Michael K. Devlin Immediately
Senior Vice President
(617) 629-4244
CENTRAL BANCORP REPORTS RESULTS FOR ITS FOURTH
QUARTER AND FISCAL YEAR ENDED MARCH 31, 2004
SOMERVILLE, MASSACHUSETTS, April 30, 2004-- Central Bancorp, Inc. (NASDAQ:
CEBK) today reported net income of $243,000, or $0.15 per diluted share, for the
quarter ended March 31, 2004, compared to a net loss of $418,000, or $0.27 per
diluted share, for the corresponding quarter in the prior fiscal year. A primary
reason for the loss in the prior year quarter was the reserve for estimated
state taxes of $835,000, net of federal tax benefits, attributable to a change
in state law affecting numerous Massachusetts banks, disallowing the deduction
for dividends received by Central Co-operative Bank from its former real estate
investment trust (REIT) subsidiary for the 2000 through 2003 fiscal years. In
addition, the prior year's quarterly results reflected an accrual for a
commercial claim and legal fees associated with a shareholder dispute that,
together, reduced earnings by $915,000. Exclusive of the foregoing significant
items, pro forma earnings were $1,332,000 for the quarter ended March 31, 2003.
The decline in earnings in the current quarter, as compared to the prior year's
quarterly pro forma results, is principally due to decreases in net interest
income ($682,000) and gains on sale of loans ($736,000) and an increase in
marketing spending ($267,000).
For the year ended March 31, 2004, net income amounted to $2,936,000, or
$1.88 per diluted share, compared to $2,187,000, or $1.37 per diluted share, in
the prior year. The results in both years were affected by significant
non-operating items. 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.The results in fiscal 2004 were
favorably affected by the June 2003 settlement of the Company's REIT-related tax
liability and insurance recoveries, which, in the aggregate, increased net
income by $703,000. Exclusive of these significant items, pro forma earnings
were $2,233,000 and $4,102,000 for the years ended March 31, 2004 and 2003,
respectively. The decline in pro forma earnings of $1,869,000 in the current
year is principally due to decreases in net interest income ($1,687,000) and
gains on sale of loans ($501,000) and increases in marketing spending ($381,000)
and salaries and employee benefits ($325,000).
The gradual but consistent decline in interest rates in recent years had a
greater relative impact on the Company's yield on earning assets, which declined
64 basis points in fiscal 2004, than on its cost of funds, which declined 32
basis points in fiscal 2004, due to the Company's limited opportunity to reduce
deposit rates and the fixed cost of its FHLB advances. In addition, as part of
its strategy to manage interest rate risk, the Company held a greater portion of
its interest-earning assets in short-term investments and investment
(Continued)
Central Bancorp, Inc.
Page 2 of 3
securities throughout fiscal 2004 rather than in long-term, fixed rate loans.
This strategy adversely affected net interest income in the current year while
improving the Company's exposure to a sustained rise in interest rates.
John D. Doherty, Chairman, President & Chief Executive Officer, stated,
"While I am disappointed by the compression in our net interest margin in fiscal
2004, we believe the decision to reduce our investment in long-term, fixed rate
residential mortgage loans, which was a major cause of this decline, is a
prudent one, particularly in light of the recent indications of a change in the
direction of interest rates. During the quarter ended March 31, 2004, the net
interest margin was 3.30% compared to 3.14% in the previous quarter."
Mr. Doherty added, "We have recently initiated a major marketing program,
including our first-ever use of radio advertisements, to promote the Bank and
its new free checking product. We have made a significant commitment to the
increased promotion of the Bank to highlight the benefits of doing business with
a community bank and to maintain our competitiveness in the attractive Middlesex
County market. We are encouraged by the number of new account openings during
the past month."
Loan quality continues to be outstanding. At March 31, 2004, loan
delinquencies were minimal and there were no loans in excess of 90 days past
due. In addition, the Company held no foreclosed assets at March 31, 2004.
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 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,
-----------------------------------------------------------
2004 2003 2004 2003
-----------------------------------------------------------
(Unaudited)
Net interest and dividend income $3,827 $ 4,509 $15,570 $ 17,257
Provision for loan losses 50 -- 200 --
Net loss on sales and write-downs
of investment securities -- (112) (135) (308)
Gain on sale of loans 32 768 295 796
Other non-interest income 210 162 966 917
Non-interest expenses 3,625 4,654 12,401 13,877
------ ------- ------- -------
Income before taxes 394 673 4,095 4,785
Provision for income taxes 151 1,091 1,159 2,598
------ ------- ------- -------
Net income (loss) $ 243 $ (418) $ 2,936 $ 2,187
====== ======= ======= =======
Earnings (loss) per share:
Basic $ .16 $ (0.27) $ 1.89 $ 1.38
====== ======= ======= =======
Diluted $ .15 $ (0.27) $ 1.88 $ 1.37
====== ======= ======= =======
Weighted average number of
shares outstanding:
Basic 1,556 1,567 1,551 1,584
====== ======= ======= =======
Diluted 1,570 1,567 1,565 1,599
====== ======= ======= =======
Reconciliation of GAAP earnings
to pro forma earnings:
Net income (loss) per GAAP $ 243 $ (418) $ 2,936 $ 2,187
Impact of REIT legislation, net of taxes -- 835 (374) 835
Impact of litigation and legal fees,
net of insurance and taxes -- 915 (329) 1,080
----- ------- ------- -------
Pro forma earnings $ 243 $ 1,332 $ 2,233 $ 4,102
====== ======= ======= =======
Consolidated Balance Sheet Data
(In Thousands)
March 31, March 31,
2004 2003
--------------------------------
Total assets $ 490,465 $ 477,208
Investment securities available for sale 83,771 61,111
Total loans (1) 357,424 390,464
Allowance for loan losses 3,537 3,284
Deposits 295,920 287,959
Borrowings 145,256 144,576
Stockholders' equity 43,454 39,443
(1) Includes loans held for sale of $799 and $647 at March 31, 2004
and March 31, 2003, respectively.