Michael K. Devlin Immediately
Senior Vice President
(617) 628-4000
CENTRAL BANCORP REPORTS FIRST QUARTER EARNINGS
SOMERVILLE, MASSACHUSETTS, July 31, 2003-- Central Bancorp, Inc.
(NASDAQ: CEBK) today reported net income of $1,288,000, or $0.83 per diluted
share, for the three months ended June 30, 2003, compared to $1,027,000, or
$0.63 per diluted share, for the corresponding quarter in the prior fiscal year.
The primary reason for the current quarter's improved performance is the
previously announced settlement of the Company's REIT-related tax liability with
the Massachusetts Department of Revenue. As a result of this settlement, the
Company recovered $374,000 of income taxes accrued in the fourth quarter of
fiscal 2003. Exclusive of the foregoing significant item, pro forma earnings
were $914,000 for the quarter ended June 30, 2003, compared to $1,027,000 for
the corresponding quarter in the prior fiscal year.
For the quarter ended June 30, 2003, the Company experienced a decrease
in net interest income of $171,000 and a reduction in its net interest margin of
20 basis points to 3.55%, as compared to the quarter ended June 30, 2002. With
the decline in rates on residential mortgage loans to a 45-year low, the Company
elected to sell virtually all of its current production of such loans. The
proceeds of these sales were held in short-term investments at June 30, 2003, at
an average yield of approximately 1%, leading to the decrease in both net
interest income and margin. The Company recognized gains on the sale of mortgage
loans of $141,000 during the current quarter.
John D. Doherty, Chairman, President & Chief Executive Officer, stated,
"The continuing decline in interest rates during the quarter to historically low
levels has presented a significant challenge to the maintenance of net interest
margin for the
(continued)
Central Bancorp, Inc.
Page 2 of 3
community banking industry. We believe our decision to sell all conforming
fixed-rate residential mortgage loans was prudent even though it has had an
adverse impact on net interest margin. With the recent increase in longer-term
rates, we believe that more acceptable alternatives to short-term investments
will become available during the remainder of the year. Nonetheless, we
anticipate continuing downward pressure on the net interest margin in fiscal
2004."
During the current quarter, the Company originated $15.8 million in
commercial real estate loans. At June 30, 2003, the Company had nearly $150
million in outstanding commercial real estate loans and construction loans,
representing 40% of the total loan portfolio. Loan quality continued to be
outstanding with no loans delinquent in excess of 90 days at June 30, 2003.
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
June 30,
----------------------------
2003 2002
----------------------------
(Unaudited)
Net interest and dividend income $ 4,109 $ 4,280
Provision for loan losses 50 --
Gain on sale of loans 141 --
Other non-interest income 273 223
Non-interest expenses 3,003 2,891
-------- -------
Income before taxes 1,470 1,612
Provision for income taxes 182 585
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Net income $ 1,288 $ 1,027
======== =======
Earnings per share:
Basic $ 0.83 $ 0.64
======== =======
Diluted $ 0.83 $ 0.63
======== =======
Weighted average number of
shares outstanding:
Basic 1,546 1,606
======== =======
Diluted 1,559 1,625
======== =======
RECONCILIATION OF GAAP EARNINGS
TO PRO FORMA EARNINGS:
Net income per GAAP $ 1,288 $ 1,027
Impact of REIT legislation, net of taxes (374) --
------- -------
Pro forma earnings $ 914 $ 1,027
======= =======
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS)
June 30, March 31,
2003 2003
--------------------------
(UNAUDITED)
Total assets $ 478,057 $ 477,208
Total loans (1) 377,929 390,464
Allowance for loan losses 3,354 3,284
Deposits 286,855 287,959
Borrowings 144,400 144,576
Stockholders' equity 41,761 39,443
(1) Includes loans held for sale of $5,051 and $647 at June 30, 2003
and March 31, 2003, respectively.