PRESS RELEASE
CENTRAL BANCORP REPORTS
QUARTERLY EARNINGS
SOMERVILLE, MASSACHUSETTS, August 8, 2007 - Central Bancorp, Inc.
(NASDAQ Global MarketSM:CEBK) (the "Company") today reported that its net income
for the quarter ended June 30, 2007 increased to $225,000, or $0.16 per diluted
share, from net income of $113,000, or $0.08 per diluted share, for the prior
year quarter.
The increase in net income primarily resulted from a $330,000 decrease
in non-interest expense. The largest decline was in marketing costs, which
declined by $218,000. Partially offsetting this improvement was a $238,000
decline in net interest and dividend income, reflecting the impact of the
continuing flat to inverted yield curve during the quarter, and strong local
competition for deposits and loans in the Company's market area, which resulted
in an increase in the cost of funds without a comparable increase in the yield
on loans.
The net interest rate spread and the net interest margin declined from
2.29% and 2.72%, respectively, for the quarter ended June 30, 2006 to 1.99% and
2.45%, respectively, for the 2007 comparable period. While the cost of funds
increased by 50 basis points, the yield on interest-earning assets increased by
only 20 basis points. Interest-bearing liabilities continued to re-price upward
faster than interest-earning assets, primarily due to the combined effect of the
prolonged flat to inverted yield curve environment and continued strong
competition for both deposits and loans in the Company's market area.
The provisions for loan losses were $0 and $50,000, respectively, for
the quarters ended June 30, 2007 and 2006. Management evaluates the level of the
loan loss reserve on a regular basis and considered the allowance for loan
losses to be adequate during both periods.
Higher pre-tax income caused income tax expense for the June 30, 2007
quarter to increase $65,000 from the corresponding 2006 period.
Central Bancorp, Inc.
Page 2 of 3
Total assets were $548.9 million at June 30, 2007 and $566.1 million at
March 31, 2007. During the quarter ended June 30, 2007, short-term investments
decreased by $12.8 million and investment securities available for sale
decreased by $1.4 million as the result of the redeployment of these investments
to pay down Federal Home Loan Bank ("FHLB") advances and to offset the impact of
the deposit decline of $13.9 million. During the prior quarter, the Company took
advantage of favorable FHLB advance rates in anticipation of a large maturity of
certificates of deposits during the quarter. With this liquidity in place, the
Company was able to offer lower rates on certificates of deposits and to
substantially reduce marketing costs due to the discontinuance of the
advertising of premium rates on certificates of deposit during the 2007 period.
Total loans declined by $2.0 million as the Company continued to sell most newly
originated residential loans in the secondary markets. Borrowings decreased by
$3.3 million to $122.4 million during the quarter ended June 30, 2007.
Senior management continued to give high priority to monitoring the
Company's asset quality by focusing on early detection and resolution of any
potentially problem loans. At June 30, 2007, non-performing loans totaled $5.4
million as compared to $2.2 million at the same date in 2006. The increase is
primarily the result of one construction loan project that is nearing
completion. Management continues to monitor the progress the borrower is making
to resolve the delinquency.
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 standalone 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.
PAGE 3 OF 3
CENTRAL BANCORP, INC.
CONSOLIDATED OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended
June 30,
-------------------------
2007 2006
-------------------------
(Unaudited)
Net interest and dividend income $3,340 $3,578
Provision for loan losses 0 50
Net gain on sales and write-downs
of investment securities 116 112
Gain on sale of loans 52 33
Other non-interest income 357 345
Non-interest expenses 3,516 (3,846)
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Income before taxes 349 172
Provision for income taxes 124 59
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Net income $ 225 $ 113
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Earnings per share:
Basic $ .16 $ .08
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Diluted $ .16 $ .08
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Weighted average number of shares outstanding:
Basic 1,392 1,440
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Diluted 1,401 1,453
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Outstanding shares, end of period 1,640 1,591
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CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
June 30, March 31,
2007 2007
----------------------------
(Unaudited)
Total assets $548,850 $566,140
Short term investments 1,699 14,470
Investment securities available for 73,292 74,705
Total loans (1) 459,143 461,117
Allowance for loan losses 3,848 3,881
Deposits 374,631 388,573
Borrowings 122,372 125,712
Subordinated debenture 11,341 11,341
Stockholders' equity 37,720 37,702
Book value per share 23.00 22.99
Equity to assets 6.87% 6.66%
Non-performing assets to total assets 0.99 0.06
(1) Includes loans held for sale of $640 and $575 at June
30, (2007) and March 31, 2007, respectively.
SELECTED FINANCIAL RATIOS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended
June 30,
-------------------------
2007 2006
-------------------------
(Unaudited)
Return on average assets 0.16% 0.08%
Return on average equity 2.39 1.16
Interest rate spread 1.99 2.29
Net interest margin 2.45 2.72
Contact:
Paul S. Feeley
Senior Vice President, Treasurer &
Chief Financial Officer
(617) 628-4000