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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 IMPROVED EARNINGS
FOR THE QUARTER ENDED JUNE 30, 2008
SOMERVILLE, MASSACHUSETTS, July 22, 2008 - Central Bancorp, Inc.
(NASDAQ Global MarketSM: CEBK) (the "Company") today reported that its net
income for the quarter ended June 30, 2008 increased to $401,000, or $0.29 per
diluted share, from net income of $225,000, or $0.16 per diluted share, for the
comparable prior year quarter.
Contributing to the earnings improvement was a $585,000 increase in net
interest and dividend income, which was partially offset by a $200,000 increase
in the provision for loan losses relating to one property, a $97,000 decrease in
non-interest income due primarily to the $121,000 write-down of one equity
security determined to be other than temporarily impaired, and by a $92,000
increase in operating expenses.
The net interest rate spread and the net interest margin increased from
1.99% and 2.45%, respectively, for the quarter ended June 30, 2007, to 2.51% and
2.88%, respectively, for the 2008 comparable period. These increases were
primarily the result of a decrease in the cost of funds, which declined by 66
basis points, mostly due to decreases in the average rates paid on deposits, as
a result of aggressive liability management, and Federal Home Loan Bank ("FHLB")
advances. During the quarter ended June 30, 2008, interest rates were reduced on
many deposit products, and therefore, many certificates of deposit that matured
during the quarter were renewed at lower rates. Additionally, lower-costing core
deposits increased by $6.3 million during the quarter ended June 30, 2008 as
compared to the quarter ended June 30, 2007. The yield on interest-earning
assets declined by 14 basis points, from 5.90% during the quarter ended June 30,
2007 to 5.76% during the same period in 2008, primarily due to a decrease in the
average yield on mortgage loans, partially offset by an increase in the average
yield on investment securities. The yield on mortgage loans declined primarily
due to foregone interest income of $160,000 related to non-accrual loans during
the quarter ended June 30, 2008 compared to $66,000 in the corresponding 2007
quarter. Compared to the prior year, the
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average yield on investment securities for the quarter ended June 30, 2008
increased due to the purchase of higher-yielding preferred stocks during fiscal
2008.
During the three months ended June 30, 2008, operating expenses totaled
$3.6 million compared to $3.5 million during the three months ended June 30,
2007. This increase is primarily attributable to increases in salaries and
benefits and marketing expenses, partially offset by decreases in data
processing expenses and professional services. Salaries and benefits increased
by $119,000 during the quarter ended June 30, 2008 compared to the same period
of 2007, primarily due to open positions being filled and salary increases
granted for the first time since April, 2006. Marketing expenses increased by
$26,000 during the quarter ended June 30, 2008 compared to the same period of
2007, as the Bank strategically decided to increase marketing expenses on a
limited basis. Data processing expenses decreased by $22,000 during the quarter
ended June 30, 2008 compared to the same period of 2007, as the Bank incurred
fewer costs for items such as license fees and due to a contract renegotiated at
a lower cost. Professional expenses decreased by $24,000 during the quarter
ended June 30, 2008 compared to the same period of 2007, primarily due to the
reduction of contract labor services after certain open positions were filled.
Total assets were $564.3 million at June 30, 2008, compared with $571.2
million at March 31, 2008. During the quarter ended June 30, 2008, short-term
investments decreased by $5.8 million, total investments decreased by $3.0
million, and deposits increased by $852,000. The proceeds from the short-term
investments, investment securities, and the increase in deposits were used to
fund loan growth of $1.2 million and FHLB maturities of $7.0 million. Deposits
increased to $361.9 million at June 30, 2008 from $361.1 million at March 31,
2008, while FHLB advances decreased to $149.7 million at June 30, 2008 from
$156.8 million at March 31, 2008. Total loans, excluding loans held for sale,
increased by $1.2 million from March 31, 2008, primarily due to increases in
residential loans of $3.0 million, commercial real estate loans of $7.9 million,
and home equity loans of $254,000, partially offset by decreases in construction
loans of $7.0 million, and commercial and industrial loans of $3.0 million.
Senior management continued to give high priority to monitoring and
managing the Company's asset quality. At June 30, 2008, non-performing loans
totaled $10.1 million, or 1.79% of total assets and 2.12% of total loans as of
June 30, 2008 compared to $9.6 million at March 31, 2008. The eight loans
constituting this category are all secured by real estate collateral located
almost exclusively in the Greater Boston area. Seven of these loans have an
active plan for resolution in place from either the sale of the real estate
directly by the borrower or through foreclosure. The other non-performing loan
is expected to enter into a bankruptcy court approved
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resolution program with the ongoing net cash flow generated from apartment rents
from the property collateral being paid to the Bank. While bankruptcy filings
have extended the time to resolve some non-performing assets, management
continues to work with borrowers and bankruptcy trustees to resolve these
situations as soon as possible.
The Company provides for loan losses in order to maintain the allowance
for loan losses at a level that management believes is adequate to absorb
probable losses based on an evaluation of known and inherent risks in the
portfolio. In determining the appropriate level of the allowance for loan
losses, the Company considers past and anticipated loss experience, evaluations
of underlying collateral, prevailing economic conditions, the nature and volume
of the loan portfolio and the levels of non-performing and other classified
loans. Management evaluates the level of the loan loss reserve on a regular
basis. During the first quarter of fiscal 2009, the Company recorded a provision
of $200,000, compared to a provision of $0 during the same quarter of fiscal
2008. Management believes there are adequate reserves and collateral securing
these loans to cover losses that may result from non-performing loans.
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.
CONSOLIDATED OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended
June 30,
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2008 2007
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(UNAUDITED)
Net interest and dividend income $3,925 $3,340
Provision for loan losses 200 0
Net gain (loss) from sales or write-downs
of investment securities (29) 116
Gains on sales of loans 13 52
Other non-interest income 444 357
Non-interest expenses 3,608 3,516
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Income before taxes 545 349
Provision for income taxes 144 124
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Net income $ 401 $ 225
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Earnings per share:
Basic $ .29 $ .16
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Diluted $ .29 $ .16
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Weighted average number of
shares outstanding:
Basic 1,386 1,392
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Diluted 1,386 1,401
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Outstanding shares, end of period 1,640 1,640
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CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
March 31,
2008 2008
-------------------------
(UNAUDITED)
Total assets $564,279 $571,245
Short-term investments 6,125 11,888
Total investments 60,016 63,054
Total loans (1) (476,123) (475,137)
Allowance for loan losses 3,809 3,613
Deposits 361,941 361,089
Borrowings 149,665 156,832
Subordinated debenture 11,341 11,341
Stockholders' equity 38,130 38,816
Book value per share 23.25 23.67
Book equity to assets 6.76 % 6.79 %
Non-performing assets to total assets 1.79 1.68
(1) Includes loans held for sale of $0 and $195 at June 30, 2008 and March 31,
2008, respectively.
SELECTED FINANCIAL RATIOS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended
June 30,
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2008 2007
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(UNAUDITED)
Return on average assets 0.28 % 0.16 %
Return on average equity 4.14 2.39
Interest rate spread 2.51 1.99
Net interest margin 2.88 2.45