EXHIBIT 99.1
Michael K. Devlin Immediately
Senior Vice President
(617) 628-4000
CENTRAL BANCORP REPORTS THIRD QUARTER EARNINGS
SOMERVILLE, MASSACHUSETTS, January 22, 2004-- Central Bancorp, Inc.
(NASDAQ: CEBK) today reported net income of $575,000, or $0.37 per diluted
share, for the three months ended December 31, 2003, compared to $910,000, or
$0.58 per diluted share, for the corresponding quarter in the prior fiscal year.
The current quarter's results include an insurance recovery of $53,000, net of
taxes, attributable to the dispute with certain shareholders, which was settled
during the previous quarter. In addition, during the quarter ended December 31,
2002, the Company incurred legal fees in connection with the shareholder
dispute, which reduced net income by approximately $165,000.
Earnings during the quarter ended December 31, 2003 were adversely affected
by a decrease in net interest income of $659,000, as compared to the same
quarter in the prior year. The gradual reduction in interest rates in recent
years had a greater relative impact on the Company's yield on earning assets in
the current fiscal year than on its cost of funds due to the limited opportunity
to reduce deposit rates and the fixed cost of FHLB advances. In addition, the
Company sold most of its current year fixed-rate residential mortgage loan
originations due to the historically low rates prevailing during the period and
invested the related proceeds on an overnight basis through September. Between
October and December 2003, the Company reinvested the majority of its overnight
funds in various intermediate-term investments and mortgage-backed securities in
order to, among other things, increase its yield on earning assets. The Company
experienced a reduction in its net interest margin from 3.73% in the quarter
ended December 31, 2002 to 3.14% in the current quarter.
For the nine months ended December 31, 2003, net income was $2,693,000, or
$1.72 per diluted share, compared to $2,605,000, or $1.63 per diluted share in
the year earlier period. The results in both years were affected by significant
non-operating items, namely, the settlement of the previously announced
REIT-related liability with the Massachusetts Department of Revenue and the net
impact of certain legal costs and insurance recoveries associated with a
shareholder dispute. Exclusive of the aggregate positive after-tax impact of
$703,000 resulting from the Company's
(continued)
Central Bancorp, Inc.
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June 2003 settlement of its REIT-related tax liability and the aforementioned
insurance recoveries in the current year period and exclusive of the legal fees
associated with the shareholder dispute, which reduced net income $165,000 in
the prior year period, net income declined $780,000 compared to the year earlier
period. This reduction was largely the result of a decrease in net interest
income of $1.0 million in the first nine months of the current year, as compared
to the prior year period.
John D. Doherty, Chairman, President & Chief Executive Officer, stated,
"The current interest-rate environment continues to create compression in our
net interest margin. We believe that our strategy of selling most of our current
year originations of fixed-rate residential mortgage loans is sound. During the
third quarter, we purchased approximately $31 million in intermediate-term
investment securities at a yield of 4.00% and increased our commercial real
estate loans, which generally reprice every five years, by $17.5 million. These
steps are expected to improve the yield on our earning assets during the
remainder of the fiscal year."
During the current quarter, the Company originated $26.6 million in
commercial real estate and construction loans and $10.2 million in residential
real estate loans. At December 31, 2003, the Company had nearly $167 million in
outstanding commercial real estate and construction loans, representing 46% of
the total loan portfolio. Loan quality continued to be outstanding with no loans
delinquent in excess of 90 days at December 31, 2003.
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 eight full-service banking offices and one limited-service high school
branch in suburban Boston.
(See accompanying tables.)
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This press release contains financial information determined by methods other
than in accordance with accounting methods generally accepted in the United
States of America ("GAAP"). The Company's management uses these non-GAAP
measures in its analysis of the Company's performance. These measures typically
adjust GAAP performance measures to exclude the effects of significant gains or
losses that are unusual in nature. Because these items and their impact on the
Company's performance are difficult to predict, management believes that
presentations of financial measures excluding the impact of these items provide
useful supplemental information that is essential to a proper understanding of
the operating results of the Company's business. These disclosures should not be
viewed as a substitute for operating results determined in accordance with GAAP,
nor are they necessarily comparable to non-GAAP performance which may be
presented by other companies.
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.
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CENTRAL BANCORP, INC.
CONSOLIDATED OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter Ended Nine Months Ended
December 31, December 31,
-------------------------------------------
2003 2002 2003 2002
-------------------------------------------
(Unaudited) (Unaudited)
Net interest and dividend income $ 3,693 $ 4,352 $ 11,743 $ 12,748
Provision for loan losses 50 -- 150 --
Net gain (loss) on sales and write-downs
of investment securities -- 14 (135) (196)
Gain on sale of loans 54 27 263 29
Other non-interest income 253 265 756 754
Non-interest expenses 3,017 3,200 8,776 9,222
-------- -------- -------- --------
Income before taxes 933 1,458 3,701 4,113
Provision for income taxes 358 548 1,008 1,508
-------- -------- -------- --------
Net income $ 575 $ 910 $ 2,693 $ 2,605
======== ======== ======== ========
Earnings per share:
Basic $ .37 $ 0.58 $ 1.74 $ 1.64
======== ======== ======== ========
Diluted $ .37 $ 0.58 $ 1.72 $ 1.63
======== ======== ======== ========
Weighted average number of shares outstanding:
Basic 1,553 1,569 1,549 1,584
======== ======== ======== ========
Diluted 1,567 1,580 1,563 1,600
======== ======== ======== ========
RECONCILIATION OF GAAP EARNINGS
TO PRO FORMA EARNINGS:
Net income per GAAP $ 575 $ 910 $ 2,693 $ 2,605
Impact of REIT legislation, net of taxes -- -- (374) --
Impact of litigation and legal fees,
net of insurance and taxes (53) 165 (329) 165
-------- -------- -------- --------
Pro forma earnings $ 522 $ 1,075 $ 1,990 $ 2,770
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CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS)
DECEMBER 31, MARCH 31,
2003 2003
---------------------
(UNAUDITED)
Total assets $478,177 $477,208
Investment securities available for sale 87,719 61,111
Total loans (1) 358,990 390,464
Allowance for loan losses 3,473 3,284
Deposits 287,095 287,959
Borrowings 145,062 144,576
Stockholders' equity 43,091 39,443
(1) Includes loans held for sale of $305 and $647 at December 31, 2003 and
March 31, 2003, respectively.