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Exhibit 99.1
NEWS RELEASE
Contact: Paul S. Feeley For Release: Immediately
Senior Vice President, Treasurer &
Chief Financial Officer
(617) 628-4000
CENTRAL BANCORP REPORTS
QUARTERLY EARNINGS
SOMERVILLE, MASSACHUSETTS, October 31, 2006 - Central Bancorp, Inc. (NASDAQ
Global MarketSM:CEBK) today reported that its net income for the quarter ended
September 30, 2006 was $351,000, or $0.24 per diluted share, compared to net
income of $624,000, or $0.43 per diluted share, for the corresponding 2005
quarter. The Company's earnings for the six-month periods ended September 30,
2006 and September 30, 2005 were $464,000, or $0.32 per diluted share, and $1.3
million, or $0.93 per diluted share, respectively.
The decrease in net income in the 2006 quarter compared to the 2005 quarter
primarily resulted from decreases of $338,000 in net interest and dividend
income and $159,000 in non-interest income, partially offset by lower
non-interest expenses and the absence of a loan loss provision for the quarter
ended September 30, 2006. Net interest and dividend income continued to be
adversely affected by the continuing flat to inverted yield curve as well as
strong local competition for the products and services we offer. Decreases
occurred in the net interest spread and the net interest margin from 2.82% and
3.22%, respectively, for the 2005 quarter to 2.42% and 2.91%, respectively, for
the 2006 quarter. These decreases in the spread and margin were primarily due to
increases in both the volume of and the rates paid on interest-bearing
liabilities. While the yield on interest-earning assets rose by 42 basis points,
the cost of funds increased by 82 basis points. Interest-bearing liabilities
continued to re-price upward faster than interest-earning assets, primarily due
to the combined effect of an increase in short-term interest rates over the
comparable period last year and continued strong competition for
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CENTRAL BANCORP, INC.
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both deposits and loans in our market. The decrease in net interest and dividend
income was partially offset during the current quarter by the receipt of
$199,000 from the Federal Home Loan Bank, which represented a normalized
dividend for the past two quarters.
Management did not record a provision for loan losses in the 2006
quarter compared to a $50,000 provision in the 2005 quarter because it believes
the allowance was sufficient at September 30, 2006. Non-interest expenses
declined $18,000, mainly reflecting the absence of non-recurring restructuring
costs of $283,000 for voluntary termination packages offered during the 2005
quarter that were partially offset by salary and benefit increases, additional
staff at our new Medford branch office, and rent, utilities and equipment at the
new branch and operations center. Income tax expense for the September 2006
quarter decreased $156,000 from the 2005 quarter due to lower pre-tax income.
The decrease in net income for the six months ended September 30, 2006
compared to the corresponding year-earlier period primarily resulted from
decreases of $919,000 in net interest and dividend income and $163,000 in
non-interest income, and a $314,000 increase in non-interest expenses. The
decrease in net interest and dividend income reflected the combined effect of a
lower net interest spread and net interest margin. Decreases occurred in the net
interest spread and the net interest margin from 2.85% and 3.22%, respectively,
for the 2005 six-month period to 2.38% and 2.82%, respectively, for the 2006
comparable period. While the cost of funds increased by 68 basis points, the
yield on interest-earning assets increased by 21 basis points.
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CENTRAL BANCORP, INC.
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The increase in non-interest expenses for the six months ended September
30, 2006 was primarily attributable to the higher expenses discussed above,
partially offset by the absence of the non-recurring restructuring costs in 2005
also discussed above. The provisions for loan losses were $50,000 and $100,000,
respectively, for the six months ended September 30, 2006 and September 30,
2005. Lower pre-tax income caused income tax expense for the six months ended
September 30, 2006 to decrease $480,000 from the corresponding 2005 period.
Total assets were $556.1 million at September 30, 2006 and $547.3 million
at March 31, 2006. During the six months ended September 30, 2006, investment
securities available for sale decreased by $5.6 million as the result of
maturities and pay-downs of investments and the mandatory redemption of a
portion of our investment in FHLB stock. During this same period, loans
increased by $19.3 million, from $415.4 million to $434.7 million due to our
continued focus on originating commercial real estate and construction loans as
well as the purchase and origination of residential real estate loans.
As deposits declined by $4.7 million, borrowings increased by $12.8 million
as we temporarily discontinued advertising premium rates on certificates of
deposit during the 2006 period, instead electing to utilize more cost-effective
FHLB advances to fund loan growth.
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.)
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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.
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CENTRAL BANCORP, INC.
CONSOLIDATED OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended Six Months Ended
September 30, September 30,
-----------------------------------------
2006 2005 2006 2005
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(Unaudited) (Unaudited)
Net interest and dividend income $3,876 $4,214 $7,454 $8,373
Provision for loan losses -- 50 50 100
Net gain on sales and write-downs
of investment securities 116 96 228 213
Gain on sale of loans 25 85 59 140
Other non-interest income 306 425 650 747
Non-interest expenses 3,787 (3,805) (7,633) (7,319)
------ ------- ------- -------
Income before taxes 536 965 708 2,054
Provision for income taxes 185 341 244 724
------ ------- ------- -------
Net income $ 351 $ 624 $ 464 $1,330
====== ======= ======= =======
Earnings per share:
Basic $ .24 $ .44 $ .32 $ .93
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Diluted $ .24 $ .43 $ .32 $ .93
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Weighted average number of
shares outstanding:
Basic 1,444 1,427 1,442 1,425
====== ======= ======= =======
Diluted 1,457 1,436 1,455 1,433
====== ======= ======= =======
Outstanding shares, end of period 1,591 1,590 1,591 1,590
====== ======= ======= =======
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
September 30, March 31,
2006 2006
-----------------------------------
(Unaudited)
Total assets $556,082 $547,275
Investment securities available for sale 101,476 107,071
Total loans (1) 434,700 415,363
Allowance for loan losses 3,850 3,788
Deposits 388,747 393,413
Borrowings 118,837 106,032
Subordinated debenture 5,258 5,258
Stockholders' equity 40,101 39,189
Equity to assets 7.21 7.16
Non-performing assets to total assets 0.29 0.22
Book value per share 25.21 24.64
(1) Includes loans held for sale of $0 and $45 at september 30, 2006
and march 31, 2006, respectively.
SELECTED FINANCIAL RATIOS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended Six Months Ended
September 30, September 30,
-----------------------------------------
2006 2005 2006 2005
-----------------------------------------
(Unaudited) (Unaudited)
Return on average assets 0.26 % 0.46 % 0.17 % 0.50 %
Return on average equity 3.55 6.38 2.35 6.85
Interest rate spread 2.42 2.82 2.38 2.85
Net interest margin 2.91 3.22 2.82 3.22