1
EXHIBIT 99.1
NEWS RELEASE
Contact: Paul S. Feeley For Release: Immediately
SENIOR VICE PRESIDENT, TREASURER &
CHIEF FINANCIAL OFFICER
(617) 628-4000
CENTRAL BANCORP, INC. REPORTS FINANCIAL
RESULTS FOR THE FISCAL YEAR AND QUARTER ENDED
MARCH 31, 2009
SOMERVILLE, MASSACHUSETTS, May 21, 2009 - Central Bancorp, Inc. (NASDAQ
Global MarketSM:CEBK) (the "Company") today reported that its net loss for the
fiscal year ended March 31, 2009 totaled $6.2 million, or $4.58 per diluted
share, as compared to net income of $1.4 million, or $1.07 per diluted share,
for the fiscal year ended March 31, 2008. The Company's net loss for the three
months ended March 31, 2009 was $1.1 million, or $0.86 per diluted share, as
compared to net income of $101 thousand, or $0.07 per diluted share, for the
corresponding period in 2008. The financial results for the fiscal year ended
March 31, 2009 were significantly impacted by the September 2008
conservatorship of the Federal National Mortgage Association ("Fannie Mae") and
Federal Home Loan Mortgage Corporation ("Freddie Mac") that resulted in a
previously announced $9.4 million impairment of the value of the Company's
investment in the preferred stock of these companies during the quarter ended
September 30, 2008.
For the fiscal year ended March 31, 2009, net interest and dividend
income totaled $15.9 million, which represents an increase of $2.3 million when
compared to $13.6 million during the fiscal year ended March 31, 2008. This
increase was the result of a decline in interest expense of $4.1 million, which
was partially offset by a $1.8 million decline in interest income. The net
interest rate spread and the net interest margin improved from 2.06% and 2.51%,
respectively, for the fiscal year ended March 31, 2008 to 2.63% and 2.96%,
respectively, for the fiscal year ended March 31, 2009. The cost of funds
(CONTINUED)
2
CENTRAL BANCORP, INC.
PAGE 2 OF 7
decreased by 84 basis points during fiscal 2009 mainly due to decreases in the
average rates paid on deposits resulting from aggressive liability management.
During the fiscal year ended March 31, 2009, the yield on interest-earning
assets declined by 27 basis points primarily due to a 32 basis point increase in
interest income on investments and a 396 basis point reduction in interest
income on short-term investments. The reduced yield on investments during the
fiscal year ended March 31, 2009 was primarily due to the combined effect of:
(1) a $125 thousand decrease in dividend income as The Co-operative Central
Bank, which insures in-full deposits in excess of FDIC limits, paid a special
dividend of $125 thousand during the quarter ended December 31, 2007 compared to
$0 during the same period of 2008; and (2) a reduction of $280 thousand in FHLB
stock dividends as the FHLB of Boston gradually reduced its dividend rate during
both fiscal years and then announced the elimination of its dividend entirely in
February 2009. Although the average balance of short-term investments increased
from $9.3 million during the fiscal year ended March 31, 2008 to $25.8 million
during the fiscal year ended March 31, 2009, interest income on these
investments declined by $273 thousand. This decline was primarily due to
recessionary economic conditions which resulted in the Federal Reserve's
lowering of the fed funds target rate from a range of 5.25% to 2.25% during the
fiscal year ended March 31, 2008, to a target range of 2.25% to 25 to 0 basis
points during the fiscal year ended March 31, 2009. This decrease in the fed
funds target rate had a corresponding effect on the interest earned on the
Company's short-term investments which is closely tied to the target fed funds
rate.
The provision for loan losses for the fiscal year ended March 31, 2009
totaled $2.1 million, of which $1.6 million was related to a single borrowing
relationship, compared to a negative provision of $70 thousand during fiscal
2008. The Company provides for loan losses in order to maintain the allowance
for loan losses at a level that management estimates 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, among other things, past and anticipated loss
experience, evaluations of underlying collateral, prevailing economic
conditions, changes in staff depth and experience, 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 and
considered the allowance for loan losses to be adequate during both the fiscal
(CONTINUED)
3
CENTRAL BANCORP, INC.
PAGE 3 OF 7
year and quarter ended March 31, 2009. However, management's ability to predict
future results is inherently uncertain and future increases to the allowance for
loan losses may be necessary due to changes in loan composition or volume,
changes in economic market area conditions or other factors.
Net losses from sales or write downs of investment securities, other
than the aforementioned $9.4 million of Fannie Mae and Freddie Mac preferred
stock impairment losses, totaled $402 thousand during the fiscal year ended
March 31, 2009, as compared to a net gain of $645 thousand during the comparable
period of 2008, reflecting the currently depressed stock market environment.
Non-interest operating expenses increased by $1.3 million or 9.4% primarily due
to increases in foreclosure and collection expenses of $579 thousand,
professional fees of $153 thousand and advertising and marketing expenses of
$389 thousand, as management strategically decided to increase advertising and
marketing efforts on a limited basis during fiscal 2009 to attract lower costing
deposits and residential and commercial real estate loans.
The effective income tax benefit rate for the fiscal year ended March
31, 2009 was 34.5%, compared to an effective income tax rate of 29.0% for fiscal
2008.
Items primarily affecting the Company's earnings for the three months
ended March 31, 2009 were: an increase in the provision for loan losses of $795
thousand; an increase in the net loss in sales and write-downs on other
investment securities of $256 thousand, and an increase in non-interest expenses
of $533 thousand primarily related to increases of $352 thousand in foreclosure
and collection expenses, $150 thousand in marketing expenses, and $146 thousand
in professional fees, partially offset by a $190 thousand decrease in salaries
and benefits mainly due to reduced employee stock ownership plan expenses; all
partially offset by an increase in net interest and dividend income of $278
thousand.
The net interest rate spread and the net interest margin improved from
2.20% and 2.60%, respectively, for the quarter ended March 31, 2008 to 2.54% and
2.86%, respectively, for the 2009 comparable period, primarily due to an 84
basis point reduction in the cost of funds, partially offset by a decrease in
the yield on interest earning assets of 50 basis points.
Total assets were $575.8 million at March 31, 2009 and $571.2 million
at March 31, 2008. The increase in assets is primarily the net result of an
increase in short-term investments of $25.4 million offset by a decrease of
$17.7 million in investment securities (including the $9.4 million reduction in
value of investment securities due to the other than temporary impairment charge
(CONTINUED)
4
CENTRAL BANCORP, INC.
PAGE 4 OF 7
for Fannie Mae and Freddie Mac preferred stock). Short-term investments
increased primarily due to the proceeds received from the sale of preferred
stock to the U.S. Treasury, and proceeds from loan and securities repayments and
maturities due to a lack of attractive re-investment alternatives during the
recessionary economic environment. Additionally, total loans, including loans
held for sale, decreased by $11.3 million at March 31, 2009 primarily due to
decreases in construction loans and commercial and industrial loans.
Construction loans declined by $16.9 million as management de-emphasized this
type of lending as a result of the current market environment. Commercial and
industrial loans declined by $8.3 million mainly due to pay-offs of such loans.
Residential and home equity loans increased from $185.3 million at March 31,
2008 to $190.7 million at March 31, 2009 due to management's increased emphasis
on this type of lending. Commercial real estate loans increased by $5.4 million.
Other assets increased by $8.5 million primarily due to the recording of a $3.9
million deferred tax asset associated with the Fannie Mae and Freddie Mac
preferred stock write-downs, and other real estate owned, which totaled $3.0
million at March 31, 2009 compared to $0 at March 31, 2008. Deposits increased
by $14.0 million primarily due to increases in checking and NOW accounts
resulting from increased marketing efforts to attract these lower-costing
accounts. FHLB advances decreased by $12.1 million to $144.6 million at March
31, 2009 from $156.7 million at March 31, 2008 as maturing advances were not
renewed but were instead funded with available cash.
As previously announced, during the quarter ended December 31, 2008 the
Company sold $10.0 million in preferred shares and a warrant to purchase 234,742
shares of Company common stock to the U.S. Department of Treasury as a
participant in the federal government's TARP Capital Purchase Program. This
voluntary program for healthy U.S. financial institutions is designed to
encourage these institutions to build capital to increase the flow of financing
to U.S. businesses and consumers and to support the weakened U.S. economy. With
the U.S. Department of Treasury's investment in the Company, at March 31, 2009,
the Company and the Bank met all regulatory requirements to be considered
well-capitalized under the federal prompt corrective action regulations.
Subsequent to the Company's receipt of the U.S. Department of Treasury's $10
(CONTINUED)
5
CENTRAL BANCORP, INC.
PAGE 5 OF 7
million investment in the Company, the Company made a $10 million capital
contribution to the Bank. As of March 31, 2009, the Company's and the Bank's
capital ratios were as follows:
At March 31, 2009
-----------------------------------
REGULATORY
THRESHOLD
FOR WELL
ACTUAL CAPITALIZED
------------- -----------------
Central Bancorp:
Tier 1 Leverage 7.77% 5.0%
Tier 1 Risk-Based Ratio 11.56% 6.0%
Total Risk-Based Ratio 12.41% 10.0%
Central Co-operative Bank:
Tier 1 Leverage 6.61% 5.0%
Tier 1 Risk-Based Ratio 9.84% 6.0%
Total Risk-Based Ratio 10.69% 10.0%
The net increase in stockholders' equity from $38.8 million at March 31, 2008 to
$40.2 million at March 31, 2009 is primarily the result of the sale of the
preferred stock and warrant to the U.S. Department of Treasury, the net
after-tax loss of $5.9 million related to the September 2008 write-down of the
Company's investment in Fannie Mae and Freddie Mac preferred stock, and a $2.0
million increase in accumulated other comprehensive loss resulting from
decreases in the market values of available for sale securities.
At March 31, 2009, non-performing assets totaled $7.6 million or 1.32%
of total assets as compared to non-performing assets of $9.6 million or 1.68% of
total assets at March 31, 2008. While bankruptcy filings continue to extend the
time required to resolve some non-performing loans, management continues to work
with borrowers and bankruptcy trustees to resolve these situations as soon as
possible. Management currently believes that there are adequate reserves and
collateral securing non-performing loans to cover losses that may result from
these loans. However, management's ability to predict future results is
inherently uncertain and future increases to the allowance for loan losses may
be necessary due to changes in loan composition or volume, changes in economic
market area conditions or other factors. Other real estate owned, which
(CONTINUED)
6
CENTRAL BANCORP, INC.
PAGE 6 OF 7
represents three properties recorded at fair value less estimated selling costs,
totaled $3.0 million or 0.52% of total assets at March 31, 2009, compared to $0
at March 31, 2008.
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.)
THIS PRESS RELEASE, AS WELL AS OTHER WRITTEN COMMUNICATIONS MADE FROM
TIME TO TIME BY CENTRAL BANCORP, INC. AND CENTRAL CO-OPERATIVE BANK, AND ORAL
COMMUNICATIONS MADE FROM TIME TO TIME BY AUTHORIZED OFFICERS OF THE COMPANY AND
BANK, MAY CONTAIN STATEMENTS RELATING TO THE FUTURE RESULTS OF THE COMPANY
(INCLUDING CERTAIN PROJECTIONS, SUCH AS EARNINGS PROJECTIONS, NECESSARY TAX
PROVISIONS, AND BUSINESS TRENDS) THAT ARE CONSIDERED "FORWARD-LOOKING
STATEMENTS" AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
(THE "PSLRA"). SUCH FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF
SUCH WORDS AS "INTEND," "BELIEVE," "EXPECT," "SHOULD," "PLANNED," "ESTIMATED"
AND "POTENTIAL." FOR THESE STATEMENTS, THE COMPANY CLAIMS THE PROTECTION OF THE
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS CONTAINED IN THE PSLRA. THE COMPANY'S
ABILITY TO PREDICT FUTURE RESULTS IS INHERENTLY UNCERTAIN AND THE COMPANY
CAUTIONS YOU THAT A NUMBER OF IMPORTANT FACTORS COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE CURRENTLY ANTICIPATED IN ANY FORWARD-LOOKING
STATEMENT. THESE FACTORS INCLUDE, AMONG OTHERS, CHANGES IN MARKET INTEREST RATES
AND GENERAL AND REGIONAL ECONOMIC CONDITIONS, CHANGES IN GOVERNMENT REGULATIONS,
CHANGES IN ACCOUNTING PRINCIPLES AND THE QUALITY OR COMPOSITION OF THE LOAN AND
INVESTMENT PORTFOLIOS. ADDITIONAL FACTORS THAT MAY AFFECT OUR RESULTS ARE
DISCUSSED UNDER "ITEM 1A RISK FACTORS" IN THE COMPANY'S QUARTERLY REPORTS ON
FORM 10-Q AND IN ITS ANNUAL REPORT ON FORM 10-K, EACH FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION (THE "SEC"), WHICH ARE AVAILABLE AT THE SEC'S WEBSITE
(WWW.SEC.GOV) AND TO WHICH REFERENCE IS HEREBY MADE. THESE FACTORS SHOULD BE
CONSIDERED IN EVALUATING THE FORWARD-LOOKING STATEMENTS. STOCKHOLDERS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH STATEMENTS, WHICH SPEAK ONLY AS OF
THE DATE OF THOSE DOCUMENTS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO US OR ANY PERSON ACTING ON OUR BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS ABOVE. EXCEPT TO THE
EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THE COMPANY DOES NOT UNDERTAKE
ANY OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENT TO REFLECT CIRCUMSTANCES
OR EVENTS THAT OCCUR AFTER THE DATE THE FORWARD-LOOKING STATEMENTS ARE MADE.
(CONTINUED)
7
CENTRAL BANCORP, INC.
PAGE 7 OF 7
CENTRAL BANCORP, INC.
CONSOLIDATED OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended Year Ended
March 31, March 31,
-------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------
(Unaudited) (Unaudited)
Net interest and dividend income $ 3,824 $ 3,546 $15,862 $ 13,596
Provision for loan losses 1,025 230 2,125 (70)
Net gain (loss) from sales or write-downs
of investment securities other than
FNMA or FHLMC (258) (2) (402) 645
Loss from write-down
of FNMA and FHLMC 0 0 (9,394) 0
Gains on sales of loans 66 40 111 158
Other non-interest income 381 349 1,640 1,429
Non-interest expenses 4,153 (3,620) (15,159) (13,859)
-------- -------- -------- --------
Income (loss) before taxes (1,165) 83 (9,467) 2,039
Provision (benefit) for income taxes (108) (18) (3,262) (592)
--------- -------- -------- --------
Net income (loss) $ (1,057) $ 101 $(6,205) $ 1,447
========= ======= ======= ========
Net income (loss) available to common shareholders $ (1,210) $ 101 $(6,403) $ 1,447
========= ======= ======= ========
Earnings (loss) per common share:
Basic $ (0.86) $ .07 $ (4.58) $ 1.07
========= ======= ======= ========
Diluted $ (0.86) $ .07 $ (4.58) $ 1.07
========= ======= ======= ========
Weighted average number of
shares outstanding:
Basic 1,412 1,357 1,398 1,350
========= ======= ======= ========
Diluted 1,412 1,359 1,398 1,355
========= ======= ======= ========
Outstanding shares, end of period 1,640 1,640 1,640 1,640
========= ======= ======= ========
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
March 31, March 31,
2009 2008
---------------------------
(Unaudited)
Total assets $ 575,827 $ 571,245
Short-term investments 37,323 11,888
Total investments 45,309 63,054
Total loans (1) 463,878 475,137
Allowance for loan losses 3,191 3,613
Other real estate owned 2,986 0
Deposits 375,074 361,089
Borrowings 145,597 156,832
Subordinated debentures 11,341 11,341
Stockholders' equity 40,239 38,816
Book value per common share 18.76 23.67
Book equity to assets 6.99% 6.79%
Non-performing assets to total assets 1.32 1.68
- -----------------
(1) Includes loans held for sale of $3,208 and $195 at March 31, 2009
and March 31, 2008, respectively.
SELECTED FINANCIAL RATIOS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended Year Ended
March 31, March 31,
---------------------------------------------
2009 2008 2009 2008
---------------------------------------------
(Unaudited) (Unaudited)
Return on average assets (0.76)% 0.07% (1.12)% 0.26%
Return on average equity (10.31) 1.03 (16.68) 3.76
Interest rate spread 2.54 2.20 2.63 2.06
Net interest margin 2.86 2.60 2.96 2.51