<PAGE>
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30,
-------
1999
- ----
COMMISSION FILE NUMBER: 0-25251
-------
CENTRAL BANCORP, INC.
--------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MASSACHUSETTS
--------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
I.R.S. EMPLOYER IDENTIFICATION NO. 04-3447594
399 HIGHLAND AVENUE, SOMERVILLE, MA. 02144
----------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER
(617) 628-4000
--------------
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the Company was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Class Outstanding at August 10, 1999
- ----------------------------- ------------------------------
Common Stock, $1.00 par value 1,939,000
<PAGE>
<PAGE>
CENTRAL BANCORP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of financial condition at
March 31, 1999 and June 30, 1999 (unaudited)
Consolidated Statements of Income for the three month
periods ended June 30, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flow for the three
month periods ended June 30, 1999 and 1998 (unaudited)
Consolidated Statements of Changes in Stockholders'
Equity for the three month periods ended June 30, 1999
and 1998 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
For the three month periods ended June 30, 1999 and
1998
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
(Incorporated by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1999)
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<PAGE>
Item 1-Financial Statements
CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
June 30, March 31,
(Dollars in Thousands) 1999 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Unaudited)
Cash and due from banks $ 4,132 $ 4,964
-------- --------
Short term investments 5,699 16,939
Investments available for sale:
Investment securities 29,157 21,943
Mortgage-backed securities 26,499 29,999
Stock in Federal Home Loan Bank of Boston, at cost 3,350 3,350
The Co-operative Central Bank Reserve Fund 1,576 1,576
-------- --------
Total investments 66,281 73,807
-------- --------
Loans:
Mortgage loans 282,848 274,146
Other loans 7,088 6,200
-------- --------
289,936 280,346
Less allowance for loan losses (2,927) (2,913)
-------- --------
Net loans 287,009 277,433
-------- --------
Accrued interest receivable 1,918 1,614
Office properties and equipment, net 2,469 2,550
Deferred tax asset, net 713 744
Goodwill, net 3,024 3,096
Other assets 208 488
-------- --------
Total assets $365,754 $364,696
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $267,246 $266,463
Advances from Federal Home Loan Bank of Boston 57,000 57,000
Advance payments by borrowers for taxes and
insurance 1,158 1,389
Accrued interest payable 301 291
Accrued income taxes 174 --
Accrued expenses and other liabilities 967 811
-------- --------
Total liabilities 326,846 325,954
-------- --------
Commitments and Contingencies (Note 2)
Stockholders' equity:
Preferred stock $1.00 par value; authorized
5,000,000 shares; none issued or outstanding -- --
Common stock $1.00 par value; authorized
15,000,000 shares; issued
1,967,000 shares (outstanding 1,957,000 at
June 30, 1999 and 1,967,000 shares at March
30, 1999) 1,967 1,967
Additional paid-in capital 11,171 11,171
Retained income 26,216 25,894
Treasury stock (10,000 shares and 0 shares,
respectively), at cost (178) --
Accumulated other comprehensive income (note 4) 316 327
Unearned compensation - ESOP (584) (617)
-------- --------
Total stockholders' equity 38,908 38,742
-------- --------
Total liabilities and stockholders' equity $365,754 $364,696
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial
statements.
<PAGE>
CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Interest and dividend income:
Mortgage loans $5,075 $5,349
Other loans 137 104
Short-term investments 207 80
Investment securities 385 398
Mortgage-backed securities 400 610
The Co-operative Central Bank
Reserve Fund 23 22
------ ------
Total interest and dividend
income 6,227 6,563
------ ------
Interest expense:
Deposits 2,327 2,840
Advances from Federal Home Loan
Bank of Boston 770 821
------ ------
Total interest expense 3,097 3,661
------ ------
Net interest and dividend income 3,130 2,902
Provision for loan losses -- --
------ ------
Net interest and dividend income
after provision for loan losses 3,130 2,902
------ ------
Non-interest income:
Deposit service charges 108 107
Net gains from sales of investment
securities 118 163
Other income 52 61
------ ------
Total non-interest income 278 331
------ ------
Operating expenses:
Salaries and employee benefits 1,191 1,090
Occupancy and equipment 296 297
Data processing service fees 137 128
Professional fees 214 172
Foreclosure expenses, net 2 --
Goodwill amortization 72 72
Other expense 321 352
------ ------
Total operating expenses 2,233 2,111
------ ------
Income before income taxes 1,175 1,122
Income tax expense 462 451
------ ------
Net income before cumulative
effect on change in
accounting principle 713 671
Cumulative effect of change in
accounting principle (234) --
------ ------
Net income $ 479 $ 671
====== ======
Earnings per common share before
cumulative effect of change in
accounting principle $ 0.37 $ 0.35
====== ======
<PAGE>
Earnings per common share before
cumulative effect of change in
accounting principle -
assuming dilution $ 0.37 $ 0.34
====== ======
Earnings per common share after
cumulative effect of change
in accounting principle $ 0.25 $ 0.35
====== ======
Earnings per common share after
cumulative effect of change
in accounting principle
assuming dilution $ 0.25 $ 0.34
====== ======
Weighted average common shares
outstanding 1,933 1,937
Weighted average common shares
outstanding, diluted 1,938 1,952
</TABLE>
See accompanying notes to unaudited consolidated financial
statements.
<PAGE>
<PAGE>
CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
(In Thousands) 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 479 $ 671
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 120 142
Amortization of premiums, fees and discounts 24 86
Amortization of goodwill 72 72
Net gains from sales of investment securities (118) (163)
Increase in accrued interest receivable (304) (171)
(Increase) decrease in deferred tax asset (31) --
(Increase) decrease in other assets 280 (266)
Decrease in advance payments by borrowers for taxes
and insurance (231) (163)
Increase (decrease)in accrued interest payable 10 (188)
Increase (decrease) in accrued income taxes 174 (299)
Increase in accrued expenses and other liabilities 156 569
--------------------
Net cash provided by operating activities 631 290
--------------------
Cash flows from investing activities:
Principal collected on loans 21,153 24,584
Loan originations (30,743) (32,032)
Principal payments on mortgage-backed securities
available for sale 3,433 4,709
Purchase of investment securities available for sale (10,974) (411)
Maturities of investment securities available for sale 2,000 1,000
Proceeds from sales of investment securities available
for sale 1,986 363
Net (increase)decrease in short-term investments 11,240 (4,540
Purchase of office properties and equipment (39) (51)
--------------------
Net cash used by investing activities (1,944) (6,378)
--------------------
Cash flows from financing activities:
Net increase in deposits 783 3,450
Proceeds from advances from FHLB of Boston 1,060 29,000
Payments on advances from FHLB of Boston (1,060) (27,000)
Purchase of Treasury Stock (178) --
Payments of dividends on common stock (157) (157)
Amortization of unearned compensation - ESOP 33 3
--------------------
Net cash provided by financing activities 481 5,296
--------------------
Net decrease in cash and due from banks (832) (792)
Cash and due from banks at beginning of period 4,964 5,718
--------------------
Cash and due from banks at end of period $ 4,132 $ 4,926
====================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 3,087 $ 3,849
Income taxes 280 750
</TABLE>
See accompanying notes to unaudited consolidated financial
statements.
<PAGE>
<PAGE>
CENTRAL BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-in Retained Comprehensive
(In Thousands) Stock Capital Income Income
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Three Months Ended June 30, 1998
- -----------------------------------
Balance at March 31, 1998 $1,965 $11,159 $23,841 $ 544
------ ------- -------- --------
Net income -- -- 671 --
Other Comprehensive Income
Unrealized (losses) on securities,
net of reclassification adjustment (note 4) -- -- -- (92)
------ ------- -------- -------
Comprehensive income -- -- 671 (92)
------ ------- -------- -------
Dividends Paid -- -- (157) --
Amortization of unearned compensation - ESOP -- -- -- --
------ ------- -------- -------
Balance at June 30, 1998 $1,965 $11,159 $24,355 $ 452
====== ======= ======= =======
Three Months Ended June 30, 1999
- -----------------------------------
Balance at March 31, 1999 $1,967 $11,171 $25,894 $ 327
------ ------- -------- -------
Net Income -- -- 479 --
Other Comprehensive Income
Unrealized (losses) on securities,
net of reclassification adjustment (note 4) -- -- -- (11)
------ ------- -------- -------
Comprehensive income -- -- 479 (11)
------ ------- -------- -------
Purchase of treasury stock -- -- -- --
Dividends Paid -- -- (157) --
Amortization of unearned compensation - ESOP -- -- -- --
------ ------- -------- -------
Balance at June 30, 1999 $1,967 $11,171 $ 26,216 $ 316
====== ======= ======== =======
<CAPTION>
Unearned Total
Treasury Compensation Stockholders'
(In Thousands) Stock ESOP Equity
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Three Months Ended June 30, 1999
- -----------------------------------
Balance at March 31, 1998 $ -- $ (723) $ 36,786
----- ------- --------
Net Income -- -- 671
Other Comprehensive Income
Unrealized (losses) on securities,
net of reclassification adjustment (note 4) -- -- (92)
----- ------- --------
Comprehensive income -- -- 579
----- ------- --------
Dividends paid -- -- (157)
Amortization of unearned compensation - ESOP -- 3 3
----- ------- --------
Balance at June 30, 1998 $ -- $ (720) $ 37,211
===== ======= ========
Three Months Ended June 30, 1999
- -----------------------------------
Balance at March 31, 1999 $ -- $ (617) $ 38,742
----- ------- --------
Net income -- -- 479
Other Comprehensive Income
Unrealized (losses) on securities,
net of reclassification adjustment (note 4) -- -- (11)
----- ------- --------
Comprehensive income -- -- 468
----- ------- --------
Purchase of treasury stock (178) -- (178)
Dividends Paid -- -- (157)
Amortization of unearned compensation - ESOP -- 33 33
----- ------- --------
Balance at June 30, 1999 $(178) $ (584) $ 38,908
===== ======= ========
</TABLE>
See accompanying notes to unaudited consolidated financial
statements.
<PAGE>
<PAGE>
CENTRAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
---------------------
The consolidated financial statements of the Company for
June 30, 1999 and the Bank for June 30, 1998 presented
herein should be read in conjunction with the financial
statements of the Company as of and for the year ended
March 31, 1999, included in the Company's Annual Report on
Form 10-K. In the opinion of management, the accompanying
unaudited consolidated financial statements reflect all
adjustments, consisting of normal recurring adjustments,
necessary to fairly present the results for the interim
periods presented. Interim results are not necessarily
indicative of results to be expected for the entire year.
(2) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
-------------------------------------------------
Commitments to originate loans, unused lines of credit and
unadvanced portions of construction loans are agreements to
lend to a customer, provided there is no violation of any
condition established in the contract. Commitments
generally have fixed expiration dates or other termination
payment of a fee. Since many of the commitments may expire
without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The
Company evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit,
is based on management's credit evaluation of the borrower.
Commitments at June 30, 1999 follow:
<TABLE>
<CAPTION>
<S> <C>
Unused lines of credit ................................ $ 9,139,000
Unadvanced portions of construction loans.............. 3,195,000
Unadvanced portions of commercial loans................ 4,562,000
Commitments to originate residential mortgage loans:
Fixed rate...................................... 3,465,000
Adjustable rate................................. 5,753,000
</TABLE>
<PAGE>
<PAGE>
CENTRAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) INCOME TAXES
------------
The Company accounts for income taxes using the asset and
liability tax method. Deferred tax assets and liabilities
are established for the temporary differences between the
financial reporting basis and the tax basis of the
Company's assets and liabilities at enacted tax rates
expected to be in effect when such amounts are realized or
settled.
(4) REPORTING COMPREHENSIVE INCOME
------------------------------
The Company has established standards for reporting and
displaying comprehensive income, which is defined as all
changes to equity except investments by, and distributions
to, shareholders. Net income is a component of comprehen-
sive income, with all other components referred to in the
aggregate as other comprehensive income.
The Company's other comprehensive income (loss) and related
tax effect is as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
(In Thousands) June 30, 1999
- ----------------------------------------------------------------------------------
Before- Tax
Tax (Benefit) After-Tax
Amount Expense Amount
<S> <C> <C> <C>
Unrealized gains (losses) on securities
Unrealized holding gains arising during
period $ 100 $ 39 $ 61
Less: reclassification adjustment for
gains realized in net income 118 46 72
------------------------------
Other comprehensive income (loss) $ (18) $ (7) $ (11)
==============================
<CAPTION>
For the Three Months Ended
(In Thousands) June 30, 1998
- ----------------------------------------------------------------------------------
Before- Tax
Tax (Benefit) After-Tax
Amount Expense Amount
<S> <C> <C> <C>
Unrealized gains (losses) on securities
Unrealized holding gains arising during
period $ 10 $ 4 $ 6
Less: reclassification adjustment for
gains realized in net income 163 65 98
------------------------------
Other comprehensive loss $ (153) $ (61) $ (92)
==============================
</TABLE>
<PAGE>
<PAGE>
CENTRAL BANCORP, INC. AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL:
- -------
On January 8, 1999, the Registrant, Central Bancorp, Inc.
became the holding company of Central Co-operative Bank when
the Bank completed its holding company reorganization.
Because substantially all of the business of the Registrant
is the business of the Bank, the discussion below focuses on
the business of the Bank. For more information, see
"Management's Discussion and Analysis of Financial Condition
and Results of Operations-Holding Company" included in the
Company's Annual Report on Form 10-K as of and for the year
ended March 31, 1999.
Net income amounted to $479,000, or $0.25 per diluted
share for the three months ended June 30, 1999 as compared to
net income of $671,000, or $0.34 per diluted share in the
corresponding quarter ended June 30, 1998.
Net income for the current quarter was lower than net
income for the same fiscal 1999 period primarily due to a
one-time charge of $234,000, net of taxes, for costs
associated with the establishment on January 8, 1999 of
Central Bancorp, Inc., as the holding company for Central
Bank. This charge represented the balance of unamortized
organization costs outstanding on April 1, 1999, that were
required to be written off in accordance with the American
Institute of Certified Public Accountants' Statement of
Position 98-5, Reporting of the Costs of Start-Up Activities.
Net income before the cumulative effect of this change in
accounting principle increased to $713,000 from $671,000 from
the prior year due to an increase in net interest income,
offset by a decrease in net gains from the sale of investment
securities and by an increase in operating expenses.
YEAR 2000 READINESS DISCLOSURE:
- ------------------------------
The statements in this section include "Year 2000
Readiness Disclosure" within the meaning of the Year 2000
Information and Readiness Disclosure Act. The following
"Year 2000" discussion contains forward looking statements
which represent the Company's beliefs or expectations
regarding future events. Forward-looking statements include,
without limitation, the Company's expectations as to when it
will complete the phases of the Plan, its estimated costs,
and its belief that its statements involve a number of risks
and uncertainties that could cause the actual results to
differ materially from the projected results. Factors that
may cause these differences include, but are not limited to,
the availability of qualified personnel and other information
technology resources, the ability to identify and remediate
all date sensitive lines of computer code, and the actions of
governmental agencies or other third parties with respect to
Year 2000 problems. This disclosure should be read in
conjunction with the Year 2000 Readiness Disclosure contained
in the Company's Annual Report on Form 10-K. as of and for
the year ended March 31, 1999.
The impact of computer systems ability to process dates
beyond 1999 creates a significant business challenge for the
Company. The Company has dedicated significant resources to
this issue. The Company has formed a committee with members
from all departments of the Company to address year
<PAGE>
<PAGE>
2000 readiness. The committee has developed plans based upon
the Federal Financial Institutions Examination Council ("FFIEC")
to address this and related issues. The components of the
Company's plan focus on; software and hardware utilized by the
Company, communication equipment and other equipment and
facilities utilized by the Company, including security and
environmental systems. Additionally, the plan includes analysis
of other risks posed by this issue such as liquidity, cash
requirements, credit risk, supplier risk, borrower readiness,
etc.
The Company is utilizing both internal and external resources to
test for year 2000 compliance. The external cost associated
with Year 2000 issues is estimated to be between $50,000 and
$100,000. Included in the estimated cost are such things as
third party proxy testing and other testing of critical systems,
customer awareness programs, any necessary new equipment or
upgrades, and other contingencies that may arise. To date the
Company has recorded external costs amounting to approximately
$50,000. This total does not include internal costs relating to
Year 2000 issues, which are not readily determinable.
The costs of the year 2000 project and the date on which
the Company plans to complete any necessary modifications are
based upon management's best estimates, which were derived
utilizing numerous assumptions. However, there can be no
guarantee that these estimates will be achieved and actual
results could differ materially from those plans.
Third party service bureaus provide the majority of the
material data processing of the Company that could be affected
by this problem. During the first quarter of fiscal 1999, the
Company converted its data processing to a service provider that
has represented to the Company that it is year 2000 compliant.
Planned testing has been completed for all critical systems.
Additional testing will continue for the remainder of the year
to ensure that any normal software changes installed after
original testing was completed did not negatively impact the
systems as they relate to the Year 2000 issue.
The Company has initiated an extensive education and
investigation program with regard to the borrowers of the
Company. This effort has been directed at determining the level
of risk to the Company in the loan portfolio from the failure of
borrowers that encounter business problems relating to year 2000
compliance. This process has included questionnaires and
interviews with large borrowers to try to assess this risk. To
date no additional loan loss provision has been deemed
necessary. However, this is an ongoing process and will be
evaluated at least quarterly for as long as necessary.
The Company has prepared a contingency plan of action to address
any business interruption problem arising with regard to year
2000. This is a dynamic plan and will be updated as deemed
appropriate by management. The plan includes operating in an
off-line mode if our data processing supplier's systems
unexpectedly fail. Additionally, the plan includes operating
alternatives such as the use of paper based records and forms,
alternative power sources and cellular phones should there be a
failure of any critical services utilized by the Company such as
electricity or telephone services.
The Company presently also believes that, based on current
information, the year 2000 problem will not pose significant
operational problems for the Company. However, the majority of
any modifications, if required, are beyond the direct control of
the Company because the Company's third party data processing
vendor must make them. Therefore, if any required modifications
are not completed in a timely manner, the year 2000 problem may
have a material adverse impact on the operations of the Company.
<PAGE>
<PAGE>
FINANCIAL CONDITION:
- -------------------
The following is a discussion of the major changes and
trends in financial condition from the end of the preceding
fiscal year, March 31, 1999, to June 30, 1999.
Total assets increased from $364.7 million at March 31, 1999
to $365.8 million at June 30, 1999 primarily as a result of
an increase in the Company's loan portfolio, partially offset
by a decline in investments and cash and due from banks.
The Company's loan balance grew by $9.6 million or 3.4% as
a result of loan originations amounting to $30.7 million,
$21.5 million of which were in residential real estate loans.
Loan amortization and pay-offs amounted to approximately
$21.2 million. The Company's investment portfolio decreased
by $7.5 million, primarily as a result of net pay-downs of
mortgage-backed securities, maturities, calls, purchases and
sales of investment securities and a decline in short term
investments. Funds from the decline in the Company's
investment portfolio were primarily used to fund the increase
in the loan portfolio.
Deposits increased during the three month period by $783,000
and accrued income taxes increased by $134,000.
NON-PERFORMING ASSETS:
The Company had non-accruing loans totaling $416,000 at
June 30, 1999, a decrease of $3,000 or 0.7% from $419,000 on
March 31, 1999; Interest income not recognized on
non-accruing loans amounted to approximately $10,000
[PSF1] for the first three months of fiscal 2000.
The following table sets forth information with respect to
the Company's non-performing assets for the dates indicated:
<TABLE>
<CAPTION>
June 30, March 31, June 30,
1999 1999 1998
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Loans accounted for on a
non-accrual basis, (non-accruing loans) $ 416 $ 419 $ 230
Impaired loans, accruing 0 0 1,301
Non-accruing loans as a percentage of
total loans 0.14% 0.15% 0.08%
Non-accruing loans as a percentage of
total assets 0.11% 0.11% 0.06%
</TABLE>
<PAGE>
<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1999, AND
- --------------------- 1998:
Net income for the three months ended June 30, 1999, and
1998, amounted to $479,000 or $0.25 per diluted share and
$671,000 or $0.34 per diluted share, respectively.
Average earning assets decreased by $1.5 million while the
rate earned on these assets also decreased 34 basis points to
6.87% during the first quarter of fiscal 2000 when compared
to the first quarter of fiscal 1999. The average balance of
interest-bearing liabilities decreased $10.8 million while
the rates paid on these liabilities decreased by 55 basis
points during the quarter ended June 30, 1999 when compared
to the same period one year ago. Together these develop-
ments resulted in a $336,000 decrease in interest and
dividend income and a corresponding decrease of $564,000 in
interest expense. The combination resulted in a $228,000
increase in net interest and dividend income from the fiscal
1999 quarter to the fiscal 2000 quarter.
Interest income from the Company's loan portfolio decreased
$241,000 in the first quarter of fiscal 2000. This decrease
was primarily the result of a $1.2 million decrease in
the average loan balance and by a 31 basis point decrease in
average rates earned on these loans.
Income from the Company's investment portfolio (which
includes short term investments, investment securities,
mortgage backed securities and The Co-operative Central Bank
Reserve Fund) decreased by $95,000 during the first quarter
of fiscal 2000 when compared to the same fiscal 1999 period.
The yield on these assets decreased by 44 basis points while
the average balance decreased by $369,000 during the fiscal
2000 quarter.
The Company's cost of deposits decreased by $513,000 during
the first quarter of fiscal 2000 when compared to the same
fiscal 1999 quarter. The rate paid on deposits decreased 65
basis points from 4.10 % during the quarter ended June 30,
1998 to 3.45% during the quarter ended June 30, 1999. The
average balance of these deposits decreased $7.4 million to
$269.6 million during the first quarter of fiscal 2000 from
$277.0 million during the fiscal 1999 first quarter.
The average balance of borrowed funds decreased by $3.4
million to $57.0 million in the fiscal 2000 first quarter
compared to $60.4 million in the same fiscal 1999 quarter.
The rate paid on borrowings decreased by 3 basis points in
the fiscal 2000 quarter to 5.40% from 5.43% in the fiscal
1999 quarter. The combined effect of these changes resulted
in a decrease of $51,000 in interest expense on borrowings to
$770,000 in the first quarter of fiscal 2000 compared to
$821,000 in fiscal 1999's first quarter.
The provision for loan losses is made to maintain the
allowance for loan losses at a level which management consi-
ders adequate to provide for probable losses based on an
evaluation of known and inherent risks in the loan portfolio.
Consistent with the current evaluation of the loan portfolio,
the Company did not make any provision for the first quarter
of fiscal 2000 or fiscal 1999.
Non-interest income decreased by approximately $53,000 to
$278,000 in the first quarter of fiscal 2000 from $331,000 in
the first fiscal 1999 quarter. The Company recorded $118,000
and $163,000 in net gains from sales of investment securities
during the first quarter of fiscal 2000 and fiscal 1999,
respectively. This $45,000 decrease in net gains from the
sale of investment securities is the primary reason for the
decrease in non-interest income between the two quarters.
<PAGE>
<PAGE>
Operating expenses increased $122,000 in the first quarter
of fiscal 2000 compared to the same quarter of fiscal 1999.
This increase is primarily attributable to increases in
salaries and employee benefits of $101,000 and professional
fees of $42,000.
The provision for Federal and state income taxes amounted
to $462,000 and $451,000 during the first quarter of fiscal
2000 and fiscal 1999, respectively. The increased expense
relates primarily to the increased level of pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES:
- -------------------------------
The Company's principal sources of liquidity are loan
amortization, loan prepayments, increases in deposits and
advances from The Federal Home Loan Bank (FHLB) of Boston.
The Company is a voluntary member of the FHLB of Boston and
as such is generally entitled to borrow up to 30% of its
total assets. Cash from these liquidity sources is used to
fund loan originations, security investments, deposit
maturities and repayment of FHLB of Boston advances. The
Company's capital to assets ratio was 10.64% on June 30,
1999, which exceeded regulatory requirements.
NEW ACCOUNTING PRONOUNCEMENT:
- ----------------------------
In June 1998, the Financial Accounting Standards Board
("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an
entity recognize all derivatives as either assets or
liabilities in the statement of financial position and
measure those instruments at fair market value. If certain
conditions are met, a derivative may be specifically desig-
nated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized
firm commitment, (b) a hedge of the exposure to variable cash
flows of a forecasted transaction, or (c) a hedge of the
foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-
for-sale security, or a foreign-currency-denominated
forecasted transaction.
The accounting for changes in the fair value of a derivative
(that is gains and losses) depends on the intended use of the
derivative and the resulting designation. In June 1999, the
FASB issued SFAS 137 which delays the effective date of SFAS
133 so that it is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The Company does not
expect this statement to have a material effect on its
consolidated financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ----------------------------------------------------------
The Company has experienced no material changes in market risk
since March 31, 1999.
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
- --------------------------
This report includes forward-looking statements that involve
inherent risks and uncertainties. A number of important
factors could cause actual results to differ materially from
those in the forward-looking statements. Those factors
include the economic environment, competition, products and
pricing in geographic and business areas in which the Company
operates, prevailing interest rates, changes in government
regulations and policies affecting financial services
companies, and credit quality and credit risk management.
Central Bancorp, Inc. undertakes no obligation to release
revisions to these forward-looking statements or reflect
events or circumstances after the date of this report.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security
Holders
At the Annual Meeting of Stockholders of
Central Bancorp, Inc. held on July 29, 1999,
stockholders voted affirmatively on the
following proposals:
1. To elect three directors to serve until
the 2002 Annual Meeting of Stockholders.
VOTE VOTE
ELECTED AT MEETING TERM FOR WITHHELD
-------------------------------------------
Marat E. Santini 3 Years 88% 12%
John F. Gilgun, Jr. 3 Years 88% 12%
John G. Quinn 3 Years 88% 12%
2. To Approve the Central Bancorp, Inc. 1999
Stock Option and Incentive Plan.
VOTE: FOR 1,439,028 - 77.1% AGAINST: 398,702 -21.4%
ABSTAIN: 29,127 - 1.5%
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27, FDS, Financial Data
Schedule
(b) Reports on Form 8-K
On April 8, 1999, the Registrant filed a
Current Report on Form 8-K announcing
the establishment of a stock repurchase
program to repurchase up to 98,500
shares, or up to 5% of the registrant's
outstanding shares of common Stock, over
a six-month period.
<PAGE>
<PAGE>
CENTRAL BANCORP, INC. AND SUBSIDIARY
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized
CENTRAL BANCORP, INC. AND SUBSIDIARY
------------------------------------
8/13/99 /s/ John D. Doherty
- ---------- -------------------------------------
Date John D. Doherty
President and Chief Executive Officer
8/13/99 /s/ Paul S. Feeley
- ---------- -------------------------------------
Date Paul S. Feeley
Senior Vice President and Treasurer
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