Central Bancorp, Inc. (NASDAQ: CEBK) (the "Company") today reported
that its net income for the quarter ended June 30, 2011 was $236
thousand and that its net income available to common shareholders
for the quarter ended June 30, 2011 was $80 thousand, or $0.05 per
diluted share, as compared to net income of $739 thousand and net
income available to common shareholders of $585 thousand, or $0.37
per diluted share, for the comparable prior year quarter. This
decrease was primarily the result of decreases in commercial real
estate loan balances as management continued to de-emphasize
commercial real estate lending in the current market environment in
an effort to reduce risk in accordance with the Company's business
plan, as well as a general decline in market interest rates on
loans. As a result of these strategic changes, the Company's
concentration of CRE loans has been reduced from a high of 600% at
March 31, 2009, 466% at March 31, 2010 and 330% at March 31, 2011
to 309% at June 30, 2011.
The Company's $503 thousand decrease in net income for the
quarter ended June 30, 2011 when compared to the quarter ended June
30, 2010 was the net result of a decrease in net interest and
dividend income of $667 thousand, an increase in non-interest
expenses of $293 thousand and an increase in the provision for loan
losses of $200 thousand, partially offset by a $377 thousand
increase in non-interest income and a $280 thousand decrease in
income tax expense.
For the quarter ended June 30, 2011, net interest and dividend
income totaled $4.0 million, compared to $4.6 million for the
quarter ended June 30, 2010. The decrease in net interest income
was the net result of a decline in interest income of $1.3 million
partially offset by a $595 thousand decline in interest expense.
The net interest rate spread and the net interest margin were 3.14%
and 3.40%, respectively, for the quarter ended June 30, 2011
compared to 3.38% and 3.63%, respectively, for the quarter ended
June 30, 2010. During the quarter ended June 30, 2011, the yield on
interest-earning assets decreased by 59 basis points primarily due
to a 45 basis point reduction in the yield on mortgage loans due to
a general decline in market interest rates and management's
decision to continue to decrease higher-risk, higher-yield
commercial real estate loan balances. The average balance of
commercial real estate loans decreased by $33.4 million, from
$225.6 million during the quarter ended June 30, 2010 to $192.2
million during the quarter ended June 30, 2011. Partially
offsetting the effect of the 59 basis point reduction in the yield
on interest-earning assets was a 35 basis point reduction in the
cost of interest-bearing liabilities due to comprehensive liability
management.
The provision for loan losses for the quarter ended June 30,
2011 totaled $500 thousand compared to a provision for loan losses
of $300 thousand during the quarter ended June 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 June 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 economic market area conditions,
regulatory considerations, or other factors.
Non-interest income totaled $905 thousand for the quarter ended
June 30, 2011 compared to $528 thousand during the quarter ended
June 30, 2010. The increase of $377 thousand was primarily due to a
$447 increase in gains of sale of investment securities as
management strategically sold certain available-for-sale equity and
mortgage-backed securities during the quarter ended June 30, 2011.
Gains on the sale of loans decreased by $33 thousand as most
residential loans originated during the quarter ended June 30, 2011
were retained rather than sold in the secondary market. Other
non-interest income decreased by $37 thousand primarily due to an
$18 thousand decrease in third party brokerage income and a $13
thousand decrease in deposit service charges.
Non-interest expenses increased by $293 thousand to $4.0 million
during the quarter ended June 30, 2011 as compared to $3.8 million
during the quarter ended June 30, 2010. The net increase was
primarily the result of a $462 thousand increase in salaries and
benefits due to increases in loan origination commissions and
staffing, partially offset by a $117 thousand decrease in
professional fees resulting from a reduction in collection and loan
review related expenses and a $38 thousand reduction in FDIC
insurance premiums. FDIC insurance premiums decreased due to a
change in the calculation methodology mandated by the FDIC and
lower deposit insurance costs due to declining average balances of
deposits.
The effective income tax rate for the quarter ended June 30,
2011 was 28.1%, compared to an effective income tax rate of 33.5%
for the same quarter of 2010. The variance in the effective tax
rate for the two periods was primarily due to differences in
management's estimates of projected pre-tax income for each fiscal
year.
Total assets were $497.2 million at June 30, 2011 compared to
$487.6 million at March 31, 2011, an increase of $9.6 million. The
increase in total assets reflected strategic actions taken by
management to reduce risk, which included increasing the
residential loan portfolio by $37.1 million and continuing to
de-emphasize commercial real estate lending in accordance with the
Company's business plan. During the quarter ended June 30, 2011,
the commercial real estate portfolio balance declined by $13.7
million. At June 30, 2011, total loans amounted to $418.0 million
compared to $394.2 million at March 31, 2011, an increase of $23.8
million. During the quarter ended June 30, 2011, short-term
investments decreased by $15.2 million as these funds were utilized
to fund growth in the loan and investment portfolios. Deposits
increased by $8.4 million due to increases in certificates of
deposit of $6.0 million and an increase in core deposits of $2.4
million.
The net increase in stockholders' equity from $47.1 million at
March 31, 2011 to $47.2 million at June 30, 2011 was due to net
income of $236 thousand and stock-related compensation of $210
thousand, partially offset by a $210 thousand decrease in
accumulated other comprehensive income resulting from a net
decrease in the market value of available for sale securities and
$201 thousand of dividends paid to common and preferred
shareholders.
The Company's and the Bank's capital ratios were as follows:
REGULATORY
THRESHOLD
FOR WELL
June 30, 2011 March 31, 2011 CAPITALIZED
--------------- --------------- ---------------
Central Bancorp:
Tier 1 Leverage 10.85% 10.66% 5.0%
Tier 1 Risk-Based Ratio 16.87% 17.22% 6.0%
Total Risk-Based Ratio 18.17% 18.53% 10.0%
Central Co-operative Bank:
Tier 1 Leverage 9.70% 9.58% 5.0%
Tier 1 Risk-Based Ratio 15.08% 15.40% 6.0%
Total Risk-Based Ratio 16.38% 16.72% 10.0%
Risk-based Capital ratios were impacted by a shift from short
term investments which are 0% risk weighted assets to residential
loans which are 50% risk weighted.
At June 30, 2011, non-performing assets totaled $10.1 million,
or 2.02% of total assets, as compared to non-performing assets of
$9.7 million, or 1.99% of total assets, at March 31, 2011. The
increase was primarily due to the addition of two commercial real
estate customer relationships which totaled $894 thousand and two
residential real estate customer relationships which totaled $514
thousand and the removal of three loans which totaled $968
thousand. Management continues to work with borrowers and
bankruptcy trustees to resolve non-performing 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. Other real estate owned
totaled $132 thousand at both June 30, 2011 and March 31, 2011.
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 Per Share Data)
Quarter Ended
June 30,
-----------------------
2011 2010
----------- -----------
(Unaudited)
Net interest and dividend income $ 3,968 $ 4,635
Provision for loan losses 500 300
Net gain from sales or write-downs of investment
securities 490 43
Gains on sales of loans 9 42
Other non-interest income 406 443
Non-interest expenses 4,045 3,752
----------- -----------
Income before taxes 328 1,111
Provision for income taxes 92 372
----------- -----------
Net income $ 236 $ 739
=========== ===========
Net income available to common shareholders 80 $ 585
=========== ===========
Earnings per common share:
Basic $ 0.05 $ 0.39
=========== ===========
Diluted $ 0.05 $ 0.37
=========== ===========
Weighted average number of
shares outstanding:
Basic 1,530,547 1,495,120
=========== ===========
Diluted 1,686,755 1,584,794
=========== ===========
Outstanding shares, end of period 1,681,071 1,667,151
=========== ===========
Consolidated Balance Sheet Data
(In Thousands, Except Per Share Data)
June 30, March 31,
2011 2011
----------- -----------
(Unaudited)
Total assets $ 497,238 $ 487,625
Short-term investments 21,963 37,190
Total investments 37,573 35,279
Total loans (1) 417,952 394,217
Allowance for loan losses 4,418 3,892
Other real estate owned 132 132
Deposits 317,499 309,077
Borrowings 117,321 117,351
Subordinated debentures 11,341 11,341
Stockholders' equity 47,156 47,121
Book value per common share 22.26 22.26
Book equity to assets 9.48% 9.66%
Non-performing assets to total assets 2.02 1.99
(1)Includes loans held for sale of $196 and $0 at June 30, 2011
and March 31, 2011, respectively.
Selected Financial
Ratios
Quarter Ended
June 30,
----------------------
2011 2010
---------- ----------
(Unaudited)
Return on average assets 0.19% 0.55%
Return on average equity 2.00 6.52
Interest rate spread 3.14 3.38
Net interest margin 3.40 3.63
Contact: Paul S. Feeley Senior Vice President, Treasurer &
Chief Financial Officer (617) 628-4000
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