##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-25251
 CENTRAL BANCORP, INC.
  Massachusetts
    
    04-3447594(State or other jurisdiction of incorporation or 
organization)
    
    (I.R.S. Employer Identification No.)399 Highland Avenue, Somerville, Massachusetts
    
    02144(Address of principal executive offices)
    
    (Zip Code)
 (617) 628-4000
  Not applicable
  þ o
  Large accelerated filer o
    
    Accelerated filer oNon-accelerated filer o
    
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
 o þ
 Common Stock, $1.00 par value
    
    1,639,951Class
    
    Outstanding at August 13, 2008




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##### 



CENTRAL BANCORP, INC.
 Form 10-Q
 Table of Contents
 Page No.Part I. Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Statements of Financial Condition at June 30, 2008 and
March 31, 2008
    
    
    3Consolidated Statements of Income for the Three Months Ended
June 30, 2008 and 2007
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the Three
Months Ended June 30, 2008 and 2007
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended
June 30, 2008 and 2007
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results
Of Operations
    
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4.
    
    Controls and Procedures
    
    
    22Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    
    23Item 1A.
    
    Risk Factors
    
    
    23Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3.
    
    Defaults Upon Senior Securities
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    24Item 5.
    
    Other Information
    
    
    24Item 6.
    
    Exhibits
    
    
    24SignaturesEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO
  2




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##### Table of Contents



Part I. Financial Information
 
 Item 1.
    
    Financial Statements
 
 CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(Unaudited)
 (Dollars in Thousands, Except Share Data)
    
    June 30, 2008
    
    
    March 31, 2008ASSETSCash and due from banks
    
    $
    6,388
    
    
    $
    5,837Short-term investments
    
    
    6,125
    
    
    
    11,888Cash and cash equivalents
    
    
    12,513
    
    
    
    17,725Investment securities available for sale (amortized cost of $52,140
at June 30, 2008 and $53,612 at March 31, 2008)
    
    
    49,922
    
    
    
    52,960Stock in Federal Home Loan Bank of Boston, at cost
    
    
    8,518
    
    
    
    8,518The Co-operative Central Bank Reserve Fund, at cost
    
    
    1,576
    
    
    
    1,576Total investments
    
    
    60,016
    
    
    
    63,054Loans held for sale
    
    
    
    
    
    
    195Loans (Note 2)
    
    
    476,123
    
    
    
    474,942Less allowance for loan losses
    
    
    3,809
    
    
    
    3,613Loans, net
    
    
    472,314
    
    
    
    471,329Accrued interest receivable
    
    
    1,885
    
    
    
    1,981Banking premises and equipment, net
    
    
    3,865
    
    
    
    3,969Deferred tax asset, net
    
    
    3,159
    
    
    
    2,557Goodwill, net
    
    
    2,232
    
    
    
    2,232Bank owned life insurance (Note 10)
    
    
    6,162
    
    
    
    6,084Other assets
    
    
    2,133
    
    
    
    2,119Total assets
    
    $
    564,279
    
    
    $
    571,245LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 3)
    
    $
    361,941
    
    
    $
    361,089Short-term borrowings
    
    
    
    
    
    
    141Federal Home Loan Bank advances
    
    
    149,665
    
    
    
    156,691Subordinated debenture (Note 4)
    
    
    11,341
    
    
    
    11,341Advanced payments by borrowers for taxes and insurance
    
    
    1,256
    
    
    
    1,308Accrued expenses and other liabilities
    
    
    1,946
    
    
    
    1,859Total liabilities
    
    
    526,149
    
    
    
    532,429Commitments and Contingencies (Note 6)Stockholders equity (Note 7):Preferred stock $1.00 par value; 5,000,000 shares authorized; none issued or
outstanding
    
    
    
    
    
    
    Common stock $1.00 par value; 15,000,000 shares authorized; and
1,639,951 shares issued at June 30, 2008 and March 31, 2008
    
    
    1,640
    
    
    
    1,640Additional paid-in capital
    
    
    3,690
    
    
    
    3,690Retained income
    
    
    40,931
    
    
    
    40,825Accumulated other comprehensive loss (Note 5)
    
    
    (1,200
    )
    
    
    (236
    )Unearned compensation  ESOP
    
    
    (6,931
    )
    
    
    (7,103
    )Total stockholders equity
    
    
    38,130
    
    
    
    38,816Total liabilities and stockholders equity
    
    $
    564,279
    
    
    $
    571,245
 See accompanying notes to unaudited consolidated financial statements.
 3




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CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(In Thousands, Except Per Share Data)
(Unaudited)
 Three Months EndedJune 30,2008
    
    
    2007Interest and dividend income:Mortgage loans
    
    $
    6,853
    
    
    $
    6,809Other loans
    
    
    190
    
    
    
    150Short-term investments
    
    
    57
    
    
    
    193Investments
    
    
    765
    
    
    
    886Total interest and dividend income
    
    
    7,865
    
    
    
    8,038Interest expense:Deposits
    
    
    2,007
    
    
    
    2,853Advances from Federal Home Loan Bank of Boston
    
    
    1,763
    
    
    
    1,634Other borrowings
    
    
    170
    
    
    
    211Total interest expense
    
    
    3,940
    
    
    
    4,698Net interest and dividend income
    
    
    3,925
    
    
    
    3,340Provision for loan losses
    
    
    200
    
    
    
    Net interest and dividend income after
provision for loan losses
    
    
    3,725
    
    
    
    3,340Noninterest income:Deposit service charges
    
    
    246
    
    
    
    252Net (losses) gains from sales and write-downs of
investment securities
    
    
    (29
    )
    
    
    116Net gains on sales of loans
    
    
    13
    
    
    
    52Bank owned life insurance income
    
    
    78
    
    
    
    Other income
    
    
    120
    
    
    
    105Total noninterest income
    
    
    428
    
    
    
    525Noninterest expenses:Salaries and employee benefits
    
    
    2,218
    
    
    
    2,099Occupancy and equipment
    
    
    553
    
    
    
    550Data processing fees
    
    
    201
    
    
    
    223Professional fees
    
    
    180
    
    
    
    204Advertising and marketing
    
    
    30
    
    
    
    4Other expenses
    
    
    426
    
    
    
    436Total noninterest expenses
    
    
    3,608
    
    
    
    3,516Income before income taxes
    
    
    545
    
    
    
    349Provision for income taxes
    
    
    144
    
    
    
    124Net income
    
    $
    401
    
    
    $
    225Earnings per common share  basic (Note 8)
    
    $
    0.29
    
    
    $
    0.16Earnings per common share  diluted (Note 8)
    
    $
    0.29
    
    
    $
    0.16Weighted average common shares outstanding  basic
    
    
    1,386
    
    
    
    1,392Weighted average common and equivalent shares
outstanding  diluted
    
    
    1,386
    
    
    
    1,401
 See accompanying notes to unaudited consolidated financial statements.
 4




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CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders Equity
(Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    Unearned
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Compensation
    
    
    Stockholders(In Thousands)
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Loss
    
    
    ESOP
    
    
    EquityThree Months Ended June 30, 2008Balance at March 31, 2008
    
    $
    1,640
    
    
    $
    3,690
    
    
    $
    40,825
    
    
    $
    (236
    )
    
    $
    (7,103
    )
    
    $
    38,816Net income
    
    
    
    
    
    
    
    
    
    
    401
    
    
    
    
    
    
    
    
    
    
    
    401Other comprehensive loss, net of tax benefit:Unrealized loss on securities, net
of reclassification adjustment (Note 5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (964
    )
    
    
    
    
    
    
    (964
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (563
    )Dividends paid ($0.18 per share)
    
    
    
    
    
    
    
    
    
    
    (295
    )
    
    
    
    
    
    
    
    
    
    
    (295
    )Stock-based compensation (Note 9)
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81Amortization of unearned compensation  ESOP
    
    
    
    
    
    
    (81
    )
    
    
    
    
    
    
    
    
    
    
    172
    
    
    
    91Balance at June 30, 2008
    
    $
    1,640
    
    
    $
    3,690
    
    
    $
    40,931
    
    
    $
    (1,200
    )
    
    $
    (6,931
    )
    
    $
    38,130
 See accompanying notes to unaudited consolidated financial statements.
 5




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CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
 Three Months EndedJune 30,(In thousands)
    
    2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    401
    
    
    $
    225Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    232
    
    
    
    243Amortization of premiums
    
    
    17
    
    
    
    14Provision for loan losses
    
    
    200
    
    
    
    Stock-based compensation and amortization of unearned compensation  ESOP
    
    
    172
    
    
    
    229Net losses (gains) from sales and write-downs of investment securities
    
    
    29
    
    
    
    (116
    )Bank owned life insurance income
    
    
    (78
    )
    
    
    Gain on sales of loans held for sale
    
    
    (13
    )
    
    
    (52
    )Originations of loans held for sale
    
    
    (1,628
    )
    
    
    (4,378
    )Proceeds from sale of loans originated for sale
    
    
    1,837
    
    
    
    4,365Decrease in accrued interest receivable
    
    
    96
    
    
    
    209Increase in other assets, net
    
    
    (14
    )
    
    
    (2
    )Decrease in advance payments by borrowers for taxes and insurance
    
    
    (52
    )
    
    
    (28
    )Increase in accrued expenses and other liabilities, net
    
    
    87
    
    
    
    2Net cash provided by operating activities
    
    
    1,286
    
    
    
    711Cash flows from investing activities:Loan principal (originations) collections, net
    
    
    (1,185
    )
    
    
    2,006Principal payments on mortgage-backed securities
    
    
    1,358
    
    
    
    1,343Purchases of restricted equity-FHLB
    
    
    
    
    
    
    (35
    )Proceeds from sales of investment securities
    
    
    1,070
    
    
    
    1,064Purchases of investment securities
    
    
    (3,002
    )
    
    
    (1,133
    )Maturities and calls of investment securities
    
    
    2,000
    
    
    
    Purchase of banking premises and equipment
    
    
    (128
    )
    
    
    (23
    )Net cash provided by investing activities
    
    
    113
    
    
    
    3,222Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    852
    
    
    
    (13,942
    )Proceeds from advances from FHLB of Boston
    
    
    
    
    
    
    43,000Repayment of advances from FHLB of Boston
    
    
    (7,027
    )
    
    
    (49,000
    )Net short-term repayments
    
    
    (141
    )
    
    
    Cash dividends paid
    
    
    (295
    )
    
    
    (253
    )Net cash used in financing activities
    
    
    (6,611
    )
    
    
    (17,535
    )Net decrease in cash and cash equivalents
    
    
    (5,212
    )
    
    
    (13,602
    )Cash and cash equivalents at beginning of period
    
    
    17,725
    
    
    
    20,617Cash and cash equivalents at end of period
    
    $
    12,513
    
    
    $
    7,015Cash paid during the period for:Interest
    
    $
    3,836
    
    
    $
    4,729Income taxes
    
    
    115
    
    
    
    10
 See accompanying notes to unaudited consolidated financial statements
 6




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CENTRAL BANCORP AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
June 30, 2008
 (1) Basis of Presentation
    (2) Loans
  June 30,
    
    
    March 31,2008
    
    
    2008Real estate loans:Residential real estate (1-4 family)
    
    $
    183,070
    
    
    $
    178,727Commercial real estate
    
    
    251,107
    
    
    
    244,496Construction
    
    
    23,924
    
    
    
    30,950Home equity lines of credit
    
    
    6,779
    
    
    
    6,559Total real estate loans
    
    
    464,880
    
    
    
    460,732Commercial loans
    
    
    10,177
    
    
    
    13,173Consumer loans
    
    
    1,066
    
    
    
    1,037Total loans
    
    
    476,123
    
    
    
    474,942Less: allowance for loan losses
    
    
    (3,809
    )
    
    
    (3,613
    )Total loans, net
    
    $
    472,314
    
    
    $
    471,329
 Comparison of Operating Results for the Quarters Ended June 30, 2008 and 2007
 Provision for Loan Losses
 7




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##### Table of Contents



Three Months EndedJune 30,2008
    
    
    2007Balance at beginning of period
    
    $
    3,613
    
    
    $
    3,881Provision charged to expense
    
    
    200
    
    
    
    Less: charge-offs
    
    
    (6
    )
    
    
    (46
    )Add: recoveries
    
    
    2
    
    
    
    13Balance at end of period
    
    $
    3,809
    
    
    $
    3,848
 (3) Deposits
  June 30,
    
    
    March 31,2008
    
    
    2008Demand deposit accounts
    
    $
    39,313
    
    
    $
    38,250NOW accounts
    
    
    28,735
    
    
    
    27,065Passbook and other savings accounts
    
    
    51,367
    
    
    
    50,252Money market deposit accounts
    
    
    69,696
    
    
    
    67,243Total non-certificate accounts
    
    
    189,111
    
    
    
    182,810Term deposit certificates:Certificates of $100,000 and above
    
    
    74,527
    
    
    
    74,052Certificates of less than $100,000
    
    
    98,303
    
    
    
    104,227Total term deposit certificates
    
    
    172,830
    
    
    
    178,279Total deposits
    
    $
    361,941
    
    
    $
    361,089
 (4) Subordinated Debentures
  8




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(5) Other Comprehensive Loss
   For the Three Months EndedJune 30, 2008Before-Tax
    
    
    Tax
    
    
    After-TaxAmount
    
    
    Effect
    
    
    AmountUnrealized losses on securities:Unrealized net holding losses during period
    
    $
    (1,595
    )
    
    $
    (610
    )
    
    $
    (985
    )Less: reclassification adjustment for net
losses included in net income
    
    
    (29
    )
    
    
    (8
    )
    
    
    (21
    )Other comprehensive loss
    
    $
    (1,566
    )
    
    $
    (602
    )
    
    $
    (964
    )
 For the Three Months EndedJune 30, 2007Before-Tax
    
    
    Tax
    
    
    After-TaxAmount
    
    
    Effect
    
    
    AmountUnrealized losses on securities:Unrealized net holding losses during period
    
    $
    (160
    )
    
    $
    (52
    )
    
    $
    (108
    )Less: reclassification adjustment for net
gains included in net income
    
    
    116
    
    
    
    41
    
    
    
    75Other comprehensive loss
    
    $
    (276
    )
    
    $
    (93
    )
    
    $
    (183
    )
 9




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##### Table of Contents



(6) Contingencies
 Legal Proceedings.
 (7) Subsequent Events
  (8) Earnings per Share (EPS)
   Three Months EndedJune 30,2008
    
    
    2007(Amounts in thousands, except pershare amounts)Net income available to common shareholders
    
    $
    401
    
    
    $
    225Weighted average number of common shares outstanding
    
    
    1,640
    
    
    
    1,640Weighted average number of unallocated ESOP and unvested
restricted shares
    
    
    (254
    )
    
    
    (248
    )Weighted average number of common shares outstanding
used in calculation of basic earnings per share
    
    
    1,386
    
    
    
    1,392Incremental shares from the assumed exercise of dilutive
stock options
    
    
    
    
    
    
    9Weighted average number of common shares outstanding
used in calculating diluted earnings per share
    
    
    1,386
    
    
    
    1,401Earnings per shareBasic
    
    $
    0.29
    
    
    $
    0.16Diluted
    
    $
    0.29
    
    
    $
    0.16
  (9) Stock-Based Compensation
  10




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11




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##### Table of Contents



Number of
    
    
    WeightedShares
    
    
    Exercise PriceOutstanding at March 31, 2008
    
    
    68,218
    
    
    $
    25.364Exercised
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    Outstanding at June 30, 2008
    
    
    68,218
    
    
    $
    25.364Exercisable at June 30, 2008
    
    
    60,218
    
    
    $
    21.705
  WeightedAverageRemaining
    
    WeightedNumber
    
    Contractual
    
    Average
    
    AggregateExercise
    
    of Shares
    
    Life
    
    Exercise
    
    IntrinsicPrice
    
    Outstanding
    
    (Years)
    
    Price
    
    Value (1)$
    16.625
    
    
    
    12,077
    (2)
    
    
    2.4
    
    
    $
    16.625
    
    
    $
    20.250
    
    
    
    13,745
    (2)
    
    
    1.3
    
    
    
    20.250
    
    
    
    28.990
    
    
    
    32,396
    (2)
    
    
    6.6
    
    
    
    28.990
    
    
    
    31.200
    
    
    
    10,000
    (3)
    
    
    8.2
    
    
    
    31.200
    
    
    
    Average/Total
    
    $
    25.364
    
    
    
    68,218
    
    
    
    5.1
    
    
    $
    25.364
    
    
    $
    
 
 (1)
    
    Represents the total intrinsic value, based on the Companys closing stock price of $11.00 on
June 30, 2008, which would have been received by the option holders had all option holders
exercised their options as of that date. As of June 30, 2008, the intrinsic value of
outstanding stock options and exercisable stock options was zero.(2)
    
    Fully vested and exercisable at the time of grant.(3)
    
    Subject to vesting over five years, 20% vested at June 30, 2008.  Weighted AverageNumber of
    
    Grant DateShares
    
    Fair ValueBalance at March 31, 2008
    
    
    39,200
    
    
    $
    31.20Granted
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Non-vested at June 30, 2008
    
    
    39,200
    
    
    $
    31.20
 12




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##### Table of Contents



(10) Bank-Owned Life Insurance
  (11) Recent Accounting Pronouncements
    ,
 13




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##### Table of Contents



(12) Fair Value Disclosures
  Level 1 
    
    Quoted prices for identical instruments in active marketsLevel 2 
    
    Quoted prices for similar instruments in active or non-active
markets and model-derived valuations in which all significant
inputs and value drivers are observable in active marketsLevel 3 
    
    Valuation derived from significant unobservable inputs
 ,
  Carrying Value (in thousands)Level 1
    
    Level 2
    
    Level 3
    
    TotalSecurities available for sale
    
    $
    5,576
    
    
    $
    43,657
    
    
    $
    689
    
    
    $
    49,922
  14




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InvestmentSecuritiesAvailable for SaleBalance at March 31, 2008
    
    $
    717Total realized and unrealized gains (losses) included in income
    
    
    Total
unrealized gains (losses) included in other comprehensive income
    
    
    2Net accretion of discount and repayment of principal
    
    
    (30
    )Net transfers in/out of Level 3
    
    
    Balance at June 30, 2008
    
    $
    689
     ImpairedLoansBalance at March 31, 2008
    
    $
    3,461Total realized and unrealized gains (losses) included in income
    
    
    Net transfers in/out of Level 3
    
    
    Balance at June 30, 2008
    
    $
    3,461
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
  15




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##### Table of Contents



www.sec.gov Part
IIItem 1A. Risk Factors
 General
      Critical Accounting Policies
   16




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Comparison of Financial Condition at June 30, 2008 and March 31, 2008
   Provision for Loan Losses
 Bank-Owned Life Insurance
 17




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Comparison of Operating Results for the Quarters Ended June 30, 2008 and 2007
  Net Interest Income.
 Interest and Dividend Income.
 18




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##### Table of Contents



Interest Expense
  Three Months Ended June 302008
    
    
    2007Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    461,936
    
    
    $
    6,853
    
    
    
    5.93
    %
    
    $
    449,084
    
    
    $
    6,809
    
    
    
    6.06
    %Other loans
    
    
    12,041
    
    
    
    190
    
    
    
    6.31
    
    
    
    7,709
    
    
    
    150
    
    
    
    7.78Investment securities
    
    
    64,072
    
    
    
    765
    
    
    
    4.78
    
    
    
    74,632
    
    
    
    886
    
    
    
    4.75Short-term investments
    
    
    7,727
    
    
    
    57
    
    
    
    2.95
    
    
    
    13,546
    
    
    
    193
    
    
    
    5.70Total interest-earning assets
    
    
    545,776
    
    
    
    7,865
    
    
    
    5.76
    
    
    
    544,971
    
    
    
    8,038
    
    
    
    5.90Allowance for loan losses
    
    
    (3,614
    )
    
    
    
    
    
    
    
    
    
    
    (3,854
    )Non-interest-earning assets
    
    
    23,134
    
    
    
    
    
    
    
    
    
    
    
    18,873Total assets
    
    $
    565,296
    
    
    
    
    
    
    
    
    
    
    $
    559,990Interest-bearing liabilities:Deposits
    
    
    321,049
    
    
    
    2,007
    
    
    
    2.50
    
    
    $
    339,904
    
    
    
    2,853
    
    
    
    3.36Advances from FHLB of Boston
    
    
    153,043
    
    
    
    1,763
    
    
    
    4.61
    
    
    
    128,055
    
    
    
    1,621
    
    
    
    5.06Other borrowings
    
    
    11,374
    
    
    
    170
    
    
    
    5.98
    
    
    
    12,425
    
    
    
    224
    
    
    
    7.21Total interest-bearing liabilities
    
    
    485,466
    
    
    
    3,940
    
    
    
    3.25
    
    
    
    480,384
    
    
    
    4,698
    
    
    
    3.91Non-interest-bearing liabilities
    
    
    41,075
    
    
    
    
    
    
    
    
    
    
    
    41,932Total liabilities
    
    
    526,541
    
    
    
    
    
    
    
    
    
    
    
    522,315Stockholders equity
    
    
    38,755
    
    
    
    
    
    
    
    
    
    
    
    37,674Total liabilities and stockholders
equity
    
    $
    565,296
    
    
    
    
    
    
    
    
    
    
    $
    559,990Net interest and dividend income
    
    
    
    
    
    $
    3,925
    
    
    
    
    
    
    
    
    
    
    $
    3,340Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.51
    %
    
    
    
    
    
    
    
    
    
    
    1.99
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.88
    %
    
    
    
    
    
    
    
    
    
    
    2.45
    %
 Provision for Loan Losses.
 19




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##### Table of Contents



Noninterest Income
 Noninterest Expenses
 20




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##### Table of Contents



Income Taxes
  21




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##### Table of Contents



Liquidity and Capital Resources
    Company
    
    BankTier 1 Capital (to average assets)
    
    
    8.36
    %
    
    
    7.01
    %Tier 1 Capital (to risk-weighted assets)
    
    
    11.38
    %
    
    
    9.55
    %Total Capital (to risk-weighted assets)
    
    
    12.30
    %
    
    
    10.47
    %
  Off-Balance Sheet Arrangements
   
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4.
    
    Controls and Procedures
  22




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##### Table of Contents



Part II. Other Information
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  We hold preferred stock issued by Federal National Mortgage Association (Fannie Mae) and
Federal National Mortgage Corporation (Freddie Mac) and other financial institutions in our
available-for-sale securities portfolio for which we cannot guarantee that we will not need to
record impairment charges if their market values do not recover.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  23




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##### Table of Contents



Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
 31.1
    
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    
    Rule 13a-14(a) Certification of Chief Financial Officer32
    
    
    Section 1350 Certifications
 24




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##### Table of Contents



SIGNATURES
  CENTRAL BANCORP, INC.
       
       RegistrantAugust 13, 2008
    By:
    /s/ John D. DohertyJohn D. DohertyChairman, President and Chief Executive OfficerAugust 13, 2008
    By:
    /s/ Paul S. FeeleyPaul S. FeeleySenior Vice President, Treasurer and
Chief Financial Officer