PRESS RELEASE
CENTRAL BANCORP REPORTS
QUARTERLY EARNINGS
SOMERVILLE, MASSACHUSETTS, July 26, 2006 - Central Bancorp, Inc.
(NASDAQ Global MarketSM:CEBK) today reported that its net income for the quarter
ended June 30, 2006 was $113,000, or $0.08 per diluted share. For the
corresponding quarter in the prior fiscal year, the Company reported net income
of $706,000, or $0.49 per diluted share.
The decrease in net income for the quarter ended June 30, 2006 compared
to the quarter ended June 30, 2005 was primarily the result of a decrease in net
interest and dividend income from $4.2 million for the 2005 quarter to $3.6
million for the 2006 period, a $4 thousand decrease in non-interest income and
an increase in non-interest expense from $3.5 million to $3.8 million, partially
offset by a $323,000 decrease in the provision for income taxes. The decrease in
net interest and dividend income is primarily the result of the combined effect
of a decrease in net interest spread and net interest margin and, to a lesser
extent, the postponement of the dividend on our investment in stock in the
Federal Home Loan Bank. Decreases occurred in the net interest spread and the
net interest margin from 2.88% and 3.23%, respectively, for the quarter ended
June 30, 2005 to 2.29% and 2.72%, respectively, for the quarter ended June 30,
2006. The decreases in the spread and margin were primarily due to increases in
both the volume and the rates paid on interest-bearing liabilities. While the
cost of funds increased by 57 basis points, the yield on interest-earning assets
declined by 2 basis points. Interest-bearing liabilities repriced upward faster
than interest-earning assets primarily due to the increase in short-term
interest rates and the flat yield curve, as well as our continued offering of
promotional rates on certificates of deposit due to increased competition for
deposit accounts in our market. The decrease in interest income is primarily the
result of the Federal Home Loan Bank's postponement of its quarterly dividend
because of restrictions in its new capital guidelines. During the quarter ended
June 30, 2005, the FHLB's dividend totaled $88 thousand; we expected the
dividend to exceed $100,000 in the quarter ended June 30, 2006. We have been
advised that the FHLB expects to declare a six-month equivalent dividend during
the quarter ending September 30, 2006. Increases in non-interest expense
reflected normal salary and benefit increases as well as added staff for our new
branch and rent, utilities and equipment for the new branch and operations
center. Marketing expense also increased from the comparable period last year.
Total interest and dividend income increased from $7.4 million for the
three-months ended June 30, 2005 to $7.5 million for the current year period,
primarily as a result of a $16.9 million, or 4.3%, increase in the average
balance of loans from June 30, 2005 to June 30, 2006. Loans increased primarily
as a result of an increase in the origination of commercial real estate loans,
which increased mainly due to our continued focus on originating these loans.
Loans decreased $3.1 million from March 31, 2006 to June 30, 2006 primarily as a
result of a net decline in commercial real estate and construction loans of $1.5
million and residential loans of $2.9 million, partially offset by an increase
in loans held for sale of $0.3 million and other loans of $1.0 million.
Total assets were $545.5 million at June 30, 2006 and $547.3 million at
March 31, 2006. During the three months ended June 30, 2006, investment
securities available for sale decreased by $12.0 million as the result of
maturities and pay-downs of investments and the mandatory redemption of a
portion of our investment in FHLB stock. This decline was offset by an increase
in short-term investments of $10.6 million. Liabilities decreased from $508.1
million at March 31, 2006 to $506.5 million at June 30, 2006, primarily due to a
decrease in borrowings of $16.7 million offset by an increase in deposits of
$15.5 million. Borrowings decreased as we used deposit growth to pay down
maturing and called borrowings at lower replacement rates. Deposits increased to
$408.9 million at June 30, 2006 from $393.4 million at March 31, 2006. The
increase in deposits occurred primarily in certificates of deposit and as a
result of our offering of promotional rates on these accounts and, to a lesser
extent, due to the opening of our new Medford office.
The provision for loan losses was $50,000 for the quarters ended June
30, 2006 and June 30, 2005. Management considered the allowance for loan losses
to be adequate during both periods.
Non-interest income decreased $4,000 for the quarter ended June 30,
2006 compared to the 2005 period, primarily as a result of the $22,000 decrease
in gain on sales of loans due to a slower residential real estate environment,
offset by an increase in deposit account related fees of $24,000. Non-interest
expense was $3.8 million in the June 2006 quarter compared to $3.5 million for
the prior year quarter primarily due to staffing and occupancy costs associated
with the opening of our new branch office and operations center as well as
infrastructure improvements. Income tax expense for the June 2006 quarter
decreased $323,000 from the 2005 quarter due to the decrease in pre-tax income.
In June we opened our new Medford branch. We are pleased with the
results to date and with the reception we have received in the community.
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 nine full service banking offices, a limited service high school
branch in suburban Boston and a stand alone 24-hour automated teller machine in
Somerville.
(See accompanying tables.)
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.
CENTRAL BANCORP, INC.
CONSOLIDATED OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended
June 30,
--------------------------
2006 2005
--------------------------
(Unaudited)
Net interest and dividend income $3,578 $4,159
Provision for loan losses 50 50
Net gain (loss) on sales and write-downs
of investment securities 112 117
Gain on sales of loans 33 55
Other non-interest income 345 322
Non-interest expenses 3,846 3,515
Income before taxes 172 1,088
Provision for income taxes 59 382
Net income $ 113 $ 706
Earnings per share:
Basic $ .08 $ .50
Diluted $ .08 $ .49
Weighted average number of
shares outstanding:
Basic 1,440 1,423
Diluted 1,453 1,429
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
June 30, March 31
2006 2006
-----------------------
Total assets $ 545,479 $ 547,275
Investment securities available for sale 95,092 107,071
Total loans (1) 412,268 415,363
Allowance for loan losses 3,843 3,788
Deposits 408,898 393,413
Borrowings 89,326 106,032
Subordinated debenture 5,258 5,258
Stockholders' equity 38,959 39,189
(1) Includes loans held for sale of $383 and $45 at June 30, 2006 and
March 31, 2006, respectively.
SELECTED FINANCIAL RATIOS
QUARTER ENDED
JUNE 30,
--------------------------
2006 2005
--------------------------
(Unaudited)
Return on average assets 0.08 % 0.53 %
Return on average equity 0.99 7.20
Interest rate spread 2.29 2.88
Net interest margin 2.72 3.23
Equity to assets 8.38 7.42
Non-performing assets to total assets 0.40 0.02
Book value per share 24.49 24.65
CONTACT:
Central Bancorp, Inc.
Paul S. Feeley, 617-628-4000
Senior Vice President, Treasurer &
Chief Financial Officer