Central Bancorp, Inc. (NASDAQ: CEBK) (the "Company") today reported
that its net income for the six months ended September 30, 2011 was
$440 thousand and that its net loss available to common
shareholders for the six months ended September 30, 2011 was $167
thousand, or $0.11 per diluted share, as compared to net income of
$1.1 million and net income available to common shareholders of
$830 thousand, or $0.52 per diluted share, for the six months ended
September 30, 2010. Net loss available to common shareholders for
both the quarter and six months ended September 30, 2011 was
impacted by a deemed dividend required under Generally Accepted
Accounting Principles as a result of the redemption of TARP
preferred stock on August 25, 2011. Net income for the quarter
ended September 30, 2011 was $204 thousand and net loss available
to common shareholders for the quarter ended September 30, 2011 was
$247 thousand, or $0.16 per diluted share, as compared to net
income of $401 thousand and net income available to common
shareholders of $246 thousand, or $0.15 per diluted share, for the
comparable prior year quarter.
The decreases in net income were primarily the result of the
combined effect of a general decline in market interest rates on
loans and a decrease in higher-yielding commercial real estate loan
balances as management continued to de-emphasize commercial real
estate lending in the current market environment in accordance with
the Company's business plan. As a result of this strategic change,
the Company's concentration ratio of non-owner occupied commercial
real estate loans to risk-based capital has been reduced from a
high of 600% at March 31, 2009, 466% at March 31, 2010 and 330% at
March 31, 2011 to 300% at September 30, 2011.
The $197 thousand decrease in net income for the quarter ended
September 30, 2011 as compared to the quarter ended September 30,
2010 was the net result of a $343 thousand decrease in net interest
and dividend income and a $185 thousand increase in non-interest
expenses, partially offset by a $209 thousand increase in
non-interest income and a $122 thousand decrease in the provision
for income taxes.
For the quarter ended September 30, 2011, net interest and
dividend income totaled $4.2 million compared to $4.5 million for
the quarter ended September 30, 2010. The decrease in net interest
income was the net result of a decline in interest income of $749
thousand partially offset by a $406 thousand decline in interest
expense.
The net interest rate spread and the net interest margin were
3.22% and 3.47%, respectively, for the quarter ended September 30,
2011 compared to 3.38% and 3.62%, respectively, for the quarter
ended September 30, 2010. During the quarter ended September 30,
2011, the yield on interest-earning assets decreased by 43 basis
points primarily due to a 53 basis point reduction in the yield on
mortgage loans, partially offset by a 27 basis point decrease in
the cost of interest bearing liabilities due to aggressive
liability management. Contributing to the reduced yield on mortgage
loans were a general decline in market interest rates and
management's decision to continue to decrease higher-risk,
higher-yielding commercial real estate loan balances.
The provision for loan losses totaled $300 thousand for both
quarters ended September 30, 2011 and September 30, 2010. 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 at September 30, 2011. 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 market area economic
conditions, regulatory considerations, or other factors.
Non-interest income totaled $500 thousand for the quarter ended
September 30, 2011 compared to $291 thousand during the quarter
ended September 30, 2010. The increase of $209 thousand was
primarily due to the absence of other than temporary impairment
write-downs on available for sale equity securities during the
current period compared to write-downs of $226 thousand during the
quarter ended September 30, 2010. Gains on the sale of securities
totaled $63 thousand during the quarter ended June 30, 2011
compared to $0 during the same period of 2010. Additionally, during
the quarter ended September 30, 2011 gains on the sale of loans
totaled $27 thousand compared to $87 thousand during the same
period of 2010. The decrease of $60 thousand resulted from
decreased loan sale activity during the quarter ended September 30,
2011 due to management's strategic decision to retain most
residential loans originated during the period rather than selling
them in the secondary market.
Non-interest expenses increased by $185 thousand to $4.1 million
during the quarter ended September 30, 2011 as compared to $3.9
million during the quarter ended September 30, 2010. Items
primarily contributing to this net increase were a $154 thousand
increase in salaries and benefits and a $116 thousand increase in
other expenses, partially offset by a $48 thousand decrease in FDIC
deposit insurance expense, a $32 thousand decrease in professional
fees and a $24 thousand decrease in data processing fees.
For the six months ended September 30, 2011 compared to the six
months ended September 30, 2010, the Company's $699 thousand
decrease in net income was the net result of a decrease in net
interest and dividend income of $1.0 million and increases in
non-interest expenses of $477 thousand and provision for loan
losses of $200 thousand, partially offset by a $585 thousand
increase in noninterest income and a decrease in provision for
income taxes of $402 thousand. Included in noninterest expense was
a decrease in FDIC deposit insurance expense of $86 thousand.
The increases in salaries and benefits during the three and six
month periods ended September 30, 2011 compared to the comparable
prior year periods reflected staffing increases and increases in
commissions primarily due to increases in residential loan
originations. The decrease in FDIC deposit insurance expense was
due to a change in the calculation methodology mandated by the FDIC
and decreases in deposit balances. The decreases in deposit
balances were due to management's strategic decision to reduce
certain commercial real estate loans and related deposit funding in
an effort to reduce risk and maintain capital levels.
The net interest rate spread and the net interest margin
decreased from 3.37% and 3.63%, respectively, for the six months
ended September 30, 2010 to 3.23% and 3.47%, respectively, for the
same period of 2011, primarily due to a 45 basis point reduction in
the yield on mortgage loans, partially offset by a 32 basis point
decrease in the average cost of interest bearing liabilities.
Total assets were $513.2 million at September 30, 2011 compared
to $487.6 million at March 31, 2011, an increase of $25.6 million.
The increase in total assets reflected strategic actions taken by
management to reduce risk, which included increasing the
residential loan portfolio by $59.4 million and continuing to
de-emphasize commercial real estate lending in accordance with the
Company's business plan. During the six months ended September 30,
2011, the commercial real estate portfolio balance declined by
$20.3 million. At September 30, 2011, total loans amounted to
$432.3 million compared to $394.2 million at March 31, 2011, an
increase of $30.1 million. During the six months ended September
30, 2011, short-term investments decreased by $14.0 million as
these funds were utilized to fund growth in the loan and investment
portfolios. Deposits increased by $24.3 million due to an increase
in certificates of deposit of $25.7 million and a decrease in core
deposits of $1.4 million.
The net decrease in stockholders' equity from $47.1 million at
March 31, 2011 to $46.8 million at September 30, 2011 was primarily
due to a $707 thousand decrease in other comprehensive income due
to an overall decrease in the market value of available for sale
securities and $465 thousand of dividends paid to common and
preferred shareholders, partially offset by net income of $440
thousand and stock-based compensation of $418 thousand.
During the quarter ended September 30, 2011 the U.S. Department
of Treasury invested $10.0 million in the Company's preferred stock
under the Small Business Lending Fund (the "SBLF"). The SBLF is a
voluntary program intended to encourage small business lending by
providing capital to qualified community banks at favorable rates.
The initial dividend rate on the SBLF funds will be 5% and may be
decreased to as low as 1% if the Company experiences specific
growth rates in its small business lending portfolio. The dividend
rate could increase to a maximum of 9% if specific small business
lending growth rates are not met.
With the proceeds from this investment, the Company has redeemed
all $10.0 million of the preferred stock that it issued to the
Treasury under the TARP Capital Purchase Program on December 5,
2008.
The Company's and the Bank's capital ratios were as follows:
REGULATORY
THRESHOLD
September 30, March 31, FOR WELL
2011 2011 CAPITALIZED
--------------- -------------- ---------------
Central Bancorp:
Tier 1 Leverage 10.32% 10.66% 5.0%
Tier 1 Risk-Based Ratio 16.28% 17.22% 6.0%
Total Risk-Based Ratio 17.51% 18.53% 10.0%
Central Co-operative Bank:
Tier 1 Leverage 9.26% 9.58% 5.0%
Tier 1 Risk-Based Ratio 14.62% 15.40% 6.0%
Total Risk-Based Ratio 15.85% 16.72% 10.0%
At September 30, 2011, non-performing assets totaled $8.5
million, or 1.66% of total assets, compared to non-performing
assets of $9.7 million, or 1.99% of total assets, at March 31,
2011. The $1.2 million decrease in non-performing assets was
primarily due to the settlement of an impaired commercial real
estate loan with a balance of $2.8 million in September, 2011
partially offset by the addition of one impaired commercial real
estate loan relationship of $1.6 million. The ratio of delinquent
loans to total loans declined from 3.46% at June 30, 2011 to 2.81%
at September 30, 2011. 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 totaled $187 thousand at September 30, 2011, compared
to $132 thousand at March 31, 2011 due to the addition of one
residential parcel.
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.
Central Bancorp, Inc.
Consolidated Operating Data
(In Thousands, Except Share and Per Share Data)
Three Months Ended Six Months Ended
September 30, September 30,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Net interest and dividend
income $ 4,192 $ 4,535 $ 8,161 $ 9,170
Provision for loan losses 300 300 800 600
Net gain (loss) from sales
or write-downs of
investment securities 64 (226) 555 (184)
Gains on sales of loans 27 87 35 129
Other non-interest income 409 430 814 874
Non-interest expenses 4,112 3,927 8,157 7,680
---------- ---------- ---------- ----------
Income before taxes 280 599 608 1,709
Provision for income taxes 76 198 168 570
---------- ---------- ---------- ----------
Net income $ 204 $ 401 $ 440 $ 1,139
========== ========== ========== ==========
Net income (loss)
available to common
shareholders $ (247) $ 246 $ (167) $ 830
========== ========== ========== ==========
Earnings (loss) per common
share:
Basic $ (0.16) $ 0.16 $ (0.11) $ 0.55
========== ========== ========== ==========
Diluted $ (0.16) $ 0.15 $ (0.11) $ 0.52
========== ========== ========== ==========
Weighted average number of
shares outstanding:
Basic 1,535,924 1,500,497 1,533,235 1,497,808
========== ========== ========== ==========
Diluted 1,535,924 1,602,963 1,533,235 1,594,935
========== ========== ========== ==========
Outstanding shares, end of
period 1,681,071 1,667,151 1,681,071 1,667,151
========== ========== ========== ==========
Consolidated Balance Sheet Data
(In Thousands, Except Per Share Data)
September 30, March 31,
2011 2011
------------- -------------
(Unaudited)
Total assets $ 513,245 $ 487,625
Short-term investments 23,206 37,190
Total investments 35,963 35,279
Total loans (1) 432,820 394,217
Allowance for loan losses 4,173 3,892
Other real estate owned 187 132
Deposits 333,359 309,077
Borrowings 117,291 117,351
Subordinated debentures 11,341 11,341
Stockholders' equity 46,760 47,121
Book value per common share 21.89 22.26
Book equity to assets 9.11% 9.66%
Non-performing assets to total assets 1.66 1.99
(1) Includes loans held for sale of $523 and $0 at September
30, 2011 and March 31, 2011, respectively.
Selected Financial Ratios
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ------------------
2011 2010 2011 2010
-------- -------- -------- --------
(Unaudited) (Unaudited)
Return on average assets 0.16% 0.31% 0.18% 0.43%
Return on average equity 1.73 3.50 1.86 4.99
Interest rate spread 3.22 3.38 3.23 3.37
Net interest margin 3.47 3.62 3.47 3.63
Contact: Paul S. Feeley Senior Vice President, Treasurer &
Chief Financial Officer (617) 628-4000
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