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Central Bancorp Inc Reports Operating Results (10-Q)

November 16, 2009 | About:
10qk

10qk

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Central Bancorp Inc (CEBK) filed Quarterly Report for the period ended 2009-09-30.

Central Bancorp, Inc. is a bank holding company for Central Co-operative Bank. The bank's primary business is to acquire funds in the form of deposits and use the funds to make mortgage loans for the construction, purchase and refinancing of residential properties, and to a lesser extent, to make loans on commercial real estate in its market area. The Bank also makes a limited amount of consumer loans including education, home improvement and secured and unsecured personal loans. Member FDIC and Share Insurance Fund. Central Bancorp Inc has a market cap of $13.37 million; its shares were traded at around $8.15 with a P/E ratio of 3.54 and P/S ratio of 0.6. The dividend yield of Central Bancorp Inc stocks is 2.45%. Central Bancorp Inc had an annual average earning growth of 3.1% over the past 10 years.

Highlight of Business Operations:

Total assets were $540.7 million at September 30, 2009 compared to $575.8 million at March 31, 2009, representing a decrease of $35.1 million, or 6.1%. Total loans (excluding loans held for sale) were $458.6 million at September 30, 2009, compared to $460.7 million at March 31, 2009, representing a decrease of $2.1 million, or 0.5%. This decrease was primarily due to decreases in commercial real estate and construction loans of $10.4 million and $12.7 million respectively, substantially offset by an increase in residential and home equity loans of $21.2 million. Construction and commercial real estate loans declined as management de-emphasized these types of lending in the current economic environment. Residential and home equity loans increased due to managements increased emphasis on these types of lending. Commercial and industrial loans decreased slightly, from $4.8 million at March 31, 2009 to $4.7 million at September 30, 2009.

The allowance for loan losses totaled $2.7 million at September 30, 2009 compared to $3.2 million at March 31, 2009, representing a net decrease of $572 thousand, or 17.9%. This net decrease was primarily due to decreases of $703 thousand related to charge-offs on nine loans, and increases of $250 thousand resulting from managements reviews of the adequacy of the allowance for loan losses. Of the $703 thousand in charge-offs, $213 thousand was related to a residential condominium loan which was written down to fair value less estimated selling costs, $115 thousand was related to the partial charge-off of a hotel loan, $125 thousand resulted from the sale to a third party of residential apartments which secured a commercial real estate loan, $25 thousand resulted from the charge-off of a commercial and industrial loan, and $21 thousand resulted from a residential condominium loan which was written down to fair value less estimated selling costs immediately prior to its transfer to OREO. The remaining $204 thousand of charge-offs related to two troubled debt restructurings and two nonaccrual residential loans which were written down to fair value less selling costs. At September 30, 2009, management increased loan loss allocations due to the continued weakened state of the local economy. This factor increase resulted in an increase in the required reserve allocation of the allowance for loan losses. Based upon managements regular analysis of the adequacy of the allowance for loan losses (see Provision for Loan Losses), management considered the allowance for loan losses to be adequate at both September 30, 2009 and March 31, 2009.

Cash and cash equivalents totaled $15.7 million at September 30, 2009 compared to $42.4 million at March 31, 2009, representing a decrease of $26.7 million, or 63.1%, comprised of a $27.0 million decrease in short-term investments and a $200 thousand increase in cash and due from banks. Investment securities totaled $46.1 million at September 30, 2009 compared to $45.3 million at March 31, 2009, representing an increase of $811 thousand, or 1.8%. The increase in investment securities is primarily due to the purchase of $5.4 million in mortgage-backed securities during the six months ended September 30,2009 and a net increase in the market value of available for sale securities partially offset by the repayment of principal on mortgage-backed securities. Stock in the Federal Home Loan Bank of Boston remained unchanged and totaled $8.5 million at both September 30, 2009 and March 31, 2009.

Net income available to common shareholders for the quarter ended September 30, 2009 was $451 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 increase is the net effect of a $121 thousand decrease in non-interest expenses, a $12 thousand decrease in net interest and dividend income, partially offset by a $9.5 million increase in noninterest income and a $700 thousand decrease in the provision for loan losses. Additionally, for the quarter ended September 30, 2009, net income was reduced by $153 thousand allocated to preferred shareholders related to the Companys 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 governments TARP Capital Purchase Program.

Interest Expense. Interest expense decreased by $563 thousand, or 15.6%, to $3.0 million for the quarter ended September 30, 2009 as compared to $3.6 million for the same period of 2008 due to decreases in the average rates paid on deposits, FHLB borrowings, and other borrowings. The cost of deposits decreased by 56 basis points from 2.18% at ended September 30, 2008 to 1.62% at September 30, 2009, as some high-cost certificates of deposit were either not renewed or were replaced by lower-costing deposits. The average balance of certificates of deposit totaled $150.9 million for the quarter ended September 30, 2009, compared to $171.8 million for the same period in 2008, a decline of $20.9 million. The average balance of lower-costing non-maturity deposits increased by $15.7 million to $201.7 million for the quarter ended September 30, 2009, as compared to an average balance of $185.9 million during the same period of 2008. The average balance of FHLB borrowings decreased by $4.7 million, from $146.2 million at September 30, 2008 to $141.5 million at September 30, 2009. The decrease in the average cost of these funds was the result of a relatively high coupon rate advance which matured during the quarter ended September 30, 2009. The average cost of other borrowings decreased as a portion of these borrowings are adjustable and the average rate paid for the quarter ended September 30, 2009 was 4.72%, compared to an average rate of 5.80% for the quarter ended September 30, 2008.

Noninterest Expenses. Noninterest expenses decreased by $121 thousand or 3.4%, to $3.5 million for the quarter ended September 30, 2009 as compared to $3.6 million during the quarter ended September 30, 2008. For the 2009 quarter, decreases in salaries and benefits of $183 thousand, professional fees of $70, marketing costs of $51 thousand, and occupancy and equipment expenses of $20 thousand, were partially offset by increases in FDIC deposit insurance premiums of $122 thousand, other expenses of $75 thousand, and data processing costs of $6 thousand. Management continues to closely monitor operating expenses throughout the Company.

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