Michael K. Devlin Immediately
Senior Vice President
(617) 629-4244
CENTRAL BANCORP REPORTS RESULTS FOR ITS FOURTH
QUARTER AND FISCAL YEAR ENDED MARCH 31, 2003
SOMERVILLE, MASSACHUSETTS, May 2, 2003-- Central Bancorp, Inc. (NASDAQ:
CEBK) today reported a net loss of $418,000, or $0.27 per diluted share, for the
quarter ended March 31, 2003, compared to net income of $817,000, or $0.50 per
diluted share, for the corresponding quarter in the prior fiscal year. A primary
reason for the current quarter's loss is the previously announced additional
state tax liability of approximately $835,000, net of tax benefits, attributable
to a recently enacted state law affecting numerous Massachusetts banks, which
disallows the deduction for dividends received by Central Co-operative Bank from
its real estate investment trust (REIT) subsidiary for the 2000 through 2003
fiscal years. In addition, the current quarter's results reflect an accrual for
the Company's portion of the estimated cost of resolution of a commercial claim
filed in fiscal 2002 and legal fees incurred in the pending dispute with certain
shareholders that, together, reduced net income by approximately $915,000.
Exclusive of the foregoing significant items, pro forma earnings were $1,332,000
for the quarter ended March 31, 2003, compared to $817,000 for the corresponding
quarter in the prior fiscal year.
For the year ended March 31, 2003, net income amounted to $2,187,000, or
$1.37 per diluted share, compared to $2,860,000, or $1.72 per diluted share, in
the year earlier period. As noted in the preceding paragraph, the results for
fiscal 2003 were adversely impacted by certain significant items, which, in the
aggregate, reduced net income by $1,915,000. Exclusive of these significant
items, pro forma earnings were $4,102,000 for the year ended March 31, 2003,
compared to $2,860,000 in the prior fiscal year. The elimination of goodwill
amortization in the current fiscal year, as required by a change in generally
accepted accounting principles, contributed $288,000 to the year-over-year
improvement.
John D. Doherty, Chairman, President & Chief Executive Officer, stated,
"While I am disappointed with the retroactive aspect of the change in state tax
law affecting the taxability of income of our REIT subsidiary and the cost of
litigation in our pending dispute with certain shareholders, I am pleased that
we were able to sustain our improved operating performance for this
(continued)
Central Bancorp, Inc.
Page 2 of 3
fiscal year, as compared to last year. We continue to be encouraged by the early
success of our mortgage banking initiative and the continuing progress of our
efforts to increase the commercial real estate loan portfolio. Commercial real
estate loan originations exceeded $48,000,000 during the year, a record level
for the Bank. In addition, core deposits increased 20% during the year."
The results for the quarter ended March 31, 2003, as compared to the same
period in the prior year, were favorably affected by an increase of $401,000 in
net interest and dividend income, an increase in gains on the sale of loans of
$768,000 and a reduction of $376,000 in losses on the sale and write-down of
investment securities. The increase in net interest and dividend income was
largely due to a 45 basis point reduction in the overall cost of funds to 2.96%.
The Company commenced full operation of its mortgage banking initiative during
the current quarter, which included the sale of loans originated in the prior
quarter. As a result of the extraordinarily high level of refinancing activity
during the last six months of fiscal 2003, the gains on loan sales realized in
the quarter ended March 31, 2003 were considerably higher than the quarterly
level anticipated in the coming fiscal year.
Loan quality continued to be outstanding with no loans delinquent in excess
of 90 days at March 31, 2003. In addition, loan delinquencies continued to be
minimal and the Company held no foreclosed assets at the end of the current
quarter.
Central Bancorp, Inc., is the holding company for Central Bank, whose legal
name is Central Co-operative Bank, a Massachusetts-chartered co-operative bank
operating eight full-service banking offices and one limited-service high school
branch in suburban Boston.
(See accompanying tables.)
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This press release contains financial information determined by methods
other than in accordance with accounting methods generally accepted in the
United States of America ("GAAP"). The Company's management uses these non-GAAP
measures in its analysis of the Company's performance. These measures typically
adjust GAAP performance measures to exclude the effects of significant gains or
losses that are unusual in nature. Because these items and their impact on the
Company's performance are difficult to predict, management believes that
presentations of financial measures excluding the impact of these items provide
useful supplemental information that is essential to a proper understanding of
the operating results of the Company's core business. These disclosures should
not be viewed as a substitute for operating results determined in accordance
with GAAP, nor are they necessarily comparable to non-GAAP performance which may
be presented by other companies.
This press release may contain certain forward-looking statements, which
are based on management's current expectations regarding economic, legislative
and regulatory issues that may impact the Company's earnings in future periods.
Factors that could cause future results to vary materially from current
management expectations include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, real estate values and
competition; changes in accounting principles, policies or guidelines; changes
in legislation or regulation; and other economic, competitive, governmental,
regulatory and technological factors affecting the Company's operations,
pricing, products and services.
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Central Bancorp, Inc.
Page 3 of 3
CENTRAL BANCORP, INC.
CONSOLIDATED OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended Year Ended
March 31, March 31,
--------------------------------------------
2003 2002 2003 2002
--------------------------------------------
(Unaudited)
Net interest and dividend income $ 4,511 $ 4,110 $ 17,259 $ 14,413
Net loss on sales and write-downs
of investment securities (113) (489) (309) (150)
Gain on sale of loans 768 -- 796 --
Other non-interest income 163 186 918 838
Non-interest expenses 4,656 2,379 13,879 10,464
-------- -------- -------- --------
Income before taxes 673 1,428 4,785 4,637
Provision for income taxes 1,091 611 2,598 1,777
-------- -------- -------- --------
Net income (loss) $ (418) $ 817 $ 2,187 $ 2,860
======== ======== ======== ========
Earnings (loss) per share:
Basic $ (0.27) $ 0.50 $ 1.38 $ 1.73
======== ======== ======== ========
Diluted $ (0.27) $ 0.50 $ 1.37 $ 1.72
======== ======== ======== ========
Weighted average number of
shares outstanding:
Basic 1,567 1,628 1,584 1,650
======== ======== ======== ========
Diluted 1,567 1,647 1,599 1,665
======== ======== ======== ========
RECONCILIATION OF GAAP EARNINGS
TO PRO FORMA EARNINGS:
Net income (loss) per GAAP $ (418) $ 817 $ 2,187 $ 2,860
-------- -------- -------- --------
Impact of REIT legislation, net of taxes 835 -- 835 --
Impact of litigation and legal fees, net of taxes 915 -- 1,080 --
-------- -------- -------- --------
Net impact 1,750 -- 1,915 --
-------- -------- -------- --------
Pro forma earnings $ 1,332 $ 817 $ 4,102 $ 2,860
======== ======== ======== ========
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS)
March 31, March 31,
2003 2002
---------------------------
Total assets $ 476,827 $ 468,219
Total loans 390,464 371,707
Allowance for loan losses 3,284 3,292
Deposits 287,939 261,907
Borrowings 144,576 164,000
Stockholders' equity 39,443 38,954