SOURCE: Central Bancorp, Inc.

June 05, 2007 15:09 ET

Central Bancorp Reports Fiscal Year and Fourth Quarter Earnings

SOMERVILLE, MA--(Marketwire - June 5, 2007) - Central Bancorp, Inc. (NASDAQ: CEBK) today reported that its net income for the year ended March 31, 2007 was $1.02 million, or $0.70 per diluted share, compared to net income of $2.64 million, or $1.84 per diluted share, for the prior fiscal year. For the quarters ended March 31, 2007 and March 31, 2006, net income was $42,000, or $0.03 per diluted share, and $518,000, or $0.36 per diluted share, respectively.

The decrease in net income for the year ended March 31, 2007 compared to the corresponding 2006 period primarily resulted from a $1.87 million decrease in net interest and dividend income, a $109,000 decrease in gains on sale of loans, a $56,000 decrease in other non-interest income, and a $673,000 increase in non-interest expenses. Partially offsetting these items was a $162,000 increase in net gain on sales of investment securities.

The continuing flat to inverted yield curve, as well as strong local competition for the products and services the Company offers, continued to adversely affect net interest and dividend income. The net interest rate spread and the net interest margin declined from 2.72% and 3.11%, respectively, for the year ended March 31, 2006 to 2.21% and 2.68%, respectively, for the 2007 comparable period. While the cost of funds increased by 72 basis points, the yield on interest-earning assets increased by only 21 basis points. Interest-bearing liabilities continued to re-price upward faster than interest-earning assets, primarily due to the combined effect of the continuing flat to inverted yield curve, an increase in short-term interest rates over the comparable period last year and continued strong competition for both deposits and loans in the Company's market area.

The increase in non-interest expenses for the year ended March 31, 2007 was primarily attributable to normal increases in salary and benefit expenses, increased occupancy and equipment expenses, partially attributable to the new branch and operations center in Medford, and higher professional service costs, mostly for audit and legal services related to the previously announced ESOP stock purchase and trust preferred issuance.

These expenses were partially offset by lower marketing expenses and the absence of $283,000 in non-recurring restructuring costs incurred during fiscal 2006. The provisions for loan losses were $80,000 and $100,000, respectively, for the years ended March 31, 2007 and March 31, 2006. Lower pre-tax income caused income tax expense for the year ended March 31, 2007 to decrease $901,000 from the corresponding 2006 period.

The lower net income for the March 31, 2007 quarter compared to the same year-earlier quarter primarily resulted from a $497,000 decrease in net interest and dividend income and a $350,000 increase in non-interest expenses. The increase in non-interest expenses was primarily caused by normal salary increases and benefit expenses, increased occupancy and equipment expenses, impacted by the new branch and operations center in Medford, as well as severance expenses incurred and higher professional service costs, mostly for specialized training, legal and audit services, partially off set by lower marketing and data processing costs. Partially offsetting these items was a $109,000 increase in the net gain on sales of investment securities. The $265,000 decrease in the provision for income taxes was primarily due to lower pre-tax income as well as successful tax strategies that had a positive impact on the quarter. Decreases occurred in net interest rate spread and net interest margin from 2.48% and 2.88%, respectively, for the 2006 quarter to 1.96% and 2.43%, respectively, for the 2007 quarter. While the yield on interest-earning assets rose by 17 basis points, the cost of funds increased by 69 basis points.

Total assets were $566.1 million at March 31, 2007 and $547.3 million at March 31, 2006. During the fiscal year ended March 31, 2007, investment securities available for sale decreased by $32.4 million as the result of maturities, sales and pay-downs of investments and the mandatory redemption of a portion of our investment in FHLB stock. During this same period, loans increased by $45.2 million to $460.5 million due to the Company's continuing focus on originating commercial real estate and construction loans, as well as the purchase of $14.2 million of newly originated residential real estate loans.

Deposits declined $4.8 million, primarily due to the temporary discontinuance of the advertising of premium rates on certificates of deposit during the 2007 period and the decision to instead utilize FHLB advances to fund loan growth. As a result, borrowings increased by $19.7 million to $125.7 million during the year ended March 31, 2007.

Due to the high priority given to monitoring asset quality, Senior Management is involved in the early detection and resolution of any potentially problem loans. At March 31, 2007, non-performing loans totaled $330,000 as compared to $1.2 million at the same date in 2006.

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 stand alone 24-hour automated teller machine in Somerville.

(See accompanying tables.)

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.


                          Central Bancorp, Inc.
                        Consolidated Operating Data
                    (In Thousands, Except Per Share Data)



                            Quarter Ended March 31,   Year Ended March 31,
                            ----------------------- -----------------------
                               2007        2006        2007        2006
                            ----------  ----------- ----------- -----------
                                  (Unaudited)            (Unaudited)
Net interest and dividend
 income                     $    3,369  $     3,866 $    14,449 $    16,317

Provision for loan losses           30           --          80         100

Net gain on sales and
 write-downs of investment
 securities                        222          113         581         419

Gain on sale of loans               40           25          99         208

Other non-interest income          324          312       1,314       1,370



Non-interest expenses            3,912        3,562      14,856      14,183
                            ----------  ----------- ----------- -----------

  Income before taxes               13          754       1,507       4,031

Provision for income taxes         (29)         236         487       1,388
                            ----------  ----------- ----------- -----------

  Net income                $       42  $       518 $     1,020 $     2,643
                            ==========  =========== =========== ===========

Earnings per share:

  Basic                     $      .03  $       .36 $       .72 $      1.85
                            ==========  =========== =========== ===========
  Diluted                   $      .03  $       .36 $       .70 $      1.84
                            ==========  =========== =========== ===========

Weighted average number of
 shares outstanding:

  Basic                          1,391        1,435       1,419       1,429
                            ==========  =========== =========== ===========
  Diluted                        1,404        1,444       1,452       1,438
                            ==========  =========== =========== ===========

Outstanding shares, end of
 period                          1,640        1,590       1,640       1,590
                            ==========  =========== =========== ===========




                         Consolidated Balance Sheet Data
                     (In Thousands, Except Per Share Data)

                                                March 31,      March 31,
                                                  2007           2006
                                              -------------  -------------
Total assets                                  $     566,140  $     547,275
Investment securities available for sale             74,705        107,071
Total loans (1)                                     460,542        415,363
Allowance for loan losses                             3,881          3,788
Deposits                                            388,573        393,413
Borrowings                                          125,712        106,032
Subordinated debenture                               11,341          5,258
Stockholders' equity                                 37,702         39,189
Book value per share                                  22.99          24.64
Equity to assets                                       6.66%          7.16%
Non-performing assets to total assets                  0.06           0.22

(1) Includes loans held for sale of $575 and $45 at March 31, 2007 and
    March 31, 2006, respectively.





                        Selected Financial Ratios
                (In Thousands, Except Per Share Data)



                             Quarter Ended                 Year Ended
                               March 31,                   March 31,
                        ------------------------  ------------------------
                            2007         2006         2007         2006
                        -----------  -----------  -----------  -----------
                             (Unaudited)                (Unaudited)
Return on average
 assets                        0.03%        0.38%        0.18%        0.49%
Return on average
 equity                        0.43         5.29         2.59         6.78
Interest rate spread           1.96         2.48         2.21         2.72
Net interest margin            2.43         2.88         2.68         3.11

Contact Information

  • Contact:
    Paul S. Feeley
    Senior Vice President, Treasurer & Chief Financial Officer
    (617) 628-4000