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EXHIBIT 99.1
FOR IMMEDIATE RELEASE July 17, 2003
Contact: Amy L. Timmerman, AVP, Investor Relations - 781-221-6396
John A. Simas, EVP and CFO - 781-221-6307
FAX: (781) 221-7594
BOSTONFED BANCORP, INC. ANNOUNCES SECOND QUARTER RESULTS AND THE DECLARATION OF
A DIVIDEND OF $.16 PER SHARE
Burlington, Mass.- BostonFed Bancorp, Inc. (AMEX: BFD) (the "Company"), the
parent of Boston Federal Savings Bank ("BFS"), a federally-chartered stock
savings bank, and Broadway National Bank ("BNB"), a national chartered
commercial bank, announced second quarter net income of $1,532,000, or $0.35
basic and $0.33 diluted earnings per share, compared to net income of
$2,583,000, or $0.58 basic and $0.55 diluted earnings per share for the second
quarter of 2002. Significant items affecting the second quarter earnings
included the reversal of approximately $2.8 million ($1.8 million net of tax) of
the first quarter provision for additional state taxes and interest applicable
to the real estate investment trust ("REIT") due to the settlement with the
Massachusetts Department of Revenue (Mass. DOR") as previously disclosed, a loan
loss provision of $2.0 million, additional impairment of originated mortgage
servicing rights ("OMSRs") and continued margin erosion.
For the six months ended June 30, 2003, the net loss was $66,000 or $0.02 basic
and diluted loss per share, compared to $4.6 million or $1.04 basic and $0.98
diluted earnings per share for the six months ended June 30, 2002.
The Company also announced the declaration of a quarterly cash dividend of $0.16
per share. The dividend is payable on or about August 14, 2003, to shareholders
of record at the close of business on August 1, 2003.
Pursuant to the Company's 10th stock repurchase program, the Company acquired
15,000 shares of its outstanding common stock at an average price of $22.92 per
share. As of June 30, 2003, the Company has acquired 79,067 shares of its
outstanding common stock at an average price of $25.85 per share under the
existing program and has 143,904 shares remaining to be repurchased under this
program. Outstanding shares as of June 30, 2003, were 4,425,208.
Net interest income for the second quarter of 2003 was $8.6 million, compared to
$9.8 million for the second quarter of 2002 despite higher average
interest-earning assets. The lowest interest rates in decades have precipitated
high levels of loan prepayments, which combined with reinvestment in lower
yielding loans and investment securities, as well as diminishing opportunities
to continue lowering core deposit interest rates, have caused a decrease in the
net interest margin. The net interest margin declined from 2.88% for the quarter
ended June 30, 2002 to 2.45% in the current quarter. On a linked-quarter basis
(March 31, 2003), the net interest margin declined by 13 basis points, six basis
points of the decline was caused by the reversal of approximately $200,000 of
accrued interest on a large delinquent borrower discussed below.
The provision for loan losses was $2.0 million for the quarter ended June 30,
2003, compared to $250,000 for the comparable quarter last year. The increase in
the provision was necessary as a charge-off of $1.6 million required
replenishment to the allowance for loan losses ("ALL"). A large commercial real
estate/business loan borrower of the Company suffered the loss of some of its
business to international competition, causing the borrower to close a large
portion of its manufacturing facilities. A current appraisal of the borrower's
real estate showed a substantial reduction in the value due to the vacated
space. Additionally, the Company provided $400,000 to the ALL due to an
increased level of non-performing loans and the higher balances invested in
commercial real estate loans, business loans and other higher yielding/higher
risk loans. At June 30, 2003, the Company's non-performing assets totaled $8.1
million, or 0.53% of total assets, compared to the December 31,
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2002 balance of $6.5 million, or 0.43% of total assets. The allowance for loan
losses was $13.5 million at June 30, 2003, compared to $12.7 million at December
31, 2002. These amounts represent 173.3% of non-performing loans and 1.17% as a
percent of loans at June 30, 2003, compared to 230.2% and 1.13%, respectively,
at December 31, 2002.
Total non-interest income declined to $2.6 million for the quarter ended June
30, 2003, compared to $4.1 million for the quarter ended June 30, 2002, due
primarily to lower loan processing and servicing fees resulting from higher
levels of amortization and impairment of OMSRs. Loan processing and servicing
fees were a negative $1.7 million for the quarter ended June 30, 2003, compared
to a negative $198,000 for the quarter ended June 30, 2002. On a year to date
basis, loan processing and servicing fees were a negative $2.5 million, compared
to a negative $509,000 for last year to date. The primary reason for the
decrease was due to an OMSR impairment charge of $3.0 million during the six
months ended June 30, 2003, whereas the impairment charge for the prior year
comparable period was $1.1 million. The impairment charge for the current
six-month period includes $2.4 million in permanent impairment due to actual
prepayments, as well as an additional $600,000 for anticipated future
prepayments, thereby increasing the valuation allowance to $3.1 million. With
the most recent adjustment, the OMSR balance of $5.6 million represents
approximately 55 basis points of the $1.020 billion of loans serviced for
others. Further declines in market interest rates, which affect loan prepayments
and prepayment speeds, may result in future impairment charges.
Gain on sale of loans amounted to $2.7 million for the quarter ended June 30,
2003, essentially the same as the quarter ended June 30, 2002. The Company has
reduced the amount of gain recognized upon the sale of adjustable-mortgage loans
to reflect current shorter estimated lives of loans serviced. Additionally, the
Company is retaining a larger portion of loan production for its own portfolio
in order to replace loans, which have prepaid and to increase the size of its
loan portfolio. The increased gain on sale of loans resulted from a continuation
of high volumes of one- to four-family mortgage loan sales, made possible by the
high volume of lending activity in the current low interest rate environment.
Included in the above gain on sale of loans were gains on sale of manufactured
housing loans, which amounted to $1.1 million for the quarter ended June 30,
2003, compared to $1.3 million for the quarter ended June 30, 2002. On a
year-to-date basis gain on sale of manufactured housing loans was $1.9 million,
compared to $2.4 million for the six months ended June 30, 2002. The decline is
due to the continuing recessionary levels of activity in the manufactured
housing market.
Deposit service fees increased from $768,000 in the quarter ended June 30, 2002,
to $900,000 in the current quarter. On a year-to-date basis, deposit service
fees were $1.8 million, compared to the prior year-to-date total of $1.4
million. The increase was primarily due to increases in fees and higher levels
of deposit account services activity.
Total non-interest expense was $9.7 million for the quarter ended June 30, 2003,
essentially the same as the prior year quarter. For the six months ended June
30, 2003, total non-interest expense was $19.6 million, compared to $19.4
million for the prior year to date. Compensation and benefits were $140,000
lower in the current quarter than the prior year second quarter as the Company
reversed a portion of the short-term incentive plan accrual due to the level of
current earnings, which would preclude the payout of a substantial portion of
the plan. This reversal more than offset increased compensation and benefits
expense for the Company's defined benefits pension plan expense, which resumed
required contributions in the third quarter of 2002 and normal year over year
salary increases. Advertising expense increased to $360,000 in the current
quarter from $264,000 in the prior year comparable quarter due to the rollout of
a more focused advertising program. The total non-interest expense for the six
months ended June 30, 2002 was impacted by a $500,000 legal settlement at the
Company's BNB subsidiary.
Income tax benefit for the quarter ended June 30, 2003, was $2.0 million, due
primarily to the reversal of a portion of the REIT accrual recorded during the
first quarter due to the Mass. DOR settlement. The net effect of the REIT tax
issue was an increase in tax benefit of approximately $1.8 million. For the six
months ended June 30, 2003, income taxes were $2.0 million, the majority of
which includes the charge for the additional REIT
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taxes applicable to prior years, net of the settlement with the Mass DOR. The
remaining tax of approximately $765,000 results in an effective tax rate of
approximately 40.3% compared to $2.4 million, an effective tax rate of 34.2% for
the six months ended June 30, 2002.
Total assets at June 30, 2003, were $1.539 billion, compared to $1.526 billion
at December 31, 2002, an increase of $13.8 million. Loans, net of allowance for
loan losses increased by $48.7 million to a new record level of $1.120 billion
at June 30, 2003 from $1.071 billion at December 31, 2002 as the Company
retained a larger portion of its loan production for portfolio purposes.
Additionally, the Company securitized and retained a portion of its loan
production in the form of mortgage-backed securities held to maturity, which
increased by $15.6 million from $25.4 million at December 31, 2002 to a balance
of $41.0 million at June 30, 2003. Somewhat offsetting these increases were
lower balances in cash and cash equivalents, which declined by $31.1 million
from a balance of $74.7 million at December 31, 2002 to $43.5 million at June
30, 2003 due primarily to a reduction in Federal Home Loan Bank ("FHLB")
Overnight Deposits. Additionally, loans held for sale declined by $15.6 million
from $31.6 million at December 31, 2002 to $16.0 million at June 30, 2003 as a
lesser portion of loan production was earmarked for sale during the recent
quarter.
Deposit accounts increased by $15.0 million to a new record level of $975.3
million at June 30, 2003 despite a $5.6 million reduction in wholesale-brokered
certificates of deposit.
Total stockholders' equity was $91.5 million at June 30, 2003, compared to $93.0
million at December 31, 2002. On a per share basis, the book value was $20.76 at
June 30, 2003, compared to $21.17 at December 31, 2002. The stockholders' equity
to total assets ratio of the Company was 5.9% at June 30, 2003, and 6.1% at
December 31, 2002.
This press release may contain certain forward-looking statements with regard to
the Company's prospective performance and strategies within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities and Exchange Act of 1934, as amended. The Company intends such
forward looking statements to be covered by the safe harbor provision for
forward looking statement contained in the Private Securities Litigation Reform
Act of 1995 and is including this statement for such purpose.
Forward looking statements are based on certain assumptions and 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, acts of terrorism or war,
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. The Company does not undertake, and specifically
disclaims any obligation, to publicly release the result of any revisions that
may be made to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
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Consolidated Balance Sheets June 30, December 31,
- -------------------------------- 2003 2002
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(Dollars In Thousands, Except Per Share Amounts)
(Unaudited)
Assets
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Cash and cash equivalents $ 43,533 $ 74,672
Investment securities available for sale 109,092 112,888
Investment securities held to maturity 2,525 2,524
Mortgage-backed securities available for sale 116,176 114,515
Mortgage-backed securities held to maturity 41,005 25,429
Loans held for sale 16,024 31,614
Loans, net of allowance for loan losses 1,120,007 1,071,356
Accrued interest receivable 6,178 6,470
Stock in FHLB of Boston & Federal Reserve Bank 24,552 24,552
Bank-owned life insurance 24,943 24,316
Premises and equipment, net 10,098 10,133
Goodwill 10,776 10,776
Other assets 14,544 16,367
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Total assets $ 1,539,453 $ 1,525,612
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Liabilities and Stockholders' Equity
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Liabilities:
Deposit accounts $ 975,273 $ 960,278
Federal Home Loan Bank advances & other borrowings 431,828 426,560
Corporation obligated mandatorily redeemable capital securities 32,000 32,000
Advance payments by borrowers for taxes and insurance 2,284 2,317
Other liabilities 6,544 11,484
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Total liabilities 1,447,929 1,432,639
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Stockholders' equity:
Common stock and additional paid- in- capital 69,662 69,347
Retained earnings 62,767 64,242
Accumulated other comprehensive income 1,016 1,096
Less unearned 1996 Stock-Based Incentive Plan (2) (14)
Less Treasury Stock (41,919) (41,698)
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Total stockholders' equity 91,524 92,973
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Total liabilities and stockholders' equity $ 1,539,453 $ 1,525,612
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Selected Financial Highlights -- (At End of Period)
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Total stockholders' equity to total assets 5.9% 6.1%
Market value per share $26.91 $26.70
Book value per common share $20.76 $21.17
Number of shares outstanding 4,425,208 4,425,348
Non-performing loans $7,776 $5,497
Real estate owned and other repossessed assets $361 $1,026
Total non-performing assets $8,137 $6,523
Total non-performing assets as a percent of
total assets 0.53% 0.43%
Allowance for loan losses $13,474 $12,656
Allowance for loan losses as a percent of
non-performing loans 173.28% 230.23%
Allowance for loan losses as a percent of
non-performing assets 165.59% 194.02%
Allowance for loan losses as a percent of loans 1.17% 1.13%
Total loans serviced for others $1,020,108 $1,084,797
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Consolidated Statements of Income
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Three Months Ended Six Months Ended
June 30, June 30,
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2003 2002 2003 2002
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(Dollars In Thousands, Except Per Share Amounts)
(Unaudited)
Interest income:
Loans $ 15,855 $ 18,673 $ 32,434 $ 37,188
Mortgage-backed securities 1,597 2,181 3,134 4,067
Investment securities 1,100 1,009 2,238 1,991
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Total interest income 18,552 21,863 37,806 43,246
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Interest expense:
Deposit accounts 4,811 5,411 9,890 11,228
Borrowed funds 4,264 5,807 8,706 11,567
Corporation obligated mandatorily redeemable
capital securities distributions 880 881 1,761 1,761
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Total interest expense 9,955 12,099 20,357 24,556
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Net interest income 8,597 9,764 17,449 18,690
Provision for loan losses 2,000 250 2,450 500
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Net interest income after provision for loan losses 6,597 9,514 14,999 18,190
Non-interest income:
Deposit service fees 900 768 1,756 1,405
Loan processing and servicing fees (1,670) (198) (2,528) (509)
Gain on sale of loans 2,651 2,731 5,821 5,599
Income from bank owned life insurance 308 306 627 603
Gain on sale of investments 7 60 7 300
Other 433 429 803 826
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Total non-interest income 2,629 4,096 6,486 8,224
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Non-interest expense:
Compensation and benefits 5,696 5,836 11,829 11,625
Occupancy and equipment 1,198 1,244 2,456 2,430
Data processing 445 465 905 920
Advertising expense 360 264 659 497
Deposit insurance premiums 40 46 88 86
Legal settlements 0 0 0 500
Other 1,916 1,832 3,649 3,360
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Total non-interest expense 9,655 9,687 19,586 19,418
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(Loss) income before income taxes (429) 3,923 1,899 6,996
Income tax (benefit) expense (1,961) 1,340 1,965 2,391
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Net income (loss) $ 1,532 $ 2,583 $ (66) $ 4,605
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Selected Financial Highlights--
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(For the periods ending)
Basic (loss) earnings per share $0.35 $0.58 ($0.02) $1.04
Diluted (loss) earnings per share $0.33 $0.55 ($0.02) $0.98
Weighted average number of shares outstanding:
Basic 4,396,223 4,420,057 4,395,488 4,409,091
Diluted 4,609,058 4,726,688 4,395,488 4,688,700
Return on average assets (annualized) 0.41% 0.70% (0.01)% 0.63%
Return on average stockholders'
equity (annualized) 6.61% 10.50% (0.14)% 9.45%
Net interest rate spread (annualized) 2.24% 2.63% 2.30% 2.50%
Net interest margin (annualized) 2.45% 2.88% 2.51% 2.77%
Mortgage loan originations
(Dollars in Thousands) $367,705 $278,444 $671,775 $519,117