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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, INC. REPORTS FINANCIAL
RESULTS FOR THE THREE AND SIX MONTHS ENDED
SEPTEMBER 30, 2009
SOMERVILLE, MASSACHUSETTS, November 3, 2009 - Central Bancorp, Inc.
(NASDAQ Global MarketSM:CEBK) (the "Company") today reported that its net
income for the quarter ended September 30, 2009 increased to $604 thousand, or
$0.30 per diluted share, as compared to a net loss of $9.5 million, or $6.80
per diluted share, for the comparable prior year quarter. The Company's net
income for the six months ended September 30, 2009 was $901 thousand, or $0.40
per diluted share, as compared to net loss of $9.1 million, or $6.53 per
diluted share, for the corresponding period in 2008. The financial results for
both 2008 periods 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 $9.4
million impairment of the value of the Company's investment in the preferred
stock of those companies. No tax benefit was recorded during that period as the
losses were initially considered capital losses and there were insufficient
capital gains to offset such losses. However, during the subsequent quarter
ending December 31, 2008, the Company recognized a tax benefit of approximately
$3.5 million on the Fannie Mae and Freddie Mac impairment charges due to the
October 3, 2008 enactment of the Emergency Economic Stabilization Act of 2008,
which permitted the Company to treat losses incurred on the Fannie Mae and
Freddie Mac preferred stock as ordinary losses for federal income tax purposes.
(continued)
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CENTRAL BANCORP, INC.
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Net interest and dividend income totaled $4.2 million during both the
quarter ended September 30, 2009 and the quarter ended September 30, 2008.
Interest income totaled $7.2 million during the quarter ended September 30,
2009, which represents a decrease of $575 thousand as compared to interest
income of $7.8 million during the quarter ended September 30, 2008. This
decrease in interest income was largely offset by a $563 thousand decrease in
interest expense, which totaled $3.0 million during the quarter ended September
30, 2009 compared to $3.6 million during the quarter ended September 30, 2008.
The net interest rate spread and the net interest margin were 2.90% and 3.19%,
respectively, for the quarter ended September 30, 2009 compared to 2.82% and
3.14%, respectively, for the quarter ended September 30, 2008, with the changes
in these ratios resulting from rate and volume changes as follows. The cost of
funds decreased by 41 basis points mainly due to a general decline in interest
rates and aggressive liability management. During the quarter ended September
30, 2009, the yield on interest-earning assets declined by 33 basis points
primarily due to a 129 basis point decrease in interest income on investments
and a 165 basis point reduction in interest income on short-term investments.
The reduced yield on investments during the quarter ended September 30, 2009
was primarily due to the combined effect of: (1) a $96 thousand decrease in
dividends which resulted from the elimination of dividends on preferred stock
issued by the Fannie Mae and Freddie Mac as a result of the above referenced
events related to those companies in September 2008; and (2) a reduction of $65
thousand in FHLB stock dividends due to the FHLB of Boston's elimination of its
dividend as announced in February 2009. The average balance of short-term
investments increased from $11.0 million during the quarter ended September 30,
2008 to $19.6 million during the quarter ended September 30, 2009. This
increase was primarily due to management's determination to use proceeds
received from the 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, 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.
(continued)
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CENTRAL BANCORP, INC.
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Notwithstanding the increase in the average balance of short-term
investments, interest income on these investments declined by $40 thousand as
the Federal Reserve lowered the fed funds target rate by approximately 175
basis points from 200 basis points during the quarter ended September 30, 2008
to 25 basis points during the quarter ended September 30, 2009. This decrease
in the fed funds target rate had a corresponding effect on the interest earned
on the Company's short-term investments, as 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 September 30, 2009
totaled $200 thousand compared to a provision for loan losses of $900 thousand
during the quarter ended September 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 September 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.
Non-interest income increased by $9.5 million from $(9.1) million during
the quarter ended September 30, 2008 to $410 thousand during the quarter ended
September 30, 2009. As previously mentioned, the Company recorded a $9.4 million
impairment on Fannie Mae and Freddie Mac preferred stock during the quarter
ended September 30, 2008. Additionally, net loss on the sales or write-downs on
other securities totaled $115 thousand during the quarter ended September 30,
2008 compared to $0 during the quarter ended September 30, 2009. Gains on the
sale of loans increased from $3 thousand during the quarter ended September 30,
(continued)
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CENTRAL BANCORP, INC.
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2008 to $32 thousand during the quarter ended September 30, 2009 due to
increased loan origination and sale activity during the 2009 period. Other
non-interest income decreased by $35 thousand over the two periods primarily due
to a $20 thousand decrease in third party brokerage income.
Non-interest expenses decreased by $121 thousand to $3.5 million during
the quarter ended September 30, 2009 as compared to $3.6 million during the
quarter ended September 30, 2008. Included in this decrease were a $183 thousand
decrease in salaries and benefits primarily due to the receipt of
benefits-related legal settlement, and a $197 thousand increase in other
expenses mainly due to a $122 thousand increase in FDIC insurance premiums.
Also, professional fees decreased by $70 thousand and marketing expenses
decreased by $51 thousand.
The effective income tax rate for the quarter ended September 30, 2009 was
33.7%, compared to an effective income tax rate of (0.7)% for the same quarter
of 2008. The tax rate for the 2008 quarter resulted from the losses due to the
Fannie Mae and Freddie Mac impairment charge during the 2008 quarter, as
previously mentioned, and the Company's inability to take the tax benefit
recorded during the fourth quarter of 2008 during the three months ended
September 30, 2009.
In addition to the losses relating to the Fannie Mae and Freddie Mac
preferred stock, items primarily affecting the Company's earnings for the six
months ended September 30, 2009 when compared to the six months ended September
30, 2008 were: a decrease in net interest income of $89 thousand; a decrease in
the provision for loan losses of $850 thousand primarily resulting from
provisions for loan losses related to one borrower which totaled $1.1 million
during the six months ended September 30, 2008 and the absence of such a
provision in the 2009 period; a net loss in sales and write-downs on other
securities of $144 thousand, and an increase in non-interest expenses of $194
thousand. The increase in non-interest expenses was primarily the result of a
$350 decrease in salaries and benefits, and a $453 thousand increase in deposit
insurance premiums which included a special assessment recorded during June 2009
that totaled $270 thousand.
The net interest rate spread and the net interest margin improved from
2.67% and 3.01%, respectively, for the six months ended September 30, 2008 to
2.75% and 3.04%, respectively, for the 2009 comparable period, primarily due to
(continued)
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CENTRAL BANCORP, INC.
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a 43 basis point reduction in the cost of funds, partially offset by a 35 basis
point decrease in the average rate earned on interest-earning assets.
Total assets were $540.7 million at September 30, 2009 compared to $575.8
million at March 31, 2009, a decrease of $35.1 million. Generally, management
utilized short-term investments, as well as loan repayment proceeds, to fund
investment purchases and certain maturing deposits and borrowings. During the
six months ended September 30, 2009, cash on hand increased by $187 thousand,
short-term investments decreased by $27.0 million, and investment securities
increased by $811 thousand. Total loans decreased by $4.6 million as commercial
real estate loans decreased by $12.7 million and construction loans declined by
$10.4 million as management de-emphasized these types of lending as a result of
the current market environment. Residential and home equity loans increased by
$21.2 million, from $190.7 million at March 31, 2009 to $211.9 million at
September 30, 2009 due to management's increased emphasis on this type of
lending. Commercial and industrial loans decreased slightly, from $4.8 million
at March 31, 2009 to $4.7 million at September 30, 2009. Deposits decreased by
$33.9 million due to a decrease in certificates of deposit of $37.0 million,
partially offset by a net increase in core deposits of $3.1 million. To reduce
excess short-term investments, management strategically did not renew certain
maturing certificates of deposit. FHLB advances decreased by $3.1 million to
$141.5 million at September 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 $43.1 million at September 30, 2009 is primarily the result of a $2.1
million decrease in accumulated other comprehensive loss resulting from net
increases in the market values of available for sale securities, and net income
of $901 thousand.
(continued)
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CENTRAL BANCORP, INC.
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The Company's and the Bank's capital ratios were as follows:
<Table>
<Caption>
-----------------------------------------------------
REGULATORY
THRESHOLD
FOR WELL
September 30, 2009 March 31, 2009 CAPITALIZED
------------------ -------------- -------------
Central Bancorp:
Tier 1 Leverage 8.64% 7.77% 5.0%
Tier 1 Risk-Based Ratio 13.15% 11.56% 6.0%
Total Risk-Based Ratio 13.90% 12.41% 10.0%
Central Co-operative Bank:
Tier 1 Leverage 7.45% 6.61% 5.0%
Tier 1 Risk-Based Ratio 11.34% 9.84% 6.0%
Total Risk-Based Ratio 12.09% 10.69% 10.0%
</Table>
At September 30, 2009, non-performing assets totaled $5.2 million, or
0.97% of total assets, as compared to non-performing assets of $7.8 million, or
1.35% of total assets, at March 31, 2009. This decrease is primarily
attributable to the sales of two parcels of residential other real estate owned
which totaled $2.7 million. At September 30, 2009, other real estate owned
totaled $336 thousand compared to a balance of $3.0 million 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 market area conditions or other
factors.
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.)
(continued)
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CENTRAL BANCORP, INC.
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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 Six Months Ended
September 30, September 30,
--------------------------------------------
2009 2008 2009 2008
--------------------------------------------
(Unaudited) (Unaudited)
Net interest and dividend income $ 4,186 $ 4,198 $ 8,034 $ 8,123
Provision for loan losses 200 900 250 1,100
Net gain (loss) from sales or write-downs
of investment securities other than
FNMA or FHLMC - (115) - (144)
Net loss from write-downs
of FNMA and FHLMC - (9,394) - (9,394)
Gains on sales of loans 32 3 181 15
Other non-interest income 378 412 763 857
Non-interest expenses 3,485 3,606 7,408 7,214
------- ------- ------- -------
Income (loss) before taxes 911 (9,402) 1,320 (8,857)
Provision for income taxes 307 64 419 208
------- ------- ------- -------
Net income (loss) $ 604 $(9,466) $ 901 $(9,065)
======= ======= ======= =======
Net income (loss) available to
common shareholders $ 451 $(9,466) $ 596 $(9,065)
======= ======= ======= =======
Earnings (loss) per share:
Basic $ 0.31 $ (6.80) $ 0.41 $( 6.53)
======= ======= ======= =======
Diluted $ 0.30 $ (6.80) $ 0.40 $( 6.53)
======= ======= ======= =======
Weighted average number of
shares outstanding:
Basic 1,452 1,391 1,449 1,388
======= ======= ======= =======
Diluted 1,498 1,391 1,473 1,388
======= ======= ======= =======
Outstanding shares, end of period 1,640 1,640 1,640 1,640
======= ======= ======= =======
</Table>
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
September 30, March 31,
2009 2009
-------------------------------------
(Unaudited)
Total assets $ 540,674 $ 575,827
Short-term investments 10,368 37,323
Total investments 46,120 45,309
Total loans (1) 459,310 463,878
Allowance for loan losses 2,719 3,191
Other real estate owned 336 2,986
Deposits 341,218 375,074
Borrowings 141,668 145,597
Subordinated debentures 11,341 11,341
Stockholders' equity 43,130 40,239
Book value per common share 20.49 18.76
Book equity to assets 7.98% 6.99%
Non-performing assets to total assets 0.97 1.35
</Table>
(1) Includes loans held for sale of $732 and $3,208 at September 30, 2009
and March 31, 2009, respectively.
SELECTED FINANCIAL RATIOS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
Quarter Ended Six Months Ended
September 30, September 30,
-------------------------------------------
2009 2008 2009 2008
-------------------------------------------
(Unaudited) (Unaudited)
Return on average assets 0.44 % (6.81)% 0.32 % (3.23)%
Return on average equity 5.68 (99.95) 4.31 (46.57)
Interest rate spread 2.90 2.82 2.75 2.67
Net interest margin 3.19 3.14 3.04 3.01
</Table>