Deferred tax (benefit) expense		(2,934	)		(943	)		(561	)
Change in valuation allowance		5,911			—			—


Total income tax (benefit) expense	$	1,207		$	(1,432	)	$	(295	)

Community Central Bank Corporation
Notes to Consolidated Financial Statements

At December 31, 2009, the conclusion was drawn that a valuation allowance was needed based primarily on our net operating loss for 2008 and 2009 and the challenging environment currently confronting banks that could impact future operating results. As a result, we recorded a $5.9 million valuation allowance on deferred tax assets at December 31, 2009 that was charged to federal income tax expense. The valuation allowance may be reversed to income in future periods to the extent that the related deferred tax assets are realized or the valuation allowance is no longer required. The temporary differences and carry forwards which comprise deferred tax assets and liabilities at December 31 are as follows:


	2009			2008
	(In thousands)
Deferred tax assets
Provision for loan losses	$	4,310		$	2,321
Depreciation		85			91
SERP Expense		854			705
Net operating loss		3,377			1,990
Intangible asset amortization		72			74
Other real estate owned		738			540
AMT carryforward		—			73
Other		481			408

		9,917			6,202

Valuation allowance for deferred tax assets		(5,911	)		—

Total net deferred tax assets	$	4,006		$	6,202

Deferred tax liabilities
Financial instruments at fair value option		(3,465	)		(2,820	)
Original issue discount		(18	)		(63	)
Accretion		(6	)		(27	)
FHLB dividends		(104	)		(104	)
Net deferred loan fees		(40	)		(32	)
Goodwill amortization		(65	)		(51	)
Other		(308	)		(127	)

Gross deferred liablilites		(4,006	)		(3,224	)

Net deferred tax asset	$	—		$	2,978

The Corporation has net operating loss carry forwards of approximately $9,932,000 that are available to reduce future taxable income through the years ending December 31, 2029.

The Corporation’s effective tax rates differ from the statutory federal tax rates. The following is a summary of such differences:


	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Provision (benefit) at statutory federal income tax rate	$	(4,567	)	$	(1,135	)	$	146
Nondeductible expenditures		64			45			62
Tax exempt municipal interest		(96	)		(186	)		(384	)
Increase in cash surrender value of bank owned life insurance		(105	)		(156	)		(119	)
Valuation adjustment		5,911			—			—


Provision (benefit) at effective federal income tax rate	$	1,207		$	(1,432	)	$	(295	)

Community Central Bank Corporation
Notes to Consolidated Financial Statements

(17) Estimated Fair Value of Financial Instruments

Fair values are based on quoted market prices for similar instruments or estimated using discounted cash flow analysis. The discount rates used are estimated using comparable market rates for similar types of instruments adjusted to be commensurate with the credit risk, overhead costs and optionality of such instruments. Considerable judgment is inherently required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented below do not necessarily represent amounts that the Corporation could realize in a current market exchange. The following methods and assumptions were used to estimate the fair value of financial instruments:

Cash and cash equivalents: For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities, Federal Home Loan Bank stock: The fair value of the security portfolio is based on matrix pricing where similar securities are used to interpolate fair value of the subject instruments and as such is considered a level 2 valuation. The carrying value of FHLB stock approximates fair value based on their redemption provisions.

Loans: For variable rate loans with no significant change in credit risk since loan origination, the carrying amount is a reasonable estimate of fair value. For all other loans, including fixed rate loans, the fair value is estimated using a discounted cash flow analysis, using interest rates currently offered on similar loans to borrowers with similar credit ratings and for the same remaining maturities. The resulting value is reduced by an estimate of losses inherent in the portfolio.

Residential mortgages held for sale: The estimated fair value of residential mortgages held for sale is the carrying amount. The duration of the portfolio is typically within two weeks or less and a commitment of sale has already occurred when the loans are funded.

Deposits: The estimated fair value of demand deposits, certain money market deposits, and savings deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity time deposits is estimated using the rates currently offered for deposits of similar remaining maturities.

Federal Home Loan Bank advances: The estimated fair value of Federal Home Loan Bank advances is estimated using rates currently offered for funding sources of similar remaining maturities.

Repurchase agreements: The estimated fair value of short-term borrowings is the carrying amount, since they mature the next day.

Accrued interest: Accrued interest receivable and payable are short-term in nature; therefore, their carrying amount approximates fair value.

Subordinated debentures: Subordinated debentures are based on current rates for similar financing.

Commitments: The fair value of commitments is estimated using the fees currently charged to enter into similar arrangements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The majority of commitments to extend credit and letters of credit would result in loans with a market rate of interest if funded. The fair value of these commitments is not material.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

The recorded carrying amounts and estimated fair values of the Corporation’s financial instruments at December 31, 2009 and 2008 are as follows:


	2009				2008
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
			(In thousands)
Financial Assets:
Cash and cash equivalents	$	34,163	$	34,163	$	16,162	$	16,162
Trading securities (a)		—		—		17,463		17,463
Securities available for sale		65,903		65,903		78,067		78,046
Securities held to maturity		3,467		3,469		1,515		1,494
FHLB stock		5,877		5,877		5,877		5,877
Residential mortgages held for sale		3,497		3,497		3,302		3,302
Loans, net of allowance		392,210		402,500		399,802		416,903
Accrued interest receivable		1,878		1,878		2,479		2,479
Interest rate swap		—		—		3,538		3,538

Financial Liabilities:
Demand and savings deposits		96,388		96,388		80,908		80,908
Time deposits		304,743		311,102		276,468		286,145
Repurchase agreements		41,106		41,106		39,394		39,394
FHLB advances		65,700		66,883		108,200		111,738
Accrued interest payable		618		618		1,050		1,050
Subordinated debentures (a)		8,366		8,366		12,757		12,757


(a)		Carried under the fair value option under ASC 825, Financial Instruments, the Fair Value Option

(18) Off-Balance Sheet Risk

The Corporation is party to financial instruments with off-balance sheet risk in the normal course of business, to meet financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and financial guarantees. These instruments involve, to varying degrees, elements of credit and interest rate risk that are not recognized on the balance sheet.

Commitments to extend credit are agreements to lend to a customer as long as there are no violations of any conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Fees from issuing these commitments to extend credit are recognized over the period to maturity. Since a portion of the commitments is expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. The Corporation evaluates each customer’s creditworthiness on a case by case basis. The amount of collateral obtained upon extension of credit is based on management’s credit evaluation of customers. The Corporation also has legally binding commitments to extend credit in the form of loans that have been approved but not yet closed. These funds are normally disbursed unless the customer fails to comply with closing requirements.

Standby letters of credit are issued in connection with agreements between customers and a third party. If the customer fails to comply with the agreement, the counterparty may enforce the standby letter of credit as a remedy. Credit risk arises from the possibility that the customer may not be able to repay the Corporation after the letter of credit is enforced.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

A summary of commitments not recorded on the balance sheet at December 31 is as follows:


	2009		2008
	(In thousands)
Unused home equity lines of credit	$	8,390	$	9,819
Unused credit card lines		2,386		1,890
Unused portion of construction lines of credit		4,906		7,756
Unused portion of all other credit lines		50,916		49,652
Standby letters of credit		650		1,015


Total outstanding commitments	$	67,248	$	70,132

(19) Restrictions on Dividends, Loans and Advances

Banking regulations place certain restrictions on dividends paid and loans or advances made by the Bank to the Corporation. The Corporation and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Under the State of Michigan Banking Code, the Bank is also restricted from paying dividends to the Corporation until its deficit retained earnings has been restored. The Bank has a retained earnings deficit of approximately $9.7 million at December 31, 2009.

(20) Parent-only Financial Statements

The following condensed financial information presents the financial condition of Community Central Bank Corporation, the Parent Holding Company, (the “Parent”) only, along with the results of its operations and its cash flow. The Parent has recorded its investment in the Bank and Community Central Capital Trust II at cost, plus the undistributed surplus of the Bank since it was formed. The Parent recognizes undistributed income of the Bank as noninterest income, and undistributed losses as noninterest expense. The Parent-only financial information should be read in conjunction with the Corporation’s consolidated financial statements.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Parent-only Balance Sheet


	December 31,
	2009			2008
	(In thousands)
Assets

Cash	$	813		$	3,523
Accrued interest receivable		—			32
Investment in subsidiary		34,941			41,773
Investment in unconsolidated subsidiary		557			557
Other assets		—			3,595

Total Assets	$	36,311		$	49,480


Liabilities and Stockholders’ Equity

Due to subsidiary/Other liabilities	$	959		$	738
Net deferred tax liability		2,998			1,591
Subordinated debentures		8,366			12,757

Total Liabilities		12,323			15,086

Preferred stock		7,146			3,050
Common stock		32,214			32,125
Retained deficit		(15,536	)		(516	)
Accumulated other comprehensive income		164			(265	)

Total Stockholders’ Equity		23,988			34,394


Total Liabilities and Stockholders’ Equity	$	36,311		$	49,480

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Parent-only Statement of Operations


	December 31,
	2009			2008			2007
	(In thousands)
Operating Income

Interest income	$	34		$	84		$	391

Other income		—			10			—

Dividend from subsidiary		—			250			1,400


Total Interest and Dividend Income		34			344			1,791

Interest Expense
Subordinated debentures		1,235			905			929


Net interest (loss) income		(1,201	)		(561	)		862

Change in fair value of assets/liabilities		4,066			7,710			—

Other expense		790			721			932


Total Operating Expense		790			721			932

Income (Loss) Before Taxes and Undistributed Income of Subsidiary		2,075			6,428			(70	)

Income tax expense (benefit)		803			2,123			(597	)

Income Before Share in Undistributed Income (loss) of Subsidiary		1,272			4,305			527

Share of undistributed (loss) income of subsidiary		(15,910	)		(6,267	)		1,884


Net Income (Loss)	$	(14,638	)	$	(1,962	)	$	2,411
Dividends declared on preferred shares		(382	)		—			—

Net Income (Loss) available on common shares	$	(15,020	)	$	(1,962	)	$	2,411

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Parent-only Statement of Cash Flow


	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Operating Activities
Net income (loss)	$	(14,638	)	$	(1,962	)	$	724
Adjustments to reconcile net income to net cash flow from operating activities
Net gain on instruments at fair value		(4,066	)		(7,710	)		(1,811	)
Undistributed income of subsidiary		15,910			6,267			475
Decrease (increase) in other assets		3,627			(779	)		(456	)
Increase (decrease) in other liabilities		221			58			125
Other operating adjustments		1,167			2,926			612

Net Cash (Used in) Provided by Operating Activities		2,221			(1,200	)		(331	)

Investing Activities
Capital contribution to subsidiaries		(8,650	)		(3,750	)		(133	)

Net Cash Used in Investing Activities		(8,650	)		(3,750	)		(133	)

Financing Activities
Stock options exercised/awards		5			17			341
Issuance of preferred shares		4,096			3,050			—
Issuance and redemption of subordinated debentures		—			—			8,247
Cash dividend paid		(382	)		(351	)		(932	)
Repurchase of stock		—			(7	)		(3,400	)


Net Cash Provided by Financing Activities		3,719			2,709			4,256

(Decrease) Increase in Cash		(2,710	)		(2,241	)		3,792
Cash at the Beginning of the Period		3,523			5,764			1,972

Cash at the End of the Period	$	813		$	3,523		$	5,764

(21) Fair Value Option for Financial Assets and Financial Liabilities

Fair Value Hierarchy

	Level 1		Valuation is based upon quoted prices for identical instruments traded in active markets.

	Level 2		Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

	Level 3		Valuation contains unobservable input(s) and is used to the extent observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity. Level 3 instruments typically include, in addition to unobservable or Level 3 components, observable components.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Management has elected the fair value option for the following reasons for each of the eligible items or group of similar eligible items.

Investment Securities:

In the first quarter of 2009, the Corporation elected to sell substantially all of the investment securities recorded as trading securities, and to unwind the hedging interest rate swap position with the counterparty which resulted in realizing a combined net loss of $400,000 in 2009. This was based on management’s determination that the combination of the securities and interest rate swap would no longer provide a benefit to the Corporation in the current historically low interest rate environment. The Corporation had held the securities and interest rate swap for an extended amount of time under ASC 825, Financial Instruments, the Fair Value Option.

Subordinated Debentures:

Management elected the fair value option for its subordinated debenture. Management considers the subordinated debenture a critical component for future growth and wished to utilize interest rate swaps at that point in time to hedge the risk of this longer term liability. Management elected the fair value option accounting treatment for interest rate swaps because it was less complex than alternative methods and therefore suitable for a community bank with limited resources. 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 was secured, in part, to reduce any volatility associated with the recognition of the fair value option under ASC 825, Financial Instruments, the Fair Value Option. Under the interest rate swap, the Corporation has agreed to receive a fixed rate of 6.71% and pay Libor plus 170 basis points. 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. In the first quarter of 2009, the Corporation elected to unwind the interest rate swap position with the counterparty which resulted in realizing $3.3 million, which represented substantially all of the unrealized gains which had been recorded as noninterest income, under the fair value option through December 31, 2008. This was based on management’s determination that the interest rate swap would no longer provide a benefit to the Corporation.

Management has the intent to utilize the fair value option on selected financial assets and liabilities on a go forward basis.

The valuations of the instruments measured under ASC 820, Fair Value Measurements, for 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 ASC 825, Financial Instruments, Fair Value Option. The inputs were observable for the asset and liability yields on commonly quoted intervals based on similar assets and liabilities for level 2 instruments. Community Central Bank Corporation does not have a credit rating through any major credit research credit rating facility. The Trust Preferred Market from which a basis for pricing on the subordinated debenture is arrived at is reflective of changes in the commercial banking environment. The determination of fair value of the subordinated debenture is considered by management to be reflective of the current assessments as to the market for fixed rate trust preferred and subordinated debentures of similar duration and characteristics. During several quarterly periods, the trust preferred market reflected only a small base of participants in the market place. The disarray in the credit markets contributed to the lack of market transactions in this financial instrument. Under ASC 820, Fair Value Measurements and Disclosures, management evaluated factors to determine whether there has been a significant decrease in volume of activity for the liability compared to normal market activity. Based on the factors observable to management contained in ASC 820, Fair Value Measurements and Disclosures, management concluded that quoted prices may not be determinative of fair value. Management also evaluated the circumstances to determine whether the issuance of subordinated debentures and trust preferred securities was orderly based on the weight of evidence available. Based on the factors contained in ASC 820, Fair Value Measurements and Disclosures, management concluded the market for bank subordinated debentures and trust preferred securities was not orderly. Management has used all observable data available, including the market data for subordinated debentures and trust preferred securities traded as assets, to obtain additional observable information. The inputs and valuation techniques used by management to determine fair value included pricing models for like type financial instruments priced to a yield to maturity of that instrument. Management uses market surveys for like type instruments in aiding the valuation process. Management also

Community Central Bank Corporation
Notes to Consolidated Financial Statements

considers market data for the issuance of subordinated debentures in evaluating the appropriate fair value of the instrument. Multiple inputs are used in the valuation process including assumptions on credit spreads, projected yield curves and other modeling techniques used in pricing financial instruments to determine the fair value after incorporating all known factors and adjustments which may be significant. A determination was made, based upon the significance of unobservable parameters as of December 31, 2009 to the overall fair value measurement, to continue to report the subordinated debentures under level 3 significant unobservable inputs. In addition to the unobservable components, or level 3 components, observable components that can be validated to external sources are part of the validation methodology. The net change in fair value associated with all instruments recorded under ASC 825, Financial Instruments, Fair Value Option, totaled $3.9 million for 2009, versus $7.5 million for 2008. The decrease was primarily related to smaller gains recorded in the fair market value of the subordinated debenture connected with the issuance of trust preferred securities.

The dramatic widening of market credit spreads for this instrument favorably impacted the relative fair value of this financial liability. Changes in credit spreads are not easily predictable and may cause adverse changes in the fair value of this instrument and a possible loss of income in the future.

Securities Available for Sale, at Fair Value: The fair values of securities available for sale are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (level 2 inputs).

The table below contains the fair value measurement at December 31, 2009 using the identified valuations and the changes in fair value for the twelve month period ended December 31, 2009.


							Changes in fair
							value for twelve
							months ended
							December 31, 2009
							measured at fair
			Fair Value Measurement at				value pursuant to
			December 31, 2009				election of the fair value option

			Significant Other		Significant		Other Gains or Losses in
	Fair Value		Observable		Unobservable		noninterest income
	Measurements		Inputs		Inputs		pretax income

Description	12/31/2009		(Level 2)		(Level 3)
			(In thousands of dollars)
Trading Securities	$	—	$	—	$	—	$	(132	)
Securities available for sale		65,903		65,903		—		—
Interest rate swap hedging securities		—		—		—		(75	)
Subordinated Debentures		8,366		—		8,366		4,391
Interest rate swap hedging subordinated debentures		—		—		—		(325	)

							$	3,859

Community Central Bank Corporation
Notes to Consolidated Financial Statements


									Changes in fair
									value for twelve
									months ended
									December 31, 2008
									measured at fair
				Fair Value Measurement at					value pursuant to
				December 31, 2008					election of the fair value options

				Significant Other			Significant		Other Gains or Losses in
	Fair Value			Observable			Unobservable		noninterest income
	Measurements			Inputs			Inputs		pretax income

Description	12/31/2008			(Level 2)			(Level 3)
				(In thousands of dollars)
Trading Securities	$	17,463		$	17,463		$	—	$	262
Securities available for sale		76,552			76,552			—		—
Interest rate swap hedging securities		(958	)		(958	)		—		(417	)
Federal Home Loan Bank Advances		—			—			—		(14	)
Subordinated Debentures		12,757			—			12,757		4,840
Interest rate swap hedging subordinated debentures		3,538			3,538			—		2,870

									$	7,541

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.

Changes in level 3 recurring fair value measurements

The tables below include a roll forward of the balance sheet amounts for the twelve month period ended, December 31, 2009 and 2008 (including the change in fair value), for financial instruments classified by the Corporation within level 3 of the valuation hierarchy. When a determination is made to classify a financial instrument within level 3, the determination is based upon the significance of the unobservable parameters to the overall fair value measurement. However, level 3 financial instruments typically include, in addition to the unobservable or level 3 components, observable components (that is, components that can be validated to external sources); accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology. Also, the Corporation attempts to risk manage the observable components of level 3 financial instruments using derivative positions that are classified within level 2 of the valuation hierarchy; as these level 2 risk management instruments are not included below, the gains or losses in the table do not reflect the effect of the Corporation’s risk management activities related to such level 3 instruments.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

Fair value measurements using significant unobservable inputs

(In thousands)

Changes in unrealized

gains / (losses)

Total realized /

Purchases

Transfers

related to financial

For the year ended

Fair Value

unrealized

issuances

in and / or

Fair Value

instruments held at

December 31, 2009

January 1, 2009

gains / (losses)

settlements, net

out of Level 3

December 31, 2009

Subordinated Debentures

12,757

4,391

—

8,366

4,391

Changes in unrealized

gains / (losses)

Total realized /

Purchases

Transfers

related to financial

For the year ended

Fair Value

unrealized

issuances

in and / or

Fair Value

instruments held at

December 31, 2008

January 1, 2008

gains / (losses)

settlements, net

out of Level 3

December 31, 2008

Subordinated Debentures

17,597

4,840

—

12,757

4,840

Assets Measured at Fair Value on a Nonrecurring Basis

Impaired Loans

The Corporation does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310, Accounting by Creditors for Impairment of a Loan. The fair value of impaired loans is estimated using primarily collateral value. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. The fair value of the collateral is based on an observable market price, current appraised value and management’s estimates of collateral and other market conditions. Due to the lack of market transactions, volatility in pricing and other factors, some of which may be unobservable, the Corporation recorded the impaired loans as nonrecurring level 3.

Other Real Estate Owned

Other real estate owned assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, other real estate owned assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. The fair value of the collateral is based on an observable market price, a current appraised value, or management’s estimates. Due to the lack of transactions, volatility in pricing and other factors, some of which may be unobservable, the Corporation recorded other real estate owned as nonrecurring level 3.

Community Central Bank Corporation
Notes to Consolidated Financial Statements

The following table presents assets measured at fair value on a nonrecurring basis at December 31, 2009.


			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical		Observable		Unobservable		Total Losses for
	Balance at		Assets		Inputs		Inputs		the year ended
Assets	December 31, 2009		(Level 1)		(Level 2)		(Level 3)		December 31, 2009
	(In thousands)
December 31, 2009 Impaired loans	$	11,722	$	—	$	—	$	11,722	$	5,481

Other real estate owned		9,300		—		—		9,300		1,271


									Total Losses for
									the year ended
									December 31, 2008
December 31, 2008 Impaired loans	$	17,936	$	—	$	—	$	17,936	$	4,509

Other real estate owned		2,913		—		—		2,913		1,075

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements throughout this document, as well as in other public filings we make with the SEC, that are subject to risks and uncertainties. These forward-looking statements 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 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: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Federal Deposit Insurance Corporation, Michigan Office of Financial and Insurance Services or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses or to write-down assets; our ability to control operating costs and expenses; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; our ability to sell other real estate owned without suffering unanticipated losses; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and other risks detailed in the Corporation’s reports filed with the Securities and Exchange Commission.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 four full service facilities in Mount Clemens, Rochester Hills, Grosse Pointe Farms and Grosse Pointe Woods, Michigan. Community Central Mortgage Company, LLC, a subsidiary of the Bank, operates locations servicing the Detroit metropolitan area and central and northwest Indiana. 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 Capital 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.

The results of our 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, although the impact of the restructuring of the American automobile companies has a direct impact on southeastern Michigan. A slowdown in the local and statewide economy has produced increased financial strain on segments of the Bank’s customer base. The Bank has experienced increased delinquency levels and losses in its loan portfolio, primarily with commercial real estate, residential developer loans within the commercial real estate loan portfolio, with commercial and industrial loans, and with residential real estate loans. Further downturns in the local economy may affect the demand for, and performance of, commercial loans and related small to medium sized 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, St. Clair and Wayne counties of Michigan may affect the pricing levels of various loan and 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 weakness in the economy continues to affect parts of our loan portfolio requiring a higher provision for loan losses. We recorded a $14.9 million provision for loan losses in 2009. In addition, net charge-offs for 2009 represented 2.22% of total average loans on an annualized basis. Total nonaccruing loans and loans past due 90 days or more and still accruing interest totaled $22.9 million, or 5.68% of total loans at December 31, 2009 compared to $17.6 million, or 4.32% at December 31, 2008. The allowance for loan losses at December 31, 2009 was $13.0 million, or 3.21% of total loans compared to $7.3 million, or 1.80% at December 31, 2008. In addition to the nonaccrual loans stated above, as of December 31, 2009, restructured loans increased to $20.4 million from $8.2 million at December 31, 2008. Although our nonperforming loan level and other real estate owned levels continue to pressure our earnings, we continue to proactively deal with these issues. Unless and until we can substantially reduce our levels of nonperforming loans and other real estate owned, however, we do not expect to return to profitability.

We continue to focus on strategies to preserve and increase capital, and emphasize segments of operations that are capital efficient, such as our mortgage banking operations, our branch deposit operations as well as our Trust and Wealth divisions. An ongoing effort to increase our core deposits has resulted in a reduction in our cost of funds. During 2009, our deposits increased $43.8 million. Brokered deposits decreased $39.8 million. We also decreased Federal Home Loan Bank (“FHLB”) advances $42.5 million during 2009, replacing them with lower cost core deposit funding.

Management is planning on reducing the brokered time deposits and FHLB advances for the foreseeable future, though these funding sources will continue to be important to the Bank. Management plans to reduce total assets to help increase the capital ratios and thereby increase capital availability for potential future provision expense.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

The total net interest income of the Corporation will be somewhat negatively affected by the planned decrease in earning assets. The decrease in earning assets should not have a negative effect on net interest margin as the reduction in wholesale funds is a relatively high cost of funds producing relatively compressed interest rate spreads at levels smaller than the current net interest margin.

In December 2009 the Corporation raised a total of $4.2 million in capital through the sale of Series B cumulative convertible perpetual preferred stock. The Series B preferred stock can be converted into common stock of the Corporation at any time by the holders, or by the Corporation under certain circumstances, at an initial conversion price of $8.00 per share of common stock, subject to adjustment and certain limitations, as described below. A warrant to purchase shares of the Corporation’s common stock is attached to each share of Series B preferred stock. Each warrant represents the right of the holder to purchase 20 shares of the Corporation’s common stock at a purchase price of $5.00 per common share and is exercisable for ten years. Dividends on the Series B preferred stock are payable quarterly in arrears at a rate of 5.00% per annum, if and when declared by the Corporation’s Board of Directors. Dividends on the Series B preferred shares are cumulative. On or after August 1, 2010, the Series B preferred stock will be subject to mandatory conversion into common stock under certain circumstances, including the Corporation’s stock price trading at or above $10.00 per share, subject to adjustment.

Selected Financial Information

The following tables set forth the Selected Consolidated Financial Statements for the period reported.

Selected Financial Condition Data


	For the Year Ended December 31,
	2009		2008		2007		2006		2005
	(In thousands)
Total assets	$	543,846	$	556,950	$	520,305	$	505,028	$	462,012
Trading securities at fair value option		—		17,463		20,115		—		—
Securities available for sale		65,903		76,552		66,809		80,916		84,177
Securities held to maturity		3,467		1,515		977		1,017		1,094
Gross loans		403,167		407,117		389,912		367,282		334,951
Allowance for credit losses		12,957		7,315		6,403		3,815		3,580

Total deposits		401,131		357,376		328,635		355,856		314,373
FHLB advances		65,700		108,200		104,495		83,528		86,545
Repurchase agreements		41,106		39,394		32,659		15,688		13,184
Subordinated debentures		8,366		12,757		17,597		10,310		10,310
Total stockholders’ equity		23,988		34,394		33,228		36,665		35,532

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Summary of Operations


	For the Year Ended December 31,
	2009			2008			2007			2006		2005
	(In thousands, except per share data)
Interest income	$	28,797		$	30,422		$	32,925		$	31,475	$	24,230
Interest expense		16,791			19,047			20,735			18,892		11,555

Net interest income		12,006			11,375			12,190			12,583		12,675
Provision for credit losses		14,850			9,502			3,600			550		100
Non-interest income		9,570			11,451			5,692			4,935		4,809
Non-interest expense		20,157			16,718			13,853			14,509		13,132


Income (loss) before taxes		(13,431	)		(3,394	)		429			2,459		4,252

Provision for income tax (benefit) expense		1,207			(1,432	)		(295	)		363		1,179

Net income (loss)	$	(14,638	)	$	(1,962	)	$	724		$	2,096	$	3,073

Dividends declared on preferred shares		(382	)		—			—			—		—

Net income (loss) available to common shares	$	(15,020	)	$	(1,962	)	$	724		$	2,096	$	3,073


Per share data:*
Basic earnings	$	(4.02	)	$	(0.53	)	$	0.19		$	0.52	$	0.80
Diluted earnings	$	(4.02	)	$	(0.53	)	$	0.19		$	0.51	$	0.78
Dividend declared	$	—		$	0.10		$	0.24		$	0.24	$	0.21


*		Per share data has been retroactively adjusted to reflect the issuance of stock dividends.

Selected Financial Ratios


	For the Year Ended December 31,
	2009			2008			2007			2006			2005
Nonperforming loans as a percentage of total loans		5.68	%		4.33	%		4.40	%		1.29	%		0.99	%
Allowance for credit losses as a percentage of total loans		3.21	%		1.80	%		1.64	%		1.04	%		1.07	%
Allowance for credit losses as a percentage of nonperforming loans		56.62	%		41.50	%		21.57	%		75.69	%		101.96	%
Return on average assets		(2.63	%)		(0.36	%)		0.14	%		0.42	%		0.72	%
Return on average equity		(43.95	%)		(5.85	%)		2.06	%		5.82	%		9.43	%
Net interest margin		2.35	%		2.30	%		2.68	%		2.83	%		3.23	%
Dividend payout ratio		0.00	%		(17.89	%)		128.59	%		43.80	%		24.15	%
Average equity to average assets		6.01	%		6.18	%		6.86	%		7.25	%		7.61	%

Application of Critical Accounting Policies

Allowance for Credit Losses: The Corporation performs a detailed quarterly review of the allowance for credit losses. The Corporation evaluates those loans classified as substandard, under its internal risk rating system, on an individual basis for impairment. 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. The Corporation uses factors such as, historical portfolio losses, national and local economic trends and levels of delinquency to determine the appropriate level and allocation of the allowance for loans in this

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

grouping. The Corporation’s policy dictates that specifically identified credit losses be recognized immediately by a charge to the allowance for credit losses.

Inherent risks and uncertainties related to determination of adequacy of the allowance for credit losses require management to depend on estimates, appraisals and evaluations of loans to prepare the analysis. Changes in economic conditions and the financial prospects of borrowers may result in changes to the estimates, appraisals and evaluations used. In addition, if circumstances and losses differ substantially from management’s assumptions and estimates, the allowance for credit losses may not be sufficient to absorb all future losses and net income could be significantly impacted.

Assets

At December 31, 2009, the Corporation’s total assets were $543.8 million, a decrease of $13.1 million or 2.35%, from December 31, 2008. The largest segment of asset decline for the year ended December 31, 2009 occurred in the trading securities and the available for sale investment portfolio which decreased in total $28.1 million. Partially offsetting the decrease in investments was an increase in cash and cash equivalents of $18.0 million. Trading securities decreased $17.5 million in 2009 primarily from the call and sale of agency securities. Securities available for sale of $65.9 million decreased $10.6 million from the maturity, call and sale of instruments. The Corporation has increased its short term cash position in order to increase its liquidity given the current economic uncertainties and to reduce its regulatory capital requirements.

Commercial real estate loans decreased $11.3 million in 2009, or 3.94%, from 2008. The decrease in the commercial real estate portfolio was entirely related to a decrease in construction and land development loans which decreased $11.7 million during 2009. The Corporation actively pursued strategies to reduce the exposure in construction and land development loans in 2009 through foreclosure of real estate and loan charge offs. The primary collateral on these loans is commercial real estate, although other forms of collateral are also used to secure the loans. We also typically obtain the personal guarantees of the borrowers. Commercial and industrial loans at December 31, 2009 totaled $48.8 million, an increase of $10.1 million or 26.01%, over the year ended December 31, 2008. Commercial and industrial loans as a percentage of total loans comprised 12.10% at December 31, 2009, an increase from 9.51% of total loans at December 31, 2008. The growth in commercial and industrial loans included those loans secured with non-real estate collateral such as receivables and deposit accounts held with the Bank. The Corporation has historically had a lower percentage of commercial and industrial type loans compared to commercial real estate loans as it concentrates its lending in the commercial real estate sector. We expect the commercial real estate and the commercial and industrial loan portfolios to shrink given the Corporation’s and Bank’s capital levels and the continuing economic difficulties in our market area.

The residential mortgage loan portfolio totaled $51.1 million at December 31, 2009, a decrease of $3.3 million or 6.08%, from 2008. The Corporation continues to sell the residential mortgage loans it originates as the yields available from these loans is relatively lower in comparison to the commercial base. The Corporation does retain the servicing, allowing the Corporation to retain customers and the related deposit base, coupled with other banking products. Adjustable rate loans represented $30.8 million, or 60.2%, of the total residential mortgage loan portfolio at December 31, 2009. Residential mortgage loans are made principally as an accommodation to our business banking customers. The residential ARM loans reprice typically at 400 basis points over the one year Treasury rate. The home equity lines of credit (“HELOC”) totaled $21.9 million, or 5.42% of total loans, at December 31, 2009, an increase of $659,000 from 2008. This portfolio product is tied to The Wall Street Journal prime interest rate. These loans are secured by real estate and are currently originated with loan to values (including all prior liens) up to 80% of the appraised value of the real estate. The Corporation has significantly curtailed lending in this segment of the loan portfolio due to the dramatic decline in real estate collateral values in southeastern Michigan and nationwide.

Consumer loans (excluding HELOCs and credit card loans) totaled $7.0 million at December 31, 2009, a decrease of $146,000 from December 31, 2008, as management intentionally sought to reduce the Corporation’s exposure in this portfolio. The largest portion of the consumer loan portfolio is comprised of boat loans. The Corporation’s geographic proximity to Lake St. Clair and the lending experience in this area have contributed to this segment of the portfolio. In 2005, the Corporation offered less competitive interest rates on boat loans to reduce potential credit exposure in this area. The current downturn in the local economy has adversely affected the ability of borrowers to repay the outstanding loans. At December 31, 2009, boat loans comprised approximately $5.6

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

million, or 80.0%, of the consumer loan portfolio and 1.39% of total loans compared to $6.0 million, or 84.0%, of the consumer portfolio and 1.50% of total loans at December 31, 2008.

Mortgage loans held for sale totaled $3.5 million at December 31, 2009 compared to $3.3 million at December 31, 2008. The mortgage loans were originated by the Bank’s mortgage subsidiary. While the total amount of mortgages held for sale increased slightly from December 31, 2008 to December 31, 2009, the total volume of residential mortgages sold increased to $136.2 million during 2009 from $71.0 million during 2008. Loans closed generally remain in loans held for sale for less than 30 days in duration. Loans are normally committed for sale before funding takes place.

The investment security portfolio totaled $69.4 million at December 31, 2009, compared to $95.5 million at December 31, 2008, and was comprised of securities held as available for sale, held to maturity and held as trading.

Total securities available for sale decreased $10.6 million from December 31, 2008 to $65.9 million at December 31, 2009, primarily from the sale and maturity of $12.0 million of U.S. Agency debt, $7.1 million in bank qualified municipal bonds, and $6.8 million of U.S. Agency collateralized mortgage obligations. The decreases in the investment portfolio were offset by increases of $15.2 million in U.S. Agency mortgage backed securities. The majority of the available for sale investment portfolio, or $56.2 million, was comprised of Ginnie Mae (GNMA) mortgage backed instruments. These securities are guaranteed by the full faith and credit of the U.S. government. Additionally, these investments carry a zero risk weighting relative to the risk based capital ratio of the Corporation and Bank. At December 31, 2009, the available for sale portfolio had net unrealized gains of $250,000, or approximately 0.38%, of the aggregate portfolio. As of December 31, 2009, the available for sale portfolio comprised $60.8 million in U.S. Agency mortgage backed securities, including collateralized mortgage obligations and $4.4 million in bank qualified tax exempt municipal bonds. The remaining portion of the available for sale portfolio represents approximately 1 percent of the outstanding balances. U.S. Agency mortgage backed securities are primarily pledged against repurchase agreements and advances from the Federal Home Loan Bank of Indianapolis. The Corporation had less than half of one percent of the portfolio invested in corporate instruments at December 31, 2009. Unrealized losses have not been recognized into income, except for those securities classified as trading, because the issuers’ bonds are of high credit quality. 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 are primarily due to increased market interest rates. A substantial part of the portfolio restructuring was related to achieving capital efficiency with instruments with very low capital requirements.

In the first quarter of 2009, the Corporation elected to sell substantially all of the investment securities recorded as trading and to unwind the hedging interest rate swap position with the counterparty which resulted in realizing a combined net loss of $400,000 in 2009. This was based on management’s determination that the combination of the securities and interest rate swap would no longer provide a benefit to the Corporation in the current historically low interest rate environment. The Corporation had held the securities and interest rate swap for an extended amount of time under ASC 825, Financial Instruments, the Fair Value Option.

The downturn in local economic conditions has led to an increase in delinquency and foreclosure activity in our market area, as it has nationwide. Nonaccrual loans in the category of commercial real estate totaled $16.0 million at December 31, 2009, and increased $3.4 million from December 31, 2008. The increase in nonaccruing commercial real estate loans was due in part to the continued weakness in the southeastern Michigan economy. Commercial and industrial nonaccrual loans totaled $584,000 at December 31, 2009, and increased moderately from $96,000 at December 31, 2008. Nonaccrual residential real estate loans totaled $5.7 million at December 31, 2009, which was an increase of $2.1 million compared to December 31, 2008. Nonaccruing home equity lines of credit totaled $219,000 at December 31, 2009 compared to $760,000 at December 31, 2008. The total nonaccruing consumer loans of $378,000 decreased from the $571,000 recorded at December 31, 2008, and is primarily attributable to a reduction in delinquent boat loans in the portfolio. Loans classified as troubled restructured debt involve forgiving a portion of interest or principal, making loans at materially less than market rates or terms or conditions not normally given to customers totaled $20.4 million. The Corporation continues to carefully monitor the performance of all of its loans. The allowance for loan losses compared to total loans at December 31, 2009 was 3.21% and the allowance for loan losses compared to nonperforming loans at that date was 56.62%.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Discussion and Analysis of Financial Condition and Results of Operations

For additional information on our nonperforming assets, see nonperforming assets under Note 5 of the Notes to Consolidated Financial Statements.

All loans are to be reported as being in nonaccrual status if: (a) they are maintained on a cash basis because of deterioration in the financial position of the borrower, (b) payment in full of interest or principal is not expected, or (c) principal or interest has been in default for a period of 90 days or more. If it can be documented that the loan obligation is both well secured and in the process of collection, the loan may stay on accrual status. Any exceptions to automatic nonaccrual status at 90 days must be approved in writing by the Senior Loan Officer and the Chief Financial Officer. A nonaccrual asset may be restored to an accrual status when none of its principal or interest is due and unpaid or when it otherwise becomes well secured and in the process of collection. A debt is “well-secured” if it is secured (1) by collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt (including accrued interest) in full, or (2) by the guaranty of a financially responsible party. A debt is “in the process of collection” if collection of the debt is proceeding in due course either through legal action, including judgment enforcement procedures, or, in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future, generally within the next 90 days.

The allowance for credit losses as a percentage of total loans was 3.21% at December 31, 2009 versus 1.80% at December 31, 2008. The large increase in the reserve percentage was primarily attributable to an increase in impaired loans with collateral deficiency. The increase in the allowance for credit losses was attributable to both an increase in collateral dependent impaired loans and the magnitude of the decrease in fair value of the collateral. Management measures the level of impairment based on the underlying estimated fair value of the collateral for those loans measured for specific reserves in the allowance for credit losses. Management evaluates the condition of the loan portfolio on a quarterly basis to determine the adequacy of the allowance for credit losses. Management’s evaluation of the allowance is further based on consideration of actual loss experience, the present and prospective financial condition of borrowers, adequacy of collateral, industry concentrations within the portfolio, and general economic conditions. Management believes that the present allowance is adequate, based on the broad range of considerations listed above.

Net loan charge-offs to average loans for the year ended December 31, 2009 totaled 2.22%, compared to 2.17% for the year ended December 31, 2008. Total loan charge-offs for 2009 were $9.8 million, compared to $8.9 million in loan charge-offs in 2008. Total recoveries in 2009 were $569,000 compared to total recoveries of $280,000 in 2008. The largest level of charge-offs occurred in the commercial real estate loan area which totaled $7.3 million. This total contained $1.2 million in builder developer loans. The commercial and industrial, commercial real estate and residential mortgage portfolios experienced higher levels of net loan charge-offs compared to 2008. The Home Equity Lines of Credit (HELOC) portfolio and the consumer loan portfolio, which is comprised primarily of boat loans, experienced lower levels of loan charge offs compared to 2008.

The Corporation performs a detailed quarterly review of the allowance for credit losses. The Corporation evaluates those loans classified as substandard, under its internal risk rating system, for impairment on an individual basis and a specific allowance is established if the loan is determined to be impaired. At December 31, 2009, the specific allowance for the commercial real estate portfolio was $8.5 million, which represented a $4.3 million increase from December 31, 2008. The specific reserve level for the commercial and industrial portfolio of $1.2 million represented a $259,000 increase from 2008. The residential real estate loans specific allowance was $1.7 million, or an increase of $867,000 or double the 2008 level of $869,000. This increase reflects the continued high level of residential mortgage loans in nonaccrual status with substantial decreases in the value of the real estate. The specific allowance for the HELOC portfolio and consumer and credit card loans was $682,000 and $616,000, respectively. The HELOC portfolio specific allowance remained almost unchanged, partially reflecting improved levels of nonperforming loans in this category. The consumer loan specific allowance increased $114,000 from 2008 to $616,000, reflecting the historically high loss rate in this portfolio of primarily boat loans. The changes in reserve allocations between the types of loans were the result of changes in impairment as defined under accounting standards.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

The level of allocation of the allowance is determined primarily by management’s evaluation of collateral value, less the cost of disposal, for the loans reviewed in this category. The remainder of the loan portfolio is segmented into loan pools with similar risk characteristics for evaluation for probable loan losses.

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 the existence of collateral and its value.

At December 31, 2009, loans totaling $23.8 million comprising primarily commercial real estate loans, were not included in the non-performing asset table contained in Note 5 of the Notes to Consolidated Financial Statements where the known information about possible credit problems of borrowers caused management to have serious doubts as to the ability of the borrowers to fully comply with present loan repayment terms and which may result in disclosure of such loans in the future.

Although management believes that the allowance for credit losses is adequate to absorb losses as they arise, there can be no assurance that the Bank will not sustain losses in any given period that could be substantial in relation to the size of the allowance for credit losses. It must be understood that inherent risks and uncertainties related to the operation of a financial institution require management to depend on estimates, appraisals and evaluations of loans and collateral to prepare the Corporation’s financial statements. Changes in economic conditions and the financial prospects of borrowers may result in changes to the estimates, appraisals and evaluations used. In addition, if circumstances and losses differ substantially from management’s assumptions and estimates, the allowance for loan losses may not be sufficient to absorb all future losses and net income could be significantly impacted.

Liabilities

During the year ended December 31, 2009, total deposits increased $43.8 million to $401.1 million. The increase in deposits was attributable to an increase in noninterest bearing demand deposit accounts of $11.5 million and retail time deposits under $100,000 of $34.1 million. The increase was offset by declines in time deposits over $100,000 as the Corporation actively pursued reduction in brokered time deposits which are included in the total. Total brokered time deposits decreased $39.8 million in 2009, decreasing to $126.6 million from $166.4 million, as the Corporation replaced wholesale funding with organic growth in deposits. The Corporation continues to utilize strategies to reduce its level of wholesale funding both in brokered time deposits and FHLB advances. The Bank experienced core deposit growth in most deposit categories with all branches of the Bank posting deposit growth. Noninterest bearing deposits, primarily business related checking accounts, increased $11.5 million, or 33.79%, at December 31, 2009 compared to December 31, 2008. The continued growth in the Bank’s branch base and a continued focused business development effort has helped increase this area of the deposit base. 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 time, 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 effect of increasing the cost of funds to a level higher than management projects. While the Bank will continue its focus on generating local deposits, it may be required to continue to use to a lesser extent, FHLB advances and brokered time deposits based on a nationwide interest rate structure, typically at what is considered to be premium interest rates. However, the local competition for certificate of deposit products has continued to be strong and the Bank has found the wholesale funding strategy to often effectively compete with the rates offered for similar term retail certificate of deposit products of local community and regional banks. If brokered deposits become unavailable to the Bank, cash equivalents and FHLB advances will be increasingly important as funding and liquidity options for the Bank.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following table shows the balance of specific deposit categories and the percentage of each category compared to total deposits:


	December 31, 2009					December 31, 2008
	Balance		Percentage			Balance		Percentage
			(Dollars in thousands)
Noninterest bearing demand	$	45,716		11.40	%	$	34,169		9.56	%
NOW accounts-interest bearing checking		17,059		4.25	%		13,670		3.83	%
Money Market		24,813		6.19	%		24,484		6.85	%
Savings		8,800		2.19	%		8,585		2.40	%
Time deposits under $100,000		77,769		19.39	%		43,685		12.22	%
Time deposits $100,000 and over		226,974		56.58	%		232,783		65.14	%


Total deposits	$	401,131		100.00	%	$	357,376		100.00	%

Short-term borrowings increased $1.7 million to $22.1 million at December 31, 2009 from December 31, 2008, due primarily to an increase in repurchase agreements which are based on the seasonal need for funds to the commercial and municipal customers who utilize the repurchase agreement product and may vary in total size dependent upon those customers’ needs. At December 31, 2009, short-term FHLB advances totaled $22.0 million and short-term repurchase agreements totaled $22.1 million. The weighted average interest rate paid on short-term borrowings at December 31, 2009 was 3.02%.

In June 2001, the Corporation started to borrow long-term advances from the FHLB to fund fixed rate investments, as part of its efforts to manage the interest rate risk associated with certain fixed rate commercial mortgage loans and investment securities. These advances are secured under a blanket security agreement by first mortgage loans and the pledging of certain securities. At December 31, 2009 FHLB advances were comprised of $22.0 million in short-term advances with a weighted average interest rate of 4.56% and long-term advances of $43.7 million with a weighted average interest rate of 4.77%. The aggregate weighted average interest rate of all FHLB advances was 4.70% with a weighted average remaining maturity of 3.0 years as of December 31, 2009. Long-term advances comprised 17 advances maturing from January 2011 to June 2016.

Stockholders’ Equity

Stockholders’ equity was $24.0 million as of December 31, 2009, which was a decrease of $10.4 million from December 31, 2008. The decrease in stockholders’ equity was primarily attributable to the net loss of $14.6 million recorded in 2009. The loss was magnified by the establishment of a valuation allowance for $5.9 million based on our determination that we may not be able to utilize in full our deferred tax asset for income tax purposes. The net change in the fair value associated with the Corporation’s subordinated debenture resulted in a valuation gain, as recorded in the consolidated statement of income, of $4.4 million in 2009, and a cumulative gain of $10.2 million, from inception in 2007. The valuation of this single instrument was a significant part of the Corporation’s equity at December 31, 2009. Partially offsetting the reduction in equity from the net loss was the successful issuance of Series B preferred stock for $4.1 million. Cash dividends paid on the Corporation’s Series A and B preferred stock decreased equity by $382,000 in 2009. The expense and corresponding increase in equity from the compensation expense for stock options awarded was $84,000. The continued low interest rate environment and the quality of the investment portfolio resulted in an increased market value of the available for sale investment security portfolio and the resulting increase in accumulated other comprehensive income of $429,000 for 2009.

Net Interest Income

The following table shows the dollar amount of changes in net interest income for each major category of interest-earning asset and interest-bearing liability, and the amount of change attributable to changes in average balances (volume) or average rates for the periods shown. Variances that are jointly attributable to both volume and rate changes have been allocated to the volume component.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations


	Year Ended									Year Ended
	December 31, 2009 vs. 2008									December 31, 2008 vs. 2007
	Increase (Decrease)									Increase (Decrease)
	Due to Changes In									Due to Changes In
				Volume									Volume
	Total			and Both			Rate			Total			and Both			Rate
							(In thousands)
Earning Assets — Interest Income
Loans	$	(70	)	$	1,469		$	(1,539	)	$	(2,264	)	$	1,486		$	(3,750	)
Securities		(1,199	)		(668	)		(531	)		(24	)		72			(96	)
Federal funds sold		(356	)		2			(358	)		(215	)		93			(308	)


Total		(1,625	)		803			(2,428	)		(2,503	)		1,651			(4,154	)

Deposits and Borrowed Funds — Interest Expense
NOW and money market accounts		(482	)		(67	)		(415	)		(1,590	)		(249	)		(1,341	)
Savings deposits		(169	)		(29	)		(140	)		(82	)		25			(107	)
Time deposits		(1,388	)		984			(2,372	)		(354	)		1,009			(1,363	)
FHLB advances and repurchase agreements		(545	)		(331	)		(214	)		1,057			1,127			(70	)
Capitalized lease obligation and ESOP loan		(1	)		(1	)		—			(5	)		(3	)		(2	)
Subordinated debentures		329			201			128			(714	)		(113	)		(601	)


Total		(2,256	)		757			(3,013	)		(1,688	)		1,796			(3,484	)

Net Interest Income	$	631		$	46		$	585		$	(815	)	$	(145	)	$	(670	)

Net interest income was $12.0 million for the year ended December 31, 2009, an increase of $631,000, or 5.55%, compared to the year ended December 31, 2008. Net interest margin, as measured on a tax equivalent basis, was 2.35% for 2009 compared with 2.30% in 2008. The increase in net interest margin was primarily the result of a higher level of noninterest bearing deposits. The reversal of interest and forgone interest totaled approximately $2.6 million and affected the net interest margin negatively by 45 basis points or approximately 16% of the decrease in net interest margin.

Interest income decreased $1.6 million, or 5.34%, to $28.8 million for the year ended December 31, 2009, compared to $30.4 million for the year ended December 31, 2008. The decrease in interest income was attributable primarily to a decrease in market interest rates, with the largest decrease attributable to the continued decline in loan yields, as fixed rate loans continued to reprice due to the historic drop in short-term interest rates instituted by the Federal Reserve Bank in 2008. Also affecting the decline in interest income from total loans was the higher overall level of nonperforming assets during 2009 compared to 2008, since loans classified as nonaccrual do not accrue interest income. Additionally loans classified as Troubled Debt Restructurings often carry a reduced interest rate compared to market rates to provide payment relief to the borrower and affect the overall loan portfolio yield. The decrease in interest income from securities for the same time period was caused by decreases in short-term interest rates, deleveraging of the investment portfolio and the restructuring of the investment portfolio to reduce duration. The substantial decrease in the overnight federal funds rate to nearly zero had a negative effect on interest income. The total yield of federal funds sold overnight was only 17 basis points.

Interest expense decreased $2.3 million, or 11.84%, to $16.8 million for the year ended December 31, 2009, compared to $19.0 million for the year ended December 31, 2008. The decrease in interest expense from 2009 compared to 2008 was due to the large and historic drop in market interest rates during 2009, with every category of interest-bearing liabilities posting a decline in interest expense.

Interest income decreased $2.5 million, or 7.60%, from $30.4 million for the year ended December 31, 2008, compared to $32.9 million for the year ended December 31, 2007. The decrease in interest income was attributable primarily to a decrease in market interest rates, with the largest decrease attributable to the decline in

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

loan yields due to the historic drop in short-term interest rates instituted by the Federal Reserve Bank in 2008. Also affecting the decline in interest income from total loans was the higher overall level of nonperforming assets during 2008 compared to 2007, since loans classified as nonaccrual do not accrue interest income. The slight decrease in interest income from securities for the same time period was caused by decreases in short-term interest rates and resulting reinvestment of the security portfolio runoff at lower market rates. Partially offsetting this decrease was an overall average increase in the security portfolio volume from 2007 to 2008. Interest expense decreased $1.7 million, or 8.14%, to $19.0 million for the year ended December 31, 2008, compared to $20.7 million for the year ended December 31, 2007. The decrease in interest expense from 2008 compared to 2007 was due to the large and historic drop in market interest rates during 2008, with every category of interest-bearing liabilities posting a decline in interest expense, except for the category of FHLB borrowings which had increased solely due to volume levels.

The average yield on earning assets for 2009 was 5.55% compared to 5.97% in 2008. The average yield on the total loan portfolio, which contains both loans held for sale and investment for 2009 was 6.06% compared to 6.45% in 2008. At the end of 2009, the Community Central Bank prime rate stood at 5.0%. The Corporation’s prime interest rate for primarily commercial loan customers did not move in tandem with the federal funds rate movement during every rate decrease. The overnight federal funds rate started 2008 at 4.25% moving to almost zero at the end of 2008 and remaining zero throughout 2009. The commercial, commercial real estate and HELOC portfolios that reprice with prime interest rate changes totaled approximately $106 million and were the primary driver for the decrease in total loan yield during 2009. The Corporation’s security portfolio had an average non-tax adjusted yield of 4.02% during 2009. The yield was 55 basis points lower than the average yield recorded in 2008. At December 31, 2009, $4.0 million of the total $69.1 million investment portfolio was variable rate.

The average rate paid on interest-bearing liabilities in 2009 was 3.58% compared to 4.07% in 2008. The decrease in the average rate was due to the decrease in overall market interest rates. The decrease in the average yield for NOW and money market accounts for 2009 were primarily attributable to the indexed money market account, with an average yield of 0.69% in 2009 versus 1.56% in 2008. The average yield paid on savings also decreased, moving to 0.63% in 2009, from 1.64% in 2008. The average yield on time deposits decreased due to the decrease in market rates and the repricing characteristics of this deposit category. The yield on the total time deposit portfolio decreased to 3.53% in 2009 from 4.49% in 2008. The yield on FHLB advances and repurchase agreements decreased to 4.08% in 2009 from 4.23% in 2008 due to the repricing of variable advances and the decrease in the interest rate paid on retail repurchase agreements. This was partially offset by an increase in the reset rate of the wholesale structured repurchase agreements totaling $19.0 million. The average rate paid on the subordinated debenture increased in 2009 to 6.66% from 5.83%, reflecting the effects of the interest rate swap which reduced the overall cost of funds on this instrument in 2008 and was unwound in 2009.

The average yield on earning assets for 2008 was 5.97% compared to 6.84% in 2007. The average yield on the total loan portfolio, which contains both loans held for sale and investment for 2008, was 6.45% compared to 7.45% in 2007. At the end of 2008, the Community Central Bank prime rate stood at 5.0%. The Corporation’s prime interest rate for primarily commercial loan customers did not move in tandem with the federal funds rate movement during every rate decrease. The overnight federal funds rate started 2008 at 4.25% moving to almost zero at the end of 2008. The commercial, commercial real estate and HELOC portfolios that reprice with prime interest rate changes totaled approximately $133.0 million and were the primary driver for the decrease in total loan yield during 2008. The Corporation’s security portfolio had an average non-tax adjusted yield of 4.57% during 2008. The yield was slightly lower than the average yield recorded. At December 31, 2008, $10.4 million of the total investment portfolio was variable rate.

The average rate paid on interest-bearing liabilities in 2008 was 4.07% compared to 4.72% in 2007. The decrease in the average rate was due to the decrease in overall market interest rates. The decrease in the average rate for NOW and money market accounts for 2008 were primarily attributable to the indexed money market account, with an average rate of 1.56% in 2008 versus 3.66% in 2007. The average rate paid on savings also decreased, moving to 1.64% in 2008, from 2.50% in 2007. The average rate on time deposits decreased due to the decrease in market rates and the repricing characteristics of this deposit category. The rate on the total time deposit portfolio decreased to 4.49% in 2008 from 5.09% in 2007. The rate on FHLB advances and repurchase agreements decreased to 4.23% in 2008 from 4.29% in 2007 due to the repricing of variable advances and the decrease in the interest rate paid on retail repurchase agreements. This was partially offset by an increase in the reset rate of the

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

wholesale structured repurchase agreements totaling $19.0 million. The average rate paid on the subordinated debenture decreased in 2008 to 5.83% from 7.76%, reflecting the effects of the interest rate swap which reduced the overall cost of funds on this instrument. The interest rate swap lowered the cost of funds as short-term interest rates continued to decrease in 2008.

The following table shows the Corporation’s consolidated average balances of assets, liabilities, and equity. The table also details the amount of interest income or interest expense and the average yield or rate for each category of interest-earning asset or interest-bearing liability, and the net interest margin for the periods indicated. The average balance of securities represents amortized cost. Nonaccruing loans are included in the average loans outstanding with no yield associated with them.


	2009							2008								2007
					Average								Average							Average
			Interest		Rate						Interest		Rate					Interest		Rate
	Average		Income/		Earned/			Average			Income/		Earned/			Average		Income/		Earned/
	Balance		Expense		Paid			Balance			Expense		Paid			Balance		Expense		Paid
										(In thousands)
Assets
Loans	$	421,747	$	25,570		6.06	%	$	397,600		$	25,640		6.45	%	$	374,502	$	27,904		7.45	%
Securities		79,570		3,197		4.02	%		96,226			4,396		4.57	%		94,669		4,420		4.67	%
Federal funds sold		17,219		30		0.17	%		16,597			386		2.44	%		12,003		601		5.01	%


Total Earning Assets / Total Interest Income / Average Yield		518,536		28,797		5.55	%		510,423			30,422		5.97	%		481,174		32,925		6.84	%


Cash and due from banks		9,663							7,822								7,173
All other assets		26,293							24,986								23,523


Total Assets	$	554,492						$	543,231							$	511,870


Liabilities & Stockholders’ Equity
NOW and money market accounts	$	38,007		263		0.69	%	$	47,852			745		1.56	%	$	63,773		2,335		3.66	%
Savings deposits		9,092		57		0.63	%		13,804			226		1.64	%		12,321		308		2.50	%
Time deposits		275,904		9,753		3.53	%		248,314			11,141		4.49	%		225,934		11,495		5.09	%
FHLB advances and repurchase agreements		134,394		5,483		4.08	%		142,512			6,028		4.23	%		115,962		4,971		4.29	%
ESOP Loan		—		—		0.00	%		15			1		5.33	%		67		6		8.96	%
Subordinated debentures		11,266		1,235		6.66	%		15,528			906		5.83	%		20,880		1,620		7.76	%


Total Interest Bearing Liabilities/ Total Interest Expense / Average Interest Rate Spread		468,663		16,791		3.58	%		468,025			19,047		4.07	%		438,937		20,735		4.72	%


Noninterest bearing deposits		49,051							37,470								34,594
All other liabilities		3,477							4,176								3,234
Stockholders’ equity		33,301							33,560								35,105


Total Liabilities & Equity	$	554,492						$	543,231							$	511,870



Net Interest Income			$	12,006							$	11,375						$	12,190


Net Interest Rate Spread						1.97	%							1.90	%						2.12	%

Net Interest Margin (Net Interest Income / Total Earning Assets)						2.32	%							2.23	%						2.53	%

Taxable equivalent						2.35	%							2.30	%						2.68	%

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Provision for Credit Losses

The provision for credit losses for the year ended December 31, 2009 was $14.9 million, an increase of $5.4 million from 2008. The increase in the provision was due primarily to impairment in commercial real estate loans. Builder developer loans which affected the provision in 2008 had a much lower impact in 2009. The provision for credit losses for the year ended December 31, 2008 was $9.5 million, an increase of $5.9 million from 2007. This large increase was primarily due to provision expense related to builder developer loans in 2008. See Management’s Discussion and Analysis of Financial Condition and Results of Operations-Assets for a more detailed discussion.

Noninterest Income

Noninterest income was $9.6 million for 2009, decreasing $1.9 million, or 16.43%, from 2008. The decrease was primarily related to gains recorded from the change in fair market value of assets and liabilities as measured under the fair value for 2009 compared to 2008, when $3.9 million and $7.5 million were recorded, respectively. The gains recorded in 2009 have been largely attributable to the fair value of the subordinated debenture connected with the issuance of trust preferred securities. The dramatic widening of market credit spreads for subordinated debentures and trust preferred securities changed the relative fair value of this financial liability dramatically. Changes in credit spreads are not easily predictable and may cause adverse changes in the fair value of this instrument and a possible loss of income in the future. Fiduciary income was $319,000 for 2009, which was a decrease of $51,000 or 13.78%, from 2008 as a result of market declines in assessable assets held under management. Mortgage banking income comprised primarily of gains on the sale of residential mortgages was $3.3 million for 2009. The increase of $1.7 million, or 112.0%, from 2008 was reflective of the sizeable growth in the secondary market sales of government FHA and FNMA mortgages, spurred by low mortgage interest rates in 2009 and government stimulus programs such as the first time home buyers tax credit. Net realized gains from the sale of securities were $726,000 for 2009 and were attributable to restructuring activities in the available for sale securities portfolio. The category of other noninterest income totaling $944,000 in 2009 decreased $332,000, primarily from losses on the disposal of repossessed assets and other real estate owned.

Noninterest income was $11.5 million for 2008, an increase of $5.8 million, or 101.2%, from 2007. The increase was primarily related to a net change in the fair value of financial assets and liabilities measured at fair value, which totaled $7.5 million on a pretax basis and $5.0 million after tax. The Corporation issued an $18.0 million subordinated debenture in February 2007, and this instrument was chosen for fair value accounting treatment as part of the early adoption of the new accounting standard, which led to the increase in income. The dramatic widening of market credit spreads experienced during 2008 increased the relative fair value of this financial liability dramatically. The Corporation hedged itself from changes in interest rates with an interest rate swap which was also accounted for at fair value. The hedge does not cover changes in credit spreads, which typically occur over much longer periods of time than we are currently experiencing. The interest rate swap had a net favorable change in fair value during 2008 of $2.9 million dollars and an overall fair value of a positive $3.5 million at December 31, 2008. In the first quarter of 2009, the Corporation elected to unwind the interest rate swap position with the counterparty which resulted in realizing a $3.3 million gain representing substantially all of the unrealized gains that had been recorded as noninterest income through December 31, 2008. Management continues to closely monitor changes in credit spreads which are not easily predictable and may cause adverse changes in the fair value of this instrument and a possible loss of income in the future.

Fiduciary income of $370,000 decreased $67,000, or 15.33%, during 2008 compared to 2007 from overall declines in the assessable fee based market values of trust assets. The decline in market values of trust assets followed the general trends in the overall equity market experienced in 2008. The Corporation had $75 million in assets under management in its trust division at December 31, 2009. Deposit service charge income of $488,000 during 2008 increased $69,000, or 16.47%, from 2007 primarily from increased service charge fees and a broadened branch base. Income from gains on the sale of residential mortgages of $1.6 million decreased $803,000 from 2007, or 34.0%, and was reflective of the decline in home sales experienced in the Midwest region. Other income of $1.3 million increased $123,000, or 10.67%, from 2007, due to an increase in several areas of noninterest income, including the net change from the increase in the cash surrender value of bank owned life insurance of $110,000. Net realized gains from the sale of securities were $214,000 for 2008 and were attributable to restructuring activities in the available for sale security portfolio.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Noninterest Expense

Noninterest expense was $20.2 million for 2009, an increase of 20.57% or $3.4 million from 2008 as a result of an increase in other operating expenses. Other operating expense of $9.8 million increased $2.5 million, or 34.19%, during 2009. The largest increases in this category occurred in expenses of $3.4 million and $486,000, respectively, associated with maintaining the other real estate owned properties and repossessed boat collateral. Other areas of noninterest expense which increased in 2009 over 2008 included increases in the FDIC insurance premium and legal costs related to loan workouts. For 2009, the Corporation’s FDIC insurance assessment was $1.4 million, compared to $410,000 for 2008. In December of 2009, the Bank prepaid an FDIC assessment of $4.0 million, which will be amortized over the years 2010 through 2012. In 2010 our prepaid portion of the assessment that will be expensed will total $1.2 million. Legal expense in 2009 from nonperforming loan workouts was approximately $743,000 which represents an increase of $278,000 or 60%, compared to the related legal expense on loan workouts for 2008 of $465,000. Salaries, benefits and payroll taxes of $8.6 million increased $1.0 million, or 13.75%, from 2008. This was attributable to origination commissions paid at the mortgage company for secondary residential mortgage sales and the result of higher mortgage origination volumes from 2008. Total salary and benefit expense without the mortgage company was $6.1 million for 2009 compared to $6.2 million for 2008, or a 1.87% reduction in total expense. No bonuses have been paid or accrued for the named executive officers for 2009 and 2008.

Noninterest expense was $16.7 million for 2008, an increase of 20.68% or $2.9 million from 2007 as a result of an increase in other operating expenses. Other operating expense of $7.3 million increased $3.2 million, or 76.52%, during 2008. The largest increases in this category occurred in expenses of $2.1 million associated with maintaining the other real estate owned properties and an impairment loss of $743,000 relating to the write-down of the goodwill associated with our North Oakland Community Bank acquisition in 2003. Other areas of noninterest expense which increased in 2008 over 2007 included increases in the FDIC insurance premium and legal costs related to loan workouts. For 2008, the Corporation’s FDIC insurance assessment was $410,000, compared to $283,000 for 2007. Legal expense in 2008 from nonperforming loan workouts was approximately $414,000 which represents an increase of $176,000 or 73.95%, compared to the related legal expense on loan workouts for 2007 of $238,000. Salaries, benefits and payroll taxes of $7.6 million declined $326,000, or 4.13%, from 2007. This was attributable to reductions in staffing levels within the mortgage company subsidiary, coupled with an overall reduction in mortgage company origination commissions as the result of lower mortgage origination volumes. No bonuses have been paid or accrued for the named executive officers for 2008 and 2007.

Income Taxes

At December 31, 2009, we determined we needed a valuation allowance based primarily on our net operating loss for 2008 and 2009 and the challenging environment currently confronting banks that could impact future operating results. As a result, we recorded a $5.9 million valuation allowance on deferred tax assets at December 31, 2009 that was charged to federal income tax expense. The valuation allowance may be reversed to income in future periods to the extent that the related deferred tax assets are realized or the valuation allowance is no longer required. We had federal income tax expense of $1.2 million for 2009 compared to a federal income tax benefit of $1.4 million in 2008. The change in tax expense was primarily attributable to the aforementioned charge to federal income tax expense to establish a valuation allowance. Permanent differences in taxable income arise from tax exempt income related to investments in qualified tax exempt securities and in BOLI. The increase in cash surrender value of BOLI is exempt from federal income tax. The level of qualified tax exempt securities was greatly reduced in 2009 as it was in 2008, as the Corporation no longer had the need for tax exempt income.

We had a federal income tax benefit of $1.4 million for 2008 compared to a federal income tax benefit of $295,000 in 2007. The change in tax benefit was primarily attributable to a pretax loss recorded in 2008 from credit losses primarily in the form of a large loan loss provision in 2008 over 2007. Permanent differences in taxable income arising from tax exempt income related to investments in qualified tax exempt securities and in BOLI also reduced the overall tax accrual in 2008. The increase in cash surrender value of BOLI is exempt from federal income tax. The level of qualified tax exempt securities was greatly reduced in 2008 as the Corporation’s need for tax exempt income diminished.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources; Asset/Liability Management

Liquidity allows the Bank 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 requires 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, unpledged securities with market values above book, loans and securities which mature within one year, and sales of residential mortgage loans. Additional liquidity is provided by 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 certificates of deposit. We anticipate that we will have sufficient funds available to meet our future commitments. We have substantially increased our cash and cash equivalent balances in 2009 in the event our access to brokered deposits is curtailed in the future. As of December 31, 2009, unused commitments comprised $67.3 million. The Bank has $185.1 million in time deposits coming due within twelve months from December 31, 2009, which includes $90.6 million of brokered deposits. The Bank will continue to, when possible, reduce the use of brokered certificates and other wholesale funding sources when replacing maturing deposits and other borrowings.

The Corporation and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments about components, risk weightings, and other factors in which the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct impact on the ability of the Bank to meet its funding requirements. The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Because the Bank was only adequately capitalized at December 31, 2009, regulatory approval is required to accept new, or renew existing brokered deposits. No assurances can be given that such approvals will be obtained. At December 31, 2009, municipal time deposits totaled $8.5 million. Municipal time deposits typically have maturities less than three months.

The largest uses and sources of cash and cash equivalents for the Corporation for the year ended December 31, 2009, as noted in the Consolidated Statement of Cash Flow, were centered primarily on cash provided from investing activities and the net cash provided by financing activities. The cash provided from investing activities was largely due to a decrease in investment securities in total of $27.0 million, with the remaining use of funds attributable to a slight increase in loans. Cash provided from financing activities, which included net increases from demand, savings and time deposits of $43.8 million and increases in short-term borrowings, consisting of retail repurchase sweep agreements, consisted of $1.7 million. The issuance of preferred stock provided $4.1 million from financing activities. Partially offsetting the increases in net cash provided from deposits was repayment of FHLB advances of $42.5 million. The net cash used in operating activities was $10.0 million. Total cash and cash equivalents at the end of December 31, 2009 was $34.2 million, an increase of $18.0 million from December 31, 2008.

Off-Balance Sheet Arrangements and Contractual Obligations

Off-Balance Sheet Arrangements: As of December 31, 2009, we have not participated in any material unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special entities. The Corporation does have significant commitments to fund loans in the ordinary course of business. These commitments and resulting off-balance sheet risk are further discussed in Note 18 of the Corporation’s Consolidated Financial Statements.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Contractual Obligations:


	Payments Due by Period
			Less than		1-3		3-5		More than
	Total		1 Year		Years		Years		5 Years
	(In thousands)
Long term debt at face value (1)	$	18,557	$	—	$	—	$	—	$	18,557
Capital lease obligations		—		—		—		—		—
Operating leases (2)		1,318		256		222		385		255
Other contractual obligations (3)		2,160		480		960		720		—


(1)		$18.6 million of subordinated debentures (see Note 11 to the Consolidated Financial Statements)

(2)		See Note 14 to the Consolidated Financial Statements

(3)		Remaining contract with core processing provider for IT services

Quantitative and Qualitative Disclosure about Market Risk

The Corporation’s Asset Liability Committee (“ALCO”) meets periodically. Some of the major areas of focus of the ALCO incorporate the following overview functions: review the interest rate risk sensitivity of the Bank to measure the impact of changing interest rates on the Bank’s net interest income, review the liquidity position through various measurements, review current and projected economic conditions and the corresponding impact on the Bank, ensure that capital and adequacy of the allowance for loan losses are maintained at proper levels to sustain growth, monitor the investment portfolio, recommend policies and strategies to the Board that incorporate a better balance of our interest rate risk, liquidity, balance sheet mix and yield management, and review the current balance sheet mix and proactively determine the future product mix.

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.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following table presents an analysis of our interest-sensitivity gap position at December 31, 2009. All interest-earning assets and interest-bearing liabilities are shown based on the earlier of their contractual maturity or repricing date adjusted by forecasted prepayment and decay rates, our historical experience, and the repricing and prepayment characteristics of portfolios acquired through acquisition.


			After Three			After One
	Within		Months But			Year But		After
	Three		Within			Within		Five
	Months		One Year			Five Years		Years			Total
	(In thousands)
Interest-earning assets
Excess cash and federal funds sold	$	26,163	$	—		$	—	$	—		$	26,163
Securities, at amortized cost		4,220		19,105			41,558		4,237			69,120
FHLB stock		—		5,877			—		—			5,877
Loans (including held for sale)		105,962		69,782			194,889		36,031			406,664

Total		136,345		94,764			236,447		40,268		$	507,824


Interest bearing liabilities
NOW and money market accounts		20,874		6,917			12,841		1,240			41,872
Savings deposits		528		2,288			5,984		—			8,800
Jumbo time deposits		51,651		94,395			80,928		—			226,974
Time deposits < $100,000		7,598		31,439			38,731		—			77,768
Repurchase agreements		22,106		—			19,000		—			41,106
FHLB		—		22,000			18,500		25,200			65,700
Subordinated debentures		—		—			—		18,557			18,557

Total		102,757		157,039			175,984		44,997		$	480,777


Rate sensitivity gap	$	33,588	$	(62,275	)	$	60,463	$	(4,729	)

Cumulative rate sensitivity gap			$	(28,687	)	$	31,776	$	27,047


Rate sensitivity gap ratio		1.33x		0.60x			1.34x		.89x

Cumulative rate sensitivity gap ratio				0.89x			1.07x		1.06x

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.

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.

Community Central Bank Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations

As of December 31, 2009, 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		(15.69	%)
Interest rates up 200 basis points		(9.59	%)
Interest rates up 100 basis points		(4.45	%)
Base Case		—
Interest rates down 100 basis points		2.97	%
Interest rates down 200 basis points		4.08	%
Interest rates down 300 basis points		(0.58	%)

Community Central Bank Corporation
Stockholder Information

SEC Form 10-K

Copies of the Corporation’s annual report on Form 10-K, as filed with the Securities and Exchange Commission are available to stockholders without charge, upon written request. Please mail your request to Ray T. Colonius; Corporate Treasurer, Community Central Bank Corporation, 120 North Main Street, Mount Clemens, MI 48043.

Stock Information

The common stock of Community Central Bank Corporation trades on The NASDAQ Capital Market under the ticker symbol “CCBD.” At December 31, 2009, there were 3,737,181 shares of Community Central Bank Corporation common stock issued and outstanding and approximately 500 shareholders of record.

The following table presents the quarterly range of high and low sales prices of Community Central Bank Corporation common stock for 2009 and 2008, as well as the dividends declared during the stated periods. The price information set forth in the table was reported by The NASDAQ Global Market and the NASDAQ Capital Market. Our cash dividend payout policy is continually reviewed by management and the Board of Directors. Dividend payment decisions are made after considering a variety of factors, including earnings, financial condition, market considerations and regulatory restrictions. The Corporation relies significantly upon dividends originating from the Bank to accumulate cash for payment of dividends to our stockholders. Restrictions on dividend payments from the Bank are described in Note 19 of the Notes to Consolidated Statements included in this Annual Report.


	2009
					Cash
					Dividends
Quarter	High		Low		Declared
Fourth	$	2.15	$	1.35	$	—
Third		1.92		1.02		—
Second		2.70		1.15		—
First		2.50		1.09		—


	2008
					Cash
					Dividends
Quarter	High		Low		Declared
Fourth	$	4.50	$	1.38	$	—
Third		4.50		2.50		0.02
Second		7.18		2.74		0.02
First		7.94		4.56		0.06

Community Central Bank Corporation
Stockholder Information

Primary Market Makers

Hill, Thompson, Magid & Co., Inc.
15 Exchange Place
Jersey City, NJ 07302-3912

Knight Securities, L.P.
545 Washington Blvd.
Jersey City, NJ 07310

RBC Capital Markets, L.P.
655 Metro Place South
Metro Center V — Suite 580
Dublin, OH 43017

Howe Barnes Hoefer and Arnett Investment, Inc.
222 South Riverside Plaza, 7^th Floor
Chicago, IL 60606

UBS Capital Markets, L.P.
677 Washington Blvd.
Stamford, CT 06902

Stock Registrar and Transfer Agent

Computershare Trust Company, N.A.
PO Box 43010
Providence, RI 02940-3010
Shareholder Inquiries 1-800-426-5523
www.computershare.com

Independent Auditor

Plante & Moran, P.L.L.C.
2601 Cambridge Ct., Suite 500
Auburn Hills, MI 48326

Legal Counsel

Silver, Freedman & Taff, L.L.P.
3299 K Street, NW, Suite 100
Washington D.C. 20007

Information

News media representatives and those seeking additional information about the Corporation should contact Ray T. Colonius, Corporate Treasurer, at (586) 783-4500, or by writing him at 120 North Main Street, Mount Clemens, MI 48043.

Annual Meeting

This year’s annual meeting of stockholders will be held at 9:00 a.m., on Tuesday, May 18, 2010, at the Concorde Inn Banquet & Convention Center, 44315 Gratiot Avenue, Clinton Township, MI 48036.

002CS-1A680

Attached files

COMMUNITY CENTRAL BANK CORP Reports

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