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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, INC. REPORTS FINANCIAL
RESULTS FOR THE QUARTER ENDED
JUNE 30, 2009
SOMERVILLE, MASSACHUSETTS, August 4, 2009 - Central Bancorp, Inc. (NASDAQ
Global MarketSM:CEBK) (the "Company") today reported that its net income for
the three months ended June 30, 2009 was $145 thousand, or $0.10 per diluted
share, as compared to net income of $401 thousand, or $0.29 per diluted share,
for the corresponding period in 2008.
The Company's decline in net income was primarily attributable to an
increase in non-interest expenses of $314 thousand and a decrease in net
interest and dividend income of $77 thousand, partially offset by an increase in
non-interest income of $106 thousand and a $150 thousand reduction in the
provision for loan losses. Additionally, for the quarter ended June 30, 2009,
net income was reduced by $153 thousand allocated to preferred shareholders
related to the Company's December 2008 sale of $10.0 million of preferred stock
and warrant to purchase common stock to the U.S. Treasury Department as a
participant in the federal government's TARP Capital Purchase Program.
The increase in non-interest expenses was primarily due to an increase in
FDIC deposit insurance premiums which totaled $341 thousand during the quarter
ended June 30, 2009 compared to deposit insurance premiums of $10 thousand
during the quarter ended June 30, 2008. Included in the June 2009 deposit
insurance premiums was a special assessment which totaled $270 thousand.
For the quarter ended June 30, 2009, net interest and dividend income
totaled $3.8 million, compared to $3.9 million during the quarter ended June 30,
(continued)
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CENTRAL BANCORP, INC.
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2008. This decrease was the net result of a decline in interest income of $677
thousand, partially offset by a $600 thousand decline in interest expense. The
net interest rate spread and the net interest margin were 2.52% and 2.83%,
respectively, for the quarter ended June 30, 2009 compared to 2.51% and 2.88%,
respectively, for the quarter ended June 30, 2008, with the changes in these
ratios resulting from rate and volume changes as follows. The cost of funds
decreased by 47 basis points mainly due to a general decline in interest rates
and aggressive liability management. During the quarter ended June 30, 2009, the
yield on interest-earning assets declined by 46 basis points primarily due to a
154 basis point decrease in interest income on investments and a 270 basis point
reduction in interest income on short-term investments. The reduced yield on
investments during the quarter ended June 30, 2009 was primarily due to the
combined effect of: (1) a $177 thousand decrease in dividends which resulted
from the September 2008 elimination of dividends on preferred stock issued by
the Federal National Mortgage Corporation and the Federal Home Loan Mortgage
Corporation; and (2) a reduction of $83 thousand in FHLB stock dividends as the
FHLB of Boston announced the elimination of its dividend in February 2009. The
average balance of short-term investments increased from $7.7 million during the
quarter ended June 30, 2008 to $32.0 million during the quarter ended June 30,
2009, primarily due to management's determination to use the proceeds received
from the aforementioned sale of preferred stock to the U. S. Treasury, and
proceeds from loan and securities repayments and maturities, to purchase
short-term investments due to a lack of attractive re-investment alternatives
during the recessionary economic environment. Notwithstanding the increase in
the average balance of short-term investments, interest income on these
investments declined by $37 thousand as the Federal Reserve lowered the fed
funds target rate by approximately 200 basis points over the two quarterly
periods. This decrease in the fed funds target rate had a corresponding effect
on the interest earned on the Company's short-term investments, because the
interest earned on these assets is closely tied to the target fed funds rate.
Short-term investments are primarily comprised of federal funds sold and
interest-earning balances at the Federal Reserve Bank of Boston.
The provision for loan losses for the quarter ended June 30, 2009 totaled
$50 thousand compared to a provision for loan losses of $200 thousand during the
(continued)
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CENTRAL BANCORP, INC.
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quarter ended June 30, 2008, the prior period's provision being primarily
attributable to one borrowing relationship. 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
the quarter ended June 30, 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.
As previously mentioned, non-interest income increased by $106 thousand,
from $428 thousand during the quarter ended June 30, 2008 to $534 thousand
during the quarter ended June 30, 2009. This increase was primarily due to a
$136 thousand increase in gains on the sale of loans due to increased loan
origination and sale activity during the 2009 period.
The effective income tax rate for the quarter ended June 30, 2009 was
27.3%, compared to an effective income tax rate of 26.4% for the same quarter of
2008.
Total assets were $560.1 million at June 30, 2009 compared to $575.8
million at March 31, 2009, which is a decrease of $15.7 million. Generally,
management utilized excess cash and short-term investments, as well as loan
repayment, investment maturity and repayment proceeds, to fund certain maturing
deposits and borrowings. During the quarter ended June 30, 2009, cash on hand
decreased by $2.0 million, short-term investments decreased by $7.9 million, and
investment securities decreased by $2.5 million. Total loans decreased by $2.2
million as commercial real estate loans decreased by $7.9 million and
construction loans declined by $3.8 million as management de-emphasized these
types of lending as a result of the current market environment. Residential and
home equity loans increased by $9.4 million, from $193.9 million at March 31,
2009 to $203.3 million at June 30, 2009 due to management's increased emphasis
on this type of lending. Commercial and industrial loans increased slightly,
from $4.8 million at March 31, 2009 to $5.0 million at June 30, 2009. Deposits
(continued)
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CENTRAL BANCORP, INC.
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decreased by $15.3 million due to a decrease in certificates of deposit of $19.8
million, partially offset by a net increase in core deposits of $4.5 million.
FHLB advances decreased by $3.0 million to $141.6 million at June 30, 2009 from
$144.6 million at March 31, 2009 as a maturing advance was not renewed but was
instead funded with available cash.
The net increase in stockholders' equity from $40.2 million at March 31,
2009 to $41.8 million at June 30, 2009 is primarily the result of a $1.3 million
decrease in accumulated other comprehensive loss resulting from net increases in
the market values of available for sale securities, net income of $298 thousand,
and $172 thousand related to the allocation of Company common stock to
participants in the Company's employee stock ownership plan.
The Company's and the Bank's capital ratios were as follows:
<Table>
<Caption>
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REGULATORY
THRESHOLD
FOR WELL
June 30, 2009 March 31, 2009 CAPITALIZED
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Central Bancorp:
Tier 1 Leverage 8.01% 7.77% 5.0%
Tier 1 Risk-Based Ratio 12.30% 11.56% 6.0%
Total Risk-Based Ratio 13.14% 12.41% 10.0%
Central Co-operative Bank:
Tier 1 Leverage 6.87% 6.61% 5.0%
Tier 1 Risk-Based Ratio 10.52% 9.84% 6.0%
Total Risk-Based Ratio 11.36% 10.69% 10.0%
</Table>
At June 30, 2009, non-performing assets totaled $8.3 million, or 1.49% of
total assets, as compared to non-performing assets of $7.8 million, or 1.35% of
total assets, at March 31, 2009. 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
(continued)
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CENTRAL BANCORP, INC.
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market area conditions or other factors. Other real estate owned, which
represents four properties recorded at fair value less estimated selling costs,
totaled $3.1 million, or 0.55% of total assets, at June 30, 2009, compared to
$3.0 million at March 31, 2009.
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)
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CENTRAL BANCORP, INC.
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CENTRAL BANCORP, INC.
CONSOLIDATED OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
Quarter Ended
June 30,
--------------------
2009 2008
--------------------
(Unaudited)
Net interest and dividend income $3,848 $3,925
Provision for loan losses 50 200
Net loss from sales or write-downs of
investment securities -- (29)
Gains on sales of loans 149 13
Other non-interest income 385 444
Non-interest expenses 3,922 (3,608)
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Income before taxes 410 545
Provision for income taxes 112 144
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Net income $ 298 $ 401
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Net income available to common shareholders $ 145 $ 401
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Earnings per common share:
Basic $ 0.10 $ 0.29
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Diluted $ 0.10 $ 0.29
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Weighted average number of shares outstanding:
Basic 1,446 1,386
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Diluted 1,450 1,386
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Outstanding shares, end of period 1,640 1,640
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</Table>
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
JUNE 30, March 31,
2009 2009
----------------------
(Unaudited)
Total assets $560,108 $575,827
Short-term investments 29,463 37,323
Total investments 42,786 45,309
Total loans (1) 461,710 463,878
Allowance for loan losses 3,064 3,191
Other real estate owned 3,063 2,986
Deposits 359,745 375,074
Borrowings 143,579 145,597
Subordinated debentures 11,341 11,341
Stockholders' equity 41,789 40,239
Book value per common share 19.69 18.76
Book equity to assets 7.46% 6.99%
Non-performing assets to total assets 1.49 1.35
</Table>
(1) Includes loans held for sale of $3,735 and $3,208 at June 30,
(2009) and March 31, 2009, respectively.
SELECTED FINANCIAL RATIOS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
Quarter Ended
June 30,
--------------
2009 2008
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(Unaudited)
Return on average assets 0.21% 0.28%
Return on average equity 2.90 4.14
Interest rate spread 2.52 2.51
Net interest margin 2.83 2.88
</Table>