U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTER ENDED JUNE 30, 2001
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COMMISSION FILE NUMBER: 0-25251
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CENTRAL BANCORP, INC.
---------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MASSACHUSETTS
-------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
I.R.S. EMPLOYER IDENTIFICATION NO. 04-3447594
399 HIGHLAND AVENUE, SOMERVILLE, MA. 02144
------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER
(617) 628-4000
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Class Outstanding at August 10, 2001
----------------------------- ------------------------------
Common Stock, $1.00 par value 1,682,319
CENTRAL BANCORP, INC. AND SUBSIDIARY
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition at March 31,
2001 and June 30, 2001 (unaudited)
Consolidated Statements of Income for the three month
periods ended June 30, 2001 and 2000 (unaudited)
Consolidated Statements of Cash Flows for the three month
periods ended June 30, 2001 and 2000 (unaudited)
Consolidated Statements of Changes in Stockholders' Equity
for the three month periods ended June 30, 2001 and 2000
(unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the three month periods ended
June 30, 2001 and 2000
Item 3. Quantitative and Qualitative Disclosures about Market Risk
(Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 2001)
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Item 1-Financial Statements:
CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
June 30, March 31,
(Dollars in Thousands) 2001 2001
- ---------------------------------------------------------------------------------------------------------------
ASSETS (Unaudited)
Cash and due from banks $ 4,955 $ 5,351
---------------------------------------
Short-term investments 43,098 34,529
Investments available for sale:
Investment securities 29,852 31,263
Mortgage-backed securities 17,679 19,314
Stock in Federal Home Loan Bank of Boston, at cost 6,150 6,150
The Co-operative Central Bank Reserve Fund 1,576 1,576
---------------------------------------
Total investments 98,355 92,832
---------------------------------------
Loans:
Mortgage loans 323,966 338,898
Other loans 7,649 6,895
---------------------------------------
331,615 345,793
Less allowance for loan losses (3,211) (3,106)
---------------------------------------
Net loans 328,404 342,687
---------------------------------------
Accrued interest receivable 2,226 2,426
Office properties and equipment, net 1,978 2,018
Deferred tax asset, net 821 801
Goodwill, net 2,448 2,520
Other assets 660 702
---------------------------------------
Total assets $ 439,847 $ 449,337
=======================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 284,131 $ 287,167
Advances from Federal Home Loan Bank of Boston 114,000 121,000
Advance payments by borrowers for taxes and insurance 1,021 1,220
Accrued interest payable 595 608
Accrued income taxes 222 --
Accrued expenses and other liabilities 1,360 1,130
---------------------------------------
Total liabilities 401,329 411,125
---------------------------------------
Commitments and Contingencies (Note 2)
Stockholders' equity:
Preferred stock $1.00 par value; authorized 5,000,000 shares;
none issued or outstanding -- --
Common stock $1.00 par value; authorized 15,000,000 shares;
Issued 1,988,000,and 1,970,000 shares (outstanding 1,682,319 and
1,684,164) at June 30, 2001 and March 31, 2001 respectively 1,988 1,970
Additional paid-in capital 11,536 11,190
Retained income 31,312 30,950
Treasury stock (305,681 shares and 285,836 shares at June 30,
2001, and March 31, 2001, respectively), at cost (5,636) (5,230)
Accumulated other comprehensive income (loss) (note 4) (477) (431)
Unearned compensation - ESOP (205) (237)
---------------------------------------
Total stockholders' equity 38,518 38,212
---------------------------------------
Total liabilities and stockholders' equity $ 439,847 $ 449,337
=======================================
See accompanying notes to unaudited consolidated financial statements.
CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
June 30,
2001 2000
----------------------------
Interest and dividend income:
Mortgage loans $ 6,149 $ 6,013
Other loans 181 126
Short-term investments 472 85
Investment securities 489 610
Mortgage-backed securities 288 375
The Co-operative Central Bank Reserve Fund 20 21
----------------------------
Total interest and dividend income 7,599 7,230
----------------------------
Interest expense:
Deposits 2,638 2,343
Advances from Federal Home Loan Bank of Boston 1,726 1,450
----------------------------
Total interest expense 4,364 3,793
----------------------------
Net interest and dividend income 3,235 3,437
Provision for loan losses -- --
----------------------------
Net interest and dividend income after
provision for loan losses 3,235 3,437
----------------------------
Non-interest income:
Deposit service charges 123 103
Net gains from sales of investment securities 203 184
Other income 83 51
----------------------------
Total non-interest income 409 338
----------------------------
Operating expenses:
Salaries and employee benefits 1,533 1,317
Occupancy and equipment 318 279
Data processing service fees 270 128
Professional fees 192 268
Goodwill amortization 72 72
Advertising 119 226
Other expense 307 286
----------------------------
Total operating expenses 2,811 2,576
----------------------------
Income before income taxes 833 1,199
Income tax expense 303 434
----------------------------
Net income $ 530 $ 765
============================
Earnings per common share $ 0.32 $ 0.43
============================
Earnings per common share, diluted $ 0.32 $ 0.43
============================
Weighted average common shares outstanding 1,661 1,788
Weighted average common shares outstanding, diluted 1,670 1,788
See accompanying notes to unaudited consolidated financial statements.
CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
June 30,
(In Thousands) 2001 2000
- ----------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 530 $ 765
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 107 112
Amortization of premiums, fees and discounts 33 23
Amortization of goodwill 72 72
Net gains from sales of investment securities (203) (184)
Increase in deferred tax asset -- (11)
Decrease (increase) in accrued interest receivable 200 (134)
Decrease in other assets 42 24
Increase (decrease) in advance payments by borrowers for taxes and insurance (199) 80
Decrease in accrued interest payable (13) (58)
Increase in accrued income taxes 222 406
Increase in accrued expenses and other liabilities 230 261
-----------------------
Net cash provided by operating activities 1,021 1,356
-----------------------
Cash flows from investing activities:
Principal collected on loans 32,381 14,341
Loan originations (18,098) (37,137)
Principal payments on mortgage-backed securities available for sale 1,667 1,044
Purchase of investment securities available for sale (7,291) (2,223)
Maturities of investment securities available for sale 7,990 --
Proceeds from sales of investment securities available for sale 784 1,167
Net (increase) decrease in short-term investments (8,569) 12,342
Purchase of office properties and equipment (67) (39)
-----------------------
Net cash provided by (used in) investing activities 8,797 (10,505)
-----------------------
Cash flows from financing activities:
Net (decrease) increase in deposits (3,036) 9,757
Proceeds from advances from FHLB of Boston -- 53,000
Payments on advances from FHLB of Boston (7,000) (53,750)
Net Directors Deferred Compensation 2 --
Purchase of Treasury stock (386) (633)
Earned ESOP shares charged to expense 50 --
Proceeds from exercise of Stock Options 292 --
Payments of dividends on common stock (168) (180)
Amortization of unearned compensation - ESOP 32 32
-----------------------
Net cash (used in) provided by financing activities (10,214) 8,226
-----------------------
Net increase (decrease) in cash and due from banks (396) (923)
Cash and due from banks at beginning of period 5,351 6,588
-----------------------
Cash and due from banks at end of period $ 4,955 $ 5,665
=======================
Supplemental disclosure of cash flow information: Cash paid during the
period for:
Interest $ 4,377 $ 3,851
Income taxes 81 28
Schedule of noncash investing activities:
Transfer of mortgage loans to real estate acquired by foreclosure -- --
See accompanying notes to unaudited consolidated financial statements.
CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Additional
Common Paid-In Retained Treasury
(In Thousands) Stock Capital Income Stock
- ------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 2000
- --------------------------------
Balance at March 31, 2000 $ 1,970 $ 11,190 $ 28,538 $ (3,043)
-------- -------- -------- --------
Net Income -- -- 765 --
Other Comprehensive Income (loss), net of tax
Unrealized (losses) on securities , net of
reclassification adjustment (note 4) -- -- -- --
-------- -------- -------- --------
Comprehensive income (loss) -- -- 765 --
-------- -------- -------- --------
Purchase of treasury stock -- -- -- (633)
Dividends Paid -- -- (180) --
Amortization of unearned compensation - ESOP -- -- -- --
-------- -------- -------- --------
Balance at June 30, 2000 $ 1,970 $ 11,190 $ 29,123 $ (3,676)
======== ======== ======== ========
Three Months Ended June 30, 2001
- --------------------------------
Balance at March 31, 2001 $ 1,970 $ 11,190 $ 30,950 $ (5,230)
-------- -------- -------- --------
Net Income -- -- 530 --
Other Comprehensive Income (loss), net of tax
Unrealized (losses) on securities, net of
reclassification adjustment (note 4) -- -- -- --
-------- -------- -------- --------
Comprehensive income (loss) -- -- 530 --
-------- -------- -------- --------
Proceeds from exercise of stock options 18 274 -- --
Earned ESOP shares charged to expense -- 50 -- --
Director Deferred Compensation -- 22 -- (20)
Purchase of treasury stock -- -- -- (386)
Dividends Paid -- -- (168) --
Amortization of unearned compensation - ESOP -- -- -- --
-------- -------- -------- --------
Balance at June 30, 2001 $ 1,988 $ 11,536 $ 31,312 $ (5,636)
======== ======== ======== ========
Accumulated
Other Unearned Total
Comprehensive Compensation Stockholders'
(In Thousands) Income (Loss) ESOP Equity
- ------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 2000
- --------------------------------
Balance at March 31, 2000 $ (825) $ (433) $ 37,397
------ ------- --------
Net Income -- -- 765
Other Comprehensive Income (loss), net of tax
Unrealized (losses) on securities , net of
reclassification adjustment (note 4) (18) -- (18)
------ ------- --------
Comprehensive income (loss) (18) -- 747
------ ------- --------
Purchase of treasury stock -- -- (633)
Dividends Paid -- -- (180)
Amortization of unearned compensation - ESOP -- 32 32
------ ------- --------
Balance at June 30, 2000 $ (843) $ (401) $ 37,363
====== ======= ========
Three Months Ended June 30, 2001
- --------------------------------
Balance at March 31, 2001 $ (431) $ (237) $ 38,212
------ ------- --------
Net Income -- -- 530
Other Comprehensive Income (loss), net of tax
Unrealized (losses) on securities, net of
reclassification adjustment (note 4) (46) -- (46)
------ ------- --------
Comprehensive income (loss) (46) -- 484
------ ------- --------
Proceeds from exercise of stock options -- -- 292
Earned ESOP shares charged to expense -- -- 50
Director Deferred Compensation -- -- 2
Purchase of treasury stock -- -- (386)
Dividends Paid -- -- (168)
Amortization of unearned compensation - ESOP -- 32 32
------ ------- --------
Balance at June 30, 2001 $ (477) $ (205) $ 38,518
====== ======= ========
See accompanying notes to unaudited consolidated financial statements.
CENTRAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
(1) BASIS OF PRESENTATION
---------------------
The consolidated financial statements of the Registrant for June 30, 2001
and 2000 presented herein should be read in conjunction with the financial
statements of the Company as of and for the year ended March 31, 2001,
included in the Company's Annual Report on Form 10-K. In the opinion of
management, the accompanying unaudited consolidated financial statements
reflect all adjustments, consisting of normal recurring adjustments,
necessary to fairly present the results for the interim periods presented.
Interim results are not necessarily indicative of results to be expected
for the entire year.
(2) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
-------------------------------------------------
Commitments to originate loans, unused lines of credit and unadvanced
portions of construction loans are agreements to lend to a customer,
provided there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments may expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Company
evaluates each customer's credit worthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on management's credit evaluation of the
borrower.
Commitments at June 30, 2001 follow: (In Thousands)
Unused lines of credit..................................... $ 10,633
Unadvanced portions of construction loans.................. 9,044
Unadvanced portions of commercial loans.................... 7,277
Commitments to originate commercial loans.................. 9,743
Commitments to originate residential mortgage loans:
Fixed rate............................................. 676
Adjustable rate........................................ 1,217
CENTRAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 2001
(UNAUDITED)
(3) INCOME TAXES
------------
The Company accounts for income taxes using the asset and liability method.
Deferred tax assets and liabilities are established for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities at enacted tax rates expected to be in
effect when such amounts are realized or settled.
(4) REPORTING COMPREHENSIVE INCOME
------------------------------
The Company has established standards for reporting and displaying
comprehensive income, which is defined as all changes to equity except
investments by, and distributions to, shareholders. Net income is a
component of comprehensive income, with all other components referred to in
the aggregate as other comprehensive income.
The Company's other comprehensive income (loss) and related tax effect is
as follows:
For the Three Months Ended
(In Thousands) June 30, 2001
----------------------------------------------------------------------------------------------------------
Before-
Tax Tax (Benefit) After-Tax
Amount Expense Amount
------ ------------- ---------
Unrealized gains (losses) on securities
Unrealized holding gains arising during period $ 137 $ 53 $ 84
Less: reclassification adjustment for
gains realized in net income 203 73 130
--------------------------------------
Other comprehensive loss $ (66) $ (20) $ (46)
======================================
For the Three Months Ended
June 30, 2000
--------------------------------------------
Before-
Tax Tax (Benefit) After-Tax
Amount Expense Amount
------ ------------- ---------
Unrealized gains (losses) on securities
Unrealized holding gains arising during period $ 155 $ 56 $ 99
Less: reclassification adjustment for
gains realized in net income 184 67 117
--------------------------------------
Other comprehensive loss $ (29) $ (11) $ (18)
======================================
CENTRAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 2001
(UNAUDITED)
(5) DIRECTORS DEFERRED COMPENSATION PLAN
------------------------------------
In fiscal 2001, the Company established a deferred compensation plan for
its directors. The plan allows the Company's directors to defer receipt of
all or a portion of their compensation. The plan requires that the
compensation deferred be invested in Company stock held in an irrevocable
trust. At June 30, 2001 the trust held 845 shares of Central Bancorp stock
that the Company has classified as treasury stock. The treasury shares are
considered outstanding in the computation of earning's per share and book
value per share.
CENTRAL BANCORP, INC. AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL:
- -------
On January 8, 1999, the Registrant, Central Bancorp, Inc. became the
holding company of Central Co-operative Bank when the Bank completed its
holding company reorganization. Because substantially all of the business
of the Registrant is the business of the Bank, the discussion below focuses
on the business of the Bank. For more information, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Holding Company" included in the Company's Annual Report on
Form 10-K as of and for the year ended March 31, 2001.
Net income amounted to $530,000, or $0.32 per diluted share for the three
months ended June 30, 2001 as compared to net income of $765,000, or $0.43
per diluted share in the corresponding quarter ended June 30, 2000.
The earnings decline for the June 30, 2001 quarter was in part due to a
$202,000 decrease in net interest and dividend income compared to the year
earlier quarter. This decrease was attributable to an acceleration in
residential loan pay-offs as borrowers sought to refinance their loans at
lower rates, a slowing of long-term, fixed-rate loan originations due to
the current interest rate environment, and a determination by the Company
to slow its lending activities during the first half of the current
calendar year in anticipation of the slowdown in the national economy and
especially in the local real estate markets. The increased liquidity
maintained following the decision to slow lending activities and the drop
in short-term rates as a result of Federal Reserve actions led to a
compression in the Company's interest rate spread and margin. The Company
anticipates that the interest rate spread and margin will improve once the
impact of interest rate declines reduce the cost of deposits.
In addition, the Company's operating expenses increased by $235,000 during
the June 30, 2001 quarter over the June 30, 2000 quarter. The higher
operating expenses for new personnel and data processing also contributed
to the decline in net income in the year-to-year comparisons. The increase
in personnel costs included the addition of staff to sell non-deposit
investment products, including mutual funds, annuities and insurance
products, to generate fee income in future periods. Additionally, the
Company increased its loan administration staff to better monitor and
develop the commercial loan area. During fiscal 2001, the Company converted
to a new computer processing system that will allow it to continue to
improve its products offerings and services to both individual and business
customers. Although more costly, the new system will allow the Company to
be more competitive with other financial services providers by allowing it
to offer the same types of products offered by larger competitors. As an
example, the Company expects to launch a full-service internet banking
product during the second fiscal quarter.
FINANCIAL CONDITION:
- -------------------
The following is a discussion of the major changes and trends in financial
condition from the end of the preceding fiscal year, March 31, 2001, to
June 30, 2001.
Total assets decreased from $449.3 million at March 31, 2001 to $439.8
million at June 30, 2001 primarily as a result of net loan payoffs and
amortization. Funds generated from the reduction in loans were used to
increase short term investments and to fund deposit outflows and maturities
of advances from FHLB of Boston.
The Company's loan balance declined by $14.2 million or 4.1% as a result of
a higher level of amortization and payoffs than originations, as the
Company made a decision to slow down long-term fixed-rate residential loan
originations because of the low rate environment for such loans. Loan
originations amounted to $18.1 million, of which $7.7 million were in
residential real estate loans. Loan amortization and pay-offs amounted to
$32.4 million. The Company's investment portfolio increased by $5.5
million, primarily as a result of an increase in short term investments,
offset by net maturities and calls of investment securities and by
pay-downs of mortgage-backed securities.
Deposits decreased during the three month period by $3.0 million primarily
due to a decrease in term deposit certificates, offset by increases in
savings and transaction accounts.
During the quarter, the Company continued its fourth common stock buyback
program. An additional 19,000 shares were purchased during the quarter at
an average price of $20.33. At June 30, 2001, 60,458 shares remained
authorized by that program. The shares repurchased since the first buyback
program was adopted in April 1999 total 304,836 at an average cost of
$18.42 per share, representing 15.47% of the common stock issued and
outstanding prior to the adoption of the first buyback program..
NON-PERFORMING ASSETS:
- ---------------------
The Company had non-accruing loans at June 30, 2001 totaling $1 thousand,
an increase of $1 thousand from March 31, 2001. Interest income not
recognized on non-accruing loans for the first three months of fiscal 2001
was less than one hundred dollars.
The following table sets forth information with respect to the Company's
non-performing assets for the dates indicated:
June 30, March 31, June 30,
2001 2001 2000
-------- --------- --------
(Dollars in thousands)
Loans accounted for on a
non-accrual basis, (non-accruing loans) $ 1 $ -- $ --
Impaired loans, accruing -- -- --
Non-accruing loans as a percentage of
total loans 0.00% 0.00% 0.00%
Non-accruing loans as a percentage of
total assets 0.00% 0.00% 0.00%
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2001, AND 2000:
- ---------------------
Net income for the three months ended June 30, 2001, and 2000, amounted to
$530,000 or $0.32 per diluted share and $765,000 or $0.43 per diluted
share, respectively.
Interest income from the Company's loan portfolio increased $191,000 in the
first quarter of fiscal 2002. This increase was primarily the result of a
$15.7 million increase in the average loan balance, offset by a 12 basis
point decrease in average rates earned on these loans.
Income from the Company's investment portfolio (which includes income on
short term investments, investment securities, mortgage-backed securities,
FHLB stock and The Co-operative Central Bank Reserve Fund) increased by
$178,000 during the first quarter of fiscal 2002 when compared to the same
fiscal 2001 period. The yield on these assets decreased by 54 basis points
while the average balance increased by $20.9 million during the fiscal 2002
quarter.
Average earning assets increased by $36.5 million while the rate earned on
these assets decreased 27 basis points to 6.97% during the first quarter of
fiscal 2002 when compared to the first quarter of fiscal 2001.
The Company's cost of deposits increased by $295,000 during the first
quarter of fiscal 2002 when compared to the same fiscal 2001 quarter. The
rate paid on deposits increased 13 basis points from 3.53% during the
quarter ended June 30, 2000 to 3.66% during the quarter ended June 30,
2001. The average balance of these deposits increased $22.5 million to
$288.0 million during the first quarter of fiscal 2002 from $265.5 million
during the fiscal 2001 first quarter.
The average balance of borrowed funds increased by $21.1 million to $119.6
million in the fiscal 2002 first quarter compared to $98.5 million in the
same fiscal 2001 quarter. The rate paid on borrowings decreased by 11 basis
points in the fiscal 2002 quarter to 5.77% from 5.89% in the
fiscal 2001 quarter. The combined effect of these changes resulted in an
increase of $276,000 in interest expense on borrowings to $1.7 million in
the first quarter of fiscal 2002 compared to $1.4 million in fiscal 2001's
first quarter.
The average balance of interest-bearing liabilities increased $43.6 million
while the rates paid on these liabilities increased by 11 basis points
during the quarter ended June 30, 2002 when compared to the same period one
year ago.
These developments resulted in a $369,000 increase in interest and dividend
income and an increase of $571,000 in interest expense. The combination
resulted in a $202,000 decrease in net interest and dividend income from
the fiscal 2001 quarter to the fiscal 2002 quarter.
The provision for loan losses is made to maintain the allowance for loan
losses at a level which management considers adequate to provide for
probable losses based on an evaluation of known and inherent risks in the
loan portfolio. Due to the Bank's stable and relatively high level of asset
quality, and, consistent with the current evaluation of the loan portfolio,
the Company did not make any provision for the first quarter of fiscal 2002
or fiscal 2001.
Non-interest income increased by $71,000 to $409,000 in the first quarter
of fiscal 2002 from $338,000 in the first fiscal 2001 quarter. The Company
recorded $203,000 and $184,000 in net gains from sales of investment
securities during the first quarter of fiscal 2002 and fiscal 2001,
respectively. Service charges on deposit accounts increased by $20,000 to
$123,000 during fiscal 2002 and other income, including fees from non
deposit investment products, increased by $32,000 to $83,000 in fiscal
2002.
Operating expenses increased $235,000 in the first quarter of fiscal 2002
compared to the same quarter of fiscal 2001. This increase is primarily
attributable to an increase of $216,000 in salaries and employee benefits
and an increase of $142,000 in Data Processing Service Fees as a result of
added personnel and a new computer processing system, offset by a reduction
in advertising expense of $107,000 for the recent quarter due to a decision
by management to slow the growth of both deposits and residential loans.
The provision for Federal and state income taxes amounted to $303,000 and
$434,000 during the first quarter of fiscal 2002 and fiscal 2001,
respectively. The decreased expense relates primarily to the decreased
level of pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES:
- -------------------------------
The Company's principal sources of liquidity are loan amortization, loan
prepayments, increases in deposits and advances from The Federal Home Loan
Bank (FHLB) of Boston. The Company is a voluntary member of the FHLB of
Boston and as such is generally entitled to borrow. Cash from these
liquidity sources is used to fund loan originations, security investments,
deposit maturities and repayment of FHLB of Boston advances. The Company's
capital to assets ratio was 8.73% on June 30, 2001, which exceeded
regulatory requirements.
NEW ACCOUNTING PRONOUNCEMENT:
- ----------------------------
In July, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 141, "Business
Combinations" and SFAS 142,
"Goodwill and Other Intangible Assets." SFAS 141 requires the use of
purchase method of accounting for all business combinations initiated after
June 30, 2001, thereby eliminating the use of the pooling of interests
method. It also provides new criteria that determine whether an acquired
intangible asset should be recognized separately from goodwill. The Company
does not expect the adoption of this statement to have a material impact on
its financial statements.
SFAS 142 requires that upon adoption of the Statement, any goodwill
recorded on an entity's balance sheet would no longer be amortized. This
would include existing goodwill (i.e., recorded goodwill at the date the
financial statement is issued), as well as goodwill arising subsequent to
the effective date of the Statement. Goodwill will not be amortized but
will be reviewed for impairment periodically or upon the occurrence of
certain triggering events. This Statement is effective for fiscal years
beginning after December 15, 2001. At June 30, 2001, the Company had $2.4
million of goodwill on its balance sheet that was being amortized at a rate
of $288,000 annually.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ----------------------------------------------------------
The Company has experienced no material changes in market risk since the
discussion of this in the annual report as of March 31, 2001.
FORWARD-LOOKING STATEMENTS
- --------------------------
This report includes forward-looking statements that involve inherent risks
and uncertainties. A number of important factors could cause actual results
to differ materially from those in the forward-looking statements. Those
factors include the economic environment, competition, products and pricing
in geographic and business areas in which the Company operates, prevailing
interest rates, changes in government regulations and policies affecting
financial services companies, and credit quality and credit risk
management. Central Bancorp, Inc. undertakes no obligation to release
revisions to these forward-looking statements or reflect events or
circumstances after the date of this report.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of Central
Bancorp, Inc. held on July 26, 2001, stockholders
voted affirmatively on the following proposal:
To elect two directors to serve until the 2004 Annual
Meeting of Stockholders.
VOTE VOTE
ELECTED AT MEETING TERM FOR WITHHELD
------------------ ---- --- --------
John D. Doherty 3 Years 96.72% 3.28%
Gregory W. Boulos 3 Years 96.59% 3.41%
There were no broker non-votes
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
During the quarter ended June 30, 2001, the
Registrant did not file a Current Report on
Form 8-K.
CENTRAL BANCORP, INC. AND SUBSIDIARY
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
CENTRAL BANCORP, INC. AND SUBSIDIARY
------------------------------------
8/14/01 /s/ John D. Doherty
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Date John D. Doherty
President and Chief Executive Officer
8/14/01 /s/ Paul S. Feeley
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Date Paul S. Feeley
Senior Vice President, Treasurer
and Chief Financial Officer