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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, February 7, 2007 - Central Bancorp, Inc.
(NASDAQ Global MarketSM:CEBK) today reported that its net income for the quarter
ended December 31, 2006 was $514,000, or $0.35 per diluted share, compared to
net income of $796,000, or $0.55 per diluted share, for the corresponding 2005
quarter. The Company's earnings for the nine-month periods ended December 31,
2006 and December 31, 2005 were $978,000, or $0.67 per diluted share, and $2.13
million, or $1.48 per diluted share, respectively.
The decrease in net income in the 2006 third quarter compared to the
2005 third quarter primarily resulted from decreases of $459,000 in net interest
and dividend income, partially offset by an increase of $28,000 in non-interest
income, including deposit related fees and gains on sales of investment
securities. 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 net
interest spread and net interest margin from 2.69% and 3.10%, respectively, for
the 2005 quarter to 2.16% and 2.66%, 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 28 basis points, the cost of funds increased by
81 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 both deposits and loans in our market.
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CENTRAL BANCORP, INC.
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Management did not record a provision for loan losses in either the
2006 or the 2005 third quarter because it believed the allowance was sufficient
at those dates. Non-interest expenses increased $8,000, mainly reflecting a
decline in salaries and benefits, offset by higher occupancy and equipment
expenses, at least partially as a result of our new Medford branch office and
operations center. Additionally, marketing expenses declined during the quarter.
Income tax expense for the December 2006 quarter decreased $157,000 from the
2005 quarter due to lower pre-tax income.
The decrease in net income for the nine months ended December 31, 2006
compared to the corresponding 2005 period primarily resulted from a decrease of
$1.45 million in net interest and dividend income, a decrease of $62,000 in
non-interest income, and a $322,000 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 2.82% and 3.20%, respectively,
for the 2005 nine-month period to 2.29% and 2.74%, respectively, for the 2006
comparable period. While the cost of funds increased by 73 basis points, the
yield on interest-earning assets increased by 20 basis points.
The increase in non-interest expenses for the nine months ended
December 31, 2006 was primarily attributable to the higher salaries and
benefits, increased occupancy and equipment expenses, partially attributable to
the new branch and operations center in Medford, and higher professional service
costs. These expenses were partially offset by lower marketing expenses and the
absence of the non-recurring restructuring costs incurred in 2005 of $283,000.
The provisions for loan losses were $50,000 and $100,000, respectively, for the
nine months ended December 31, 2006 and December 31, 2005. Lower pre-tax income
caused income tax expense for the nine months ended December 31, 2006 to
decrease $637,000 from the corresponding 2005 period.
(CONTINUED)
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CENTRAL BANCORP, INC.
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Total assets were $565.5 million at December 31, 2006 and $547.3
million at March 31, 2006. During the nine months ended December 31, 2006,
investment securities available for sale decreased by $13.6 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 $41.4 million, from $415.4 million to $456.8 million due to our
continued focus on originating commercial real estate and construction loans as
well as the purchase of $14.2 million of residential real estate loans.
Deposits declined by $6.2 million, primarily due to our decision to
temporarily discontinue advertising our premium rates on certificates of deposit
during the 2006 period, instead electing to utilize FHLB advances to fund loan
growth. As a result, borrowings increased by $22.9 million during the nine
months ended December 31, 2006 to $128.9 million.
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 Nine Months Ended
December 31, December 31,
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2006 2005 2006 2005
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(Unaudited) (Unaudited)
Net interest and dividend income $ 3,620 $ 4,079 $11,079 $12,529
Provision for loan losses -- -- 50 100
Net gain on sales and write-downs
of investment securities 131 93 359 306
Gain on sale of loans -- 44 59 183
Other non-interest income 344 310 989 980
Non-interest expenses 3,310 3,302 10,943 10,621
------- ------- ------- -------
Income before taxes 785 1,224 1,493 3,277
Provision for income taxes 271 428 515 1,152
------- ------- ------- -------
Net income $ 514 $ 796 $ 978 $ 2,125
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Earnings per share:
Basic $ .36 $ .56 $ .68 $ 1.49
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Diluted $ .35 $ .55 $ .67 $ 1.48
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Weighted average number of
shares outstanding:
Basic 1,448 1,431 1,445 1,427
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Diluted 1,463 1,440 1,459 1,435
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Outstanding shares, end of period 1,640 1,590 1,640 1,590
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CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
December 31, March 31,
2006 2006
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(Unaudited)
Total assets $565,482 $547,275
Investment securities available for sale 93,515 107,071
Total loans (1) 456,813 415,363
Allowance for loan losses 3,847 3,788
Deposits 387,174 393,413
Borrowings 128,942 106,032
Subordinated debenture 5,258 5,258
Stockholders' equity 40,763 39,189
Equity to assets 7.25 7.16
Non-performing assets to total assets 0.06 0.22
Book value per share 24.86 24.64
(1) Includes loans held for sale of $755 and $45 at December 31, 2006
and March 31, 2006, respectively.
SELECTED FINANCIAL RATIOS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended Nine Months Ended
December 31, December 31,
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2006 2005 2006 2005
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(Unaudited) (Unaudited)
Return on average assets 0.37 % 0.59 % 0.24 % 0.40 %
Return on average equity 5.09 8.15 3.26 5.43
Interest rate spread 2.16 2.69 2.29 2.82
Net interest margin 2.66 3.10 2.74 3.20