UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 11, 2008
CENTRAL BANCORP, INC.
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(Exact Name Of Registrant As Specified In Charter)
MASSACHUSETTS 0-25251 04-3447594
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(State Or Other Jurisdiction (Commission (IRS Employer
Of Incorporation) File Number) Identification No.)
399 HIGHLAND AVENUE, SOMERVILLE, MASSACHUSETTS 02144
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(Address Of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (617) 628-4000
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NOT APPLICABLE
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(Former Name Or Former Address, If Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.06 MATERIAL IMPAIRMENTS.
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Central Bancorp, Inc. (NASDAQ Global MarketSM: CEBK) (the "Company"),
parent company of Central Co-Operative Bank (the "Bank"), announced today that
the U.S. government's actions with respect to the Federal Home Loan Mortgage
Corporation ("Freddie Mac") and Federal National Mortgage Association ("Fannie
Mae") will adversely impact the value of the Company's perpetual preferred stock
investments in Fannie Mae and Freddie Mac.
On September 7, 2008, the U.S. Treasury, the Federal Reserve, and the
Federal Housing Finance Agency ("FHFA") announced that the FHFA was putting
Fannie Mae and Freddie Mac under conservatorship and giving management control
to their regulator, the FHFA. Key provisions of the U.S. Government's plan
announced to date are as follows:
o Dividends on Fannie Mae and Freddie Mac common and preferred stock were
eliminated;
o Fannie Mae and Freddie Mac will be required to reduce their mortgage
portfolios over time;
o The U.S. Government agreed to provide equity capital to cover mortgage
defaults in return for $1.0 billion of senior preferred stock in Fannie
Mae and Freddie Mac and warrants for the purchase of 79.9% of the
common stock of Fannie Mae and Freddie Mac; and
o The U.S. Government also announced that the U.S. Treasury would provide
secured loans to Fannie Mae and Freddie Mac as needed until the end of
2009 and that the U.S. Treasury plans to purchase mortgage backed
securities from Fannie Mae and Freddie Mac in the open market.
At June 30, 2008, the Company had five securities totaling $10.1
million of perpetual preferred stock of Fannie Mae and Freddie Mac which had an
unrealized loss of $799,000. The impact of the above actions and concerns in the
marketplace about the future value of the perpetual preferred stock of Fannie
Mae and Freddie Mac have caused the values of these investments to decrease
materially and it is unclear when or if the value of the investments will
improve in the future. Given the above developments, on September 11, 2008, the
Company concluded that it will record a non-cash other than temporary impairment
on these investments for the quarter ending September 30, 2008, the amount of
which is expected to equal the difference between the net book value of the
securities at September 30, 2008 and the market value of the securities at
September 30, 2008. As of the closing price on September 11, 2008, the market
value of these securities was approximately $890,600.
If the investments were valued at zero and if the Company was not able
to record a tax benefit for the loss, the resulting capital ratios would render
the Bank adequately capitalized because the Bank's total risk-based capital
ratio would fall below 10%. The impact on the Company's and Bank's capital
ratios would be as follows:
(UNAUDITED)
AT
JUNE 30, 2008
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REGULATORY REGULATORY
THRESHOLD THRESHOLD
FOR WELL FOR ADEQUATELY
ACTUAL PRO FORMA CAPITALIZED CAPITALIZED
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Central Bancorp:
Tier 1 Leverage 8.36% 6.66% 5.0% 4.0%
Tier 1 Risk-Based Ratio 11.38% 9.28% 6.0% 4.0%
Total Risk-Based Ratio 12.30% 10.22% 10.0% 8.0%
Central Co-operative Bank:
Tier 1 Leverage 7.01% 5.30% 5.0% 4.0%
Tier 1 Risk-Based Ratio 9.55% 7.40% 6.0% 4.0%
Total Risk-Based Ratio 10.47% 8.34% 10.0% 8.0%
A copy of the Company's related press release, dated September 12,
2008, is included as Exhibit 99.1 hereto and is furnished herewith.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
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(d) Exhibits
Number Description
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99.1 Press Release dated September 12, 2008
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENTRAL BANCORP, INC.
Date: September 12, 2008 By: /s/ John D. Doherty
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John D. Doherty
Chairman, President and Chief Executive Officer