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NEWS RELEASE
Contact: Paul S. Feeley For Release: Immediately
Senior Vice President, Treasurer &
Chief Financial Officer
(617) 628-4000
CENTRAL BANCORP REPORTS FISCAL YEAR
AND FOURTH QUARTER EARNINGS
SOMERVILLE, MASSACHUSETTS, June 05, 2007 - Central Bancorp, Inc. (NASDAQ
Global MarketSM:CEBK) today reported that its net income for the year ended
March 31, 2007 was $1.02 million, or $0.70 per diluted share, compared to net
income of $2.64 million, or $1.84 per diluted share, for the prior fiscal year.
For the quarters ended March 31, 2007 and March 31, 2006, net income was
$42,000, or $0.03 per diluted share, and $518,000, or $0.36 per diluted share,
respectively.
The decrease in net income for the year ended March 31, 2007 compared to
the corresponding 2006 period primarily resulted from a $1.87 million decrease
in net interest and dividend income, a $109,000 decrease in gains on sale of
loans, a $56,000 decrease in other non-interest income, and a $673,000 increase
in non-interest expenses. Partially offsetting these items was a $162,000
increase in net gain on sales of investment securities.
The continuing flat to inverted yield curve, as well as strong local
competition for the products and services the Company offers, continued to
adversely affect net interest and dividend income. The net interest rate spread
and the net interest margin declined from 2.72% and 3.11%, respectively, for the
year ended March 31, 2006 to 2.21% and 2.68%, respectively, for the 2007
comparable period. While the cost of funds increased by 72 basis points, the
yield on interest-earning assets increased by only 21 basis points.
Interest-bearing liabilities continued to re-price upward faster than
interest-earning assets, primarily due to the combined effect of the continuing
flat to inverted yield curve, an increase in short-term interest rates over the
comparable period last year and continued strong competition for both deposits
and loans in the Company's market area.
(continued)
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Central Bancorp, Inc.
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The increase in non-interest expenses for the year ended March 31, 2007
was primarily attributable to normal increases in salary and benefit expenses,
increased occupancy and equipment expenses, partially attributable to the new
branch and operations center in Medford, and higher professional service costs,
mostly for audit and legal services related to the previously announced ESOP
stock purchase and trust preferred issuance.
These expenses were partially offset by lower marketing expenses and the
absence of $283,000 in non-recurring restructuring costs incurred during fiscal
2006. The provisions for loan losses were $80,000 and $100,000, respectively,
for the years ended March 31, 2007 and March 31, 2006. Lower pre-tax income
caused income tax expense for the year ended March 31, 2007 to decrease $901,000
from the corresponding 2006 period.
The lower net income for the March 31, 2007 quarter compared to the same
year-earlier quarter primarily resulted from a $497,000 decrease in net interest
and dividend income and a $350,000 increase in non-interest expenses. The
increase in non-interest expenses was primarily caused by normal salary
increases and benefit expenses, increased occupancy and equipment expenses,
impacted by the new branch and operations center in Medford, as well as
severance expenses incurred and higher professional service costs, mostly for
specialized training, legal and audit services, partially off set by lower
marketing and data processing costs. Partially offsetting these items was a
$109,000 increase in the net gain on sales of investment securities. The
$265,000 decrease in the provision for income taxes was primarily due to lower
pre-tax income as well as successful tax strategies that had a positive impact
on the quarter. Decreases occurred in net interest rate spread and net interest
margin from 2.48% and 2.88%, respectively, for the 2006 quarter to 1.96% and
2.43%, respectively, for the 2007 quarter. While the yield on interest-earning
assets rose by 17 basis points, the cost of funds increased by 69 basis points.
Total assets were $566.1 million at March 31, 2007 and $547.3 million at
March 31, 2006. During the fiscal year ended March 31, 2007, investment
securities available for sale
(continued)
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Central Bancorp, Inc.
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decreased by $32.4 million as the result of maturities, sales 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 $45.2 million to $460.5
million due to the Company's continuing focus on originating commercial real
estate and construction loans, as well as the purchase of $14.2 million of newly
originated residential real estate loans.
Deposits declined $4.8 million, primarily due to the temporary
discontinuance of the advertising of premium rates on certificates of deposit
during the 2007 period and the decision to instead utilize FHLB advances to fund
loan growth. As a result, borrowings increased by $19.7 million to $125.7
million during the year ended March 31, 2007.
Due to the high priority given to monitoring asset quality, Senior
Management is involved in the early detection and resolution of any potentially
problem loans. At March 31, 2007, non-performing loans totaled $330,000 as
compared to $1.2 million at the same date in 2006.
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.
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Central Bancorp, Inc.
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<Table>
<Caption>
CENTRAL BANCORP, INC.
CONSOLIDATED OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended Year Ended
March 31, March 31,
--------------------------------------------
2007 2006 2007 2006
--------------------------------------------
(Unaudited) (Unaudited)
Net interest and dividend income $3,369 $3,866 $14,449 $16,317
Provision for loan losses 30 -- 80 100
Net gain on sales and write-downs
of investment securities 222 113 581 419
Gain on sale of loans 40 25 99 208
Other non-interest income 324 312 1,314 1,370
Non-interest expenses 3,912 (3,562) (14,856) (14,183)
------ ------ ------- -------
Income before taxes 13 754 1,507 4,031
Provision for income taxes (29) 236 487 1,388
------ ------ ------- -------
Net income $ 42 $ 518 $ 1,020 $ 2,643
------ ------ ------- -------
Earnings per share:
Basic $ .03 $ .36 $ .72 $ 1.85
------ ------ ------- -------
Diluted $ .03 $ .36 $ .70 $ 1.84
------ ------ ------- -------
Weighted average number of
shares outstanding:
Basic 1,391 1,435 1,419 1,429
------ ------ ------- -------
Diluted 1,404 1,444 1,452 1,438
------ ------ ------- -------
Outstanding shares, end of period 1,640 1,590 1,640 1,590
------ ------ ------- -------
</Table>
<Table>
<Caption>
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
March 31, March 31,
2007 2006
--------- ---------
(Unaudited)
Total assets $566,140 $547,275
Investment securities available 74,705 107,071
Total loans (1) 460,542 415,363
Allowance for loan losses 3,881 3,788
Deposits 388,573 393,413
Borrowings 125,712 106,032
Subordinated debenture 11,341 5,258
Stockholders' equity 37,702 39,189
Book value per share 22.99 24.64
Equity to assets 6.66% 7.16%
Non-performing assets to total assets 0.06 0.22
</Table>
(1) Includes loans held for sale of $575 and $45 at March 31, 2007
and March 31, 2006, respectively.
<Table>
<Caption>
SELECTED FINANCIAL RATIOS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended Year Ended
March 31, March 31,
--------------------------------------------
2007 2006 2007 2006
--------------------------------------------
(Unaudited) (Unaudited)
Return on average assets 0.03 % 0.38 % 0.18 % 0.49 %
Return on average equity 0.43 5.29 2.59 6.78
Interest rate spread 1.96 2.48 2.21 2.72
Net interest margin 2.43 2.88 2.68 3.11
</Table>