##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 FORM 10-Q
  x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
 June 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
 
 0-25251
 CENTRAL BANCORP, INC.
 
  Massachusetts
    
    04-3447594(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)
 399 Highland Avenue, Somerville, Massachusetts
    
    02144(Address of principal executive offices)
    
    (Zip Code)
 (617) 628-4000
 
  Not applicable
 
  x o
 o o
  Large accelerated filer o
    
    Accelerated filer oNon-accelerated filer o
    
    Smaller Reporting Company x(Do not check if a smaller reporting company)
  X
 Common Stock, $1.00 par value
    
    1,667,151Class
    
    Outstanding at August 13, 2010




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##### 



CENTRAL BANCORP, INC.
 FORM 10-Q
 Table of Contents
 Part I. Financial Information
    
    Page No.Item 1. Financial Statements (Unaudited)Consolidated Statements of Financial Condition at June 30, 2010 and
March 31, 2010
    
    
    1Consolidated Statements of Income for the Three Months Ended June
30, 2010 and 2009
    
    
    2Consolidated Statements of Changes in Stockholders Equity for the
Three Months Ended June 30, 2010
    
    
    3Consolidated Statements of Cash Flows for the Three Months Ended
June 30, 2010 and 2009
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4(T). Controls and Procedures

    
    
    26Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    
    27Item 1A.
    
    Risk Factors
    
    
    27Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3.
    
    Defaults Upon Senior Securities
    
    
    27Item 4.
    
    [Removed and Reserved]
    
    
    27Item 5.
    
    Other Information
    
    
    27Item 6.
    
    Exhibits
    
    
    28SignaturesEX-10.1EX-31.1EX-31.2EX-32




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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 and Per Share Data)
    

    June 30, 2010

    

    March 31, 2010ASSETSCash and due from banks
    

    $
    4,739
    
    

    $
    4,328Short-term investments
    

    
    14,038
    
    

    
    12,208Cash and cash equivalents
    

    
    18,777
    
    

    
    16,536Investment securities available for sale (Note 2)
    

    
    29,527
    
    

    
    34,368Stock 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
    

    
    39,621
    
    

    
    44,462Loans held for sale
    

    
    1,007
    
    

    
    392Loans (Note 3)
    

    
    448,214
    
    

    
    461,510Less allowance for loan losses
    

    
    (3,336
    )
    

    
    (3,038
    )Loans, net
    

    
    444,878
    
    

    
    458,472Accrued interest receivable
    

    
    1,648
    
    

    
    1,896Banking premises and equipment, net
    

    
    2,841
    
    

    
    2,759Deferred tax asset, net
    

    
    4,826
    
    

    
    4,681Other real estate owned
    

    
    --
    
    

    
    60Goodwill, net
    

    
    2,232
    
    

    
    2,232Bank owned life insurance (Note 11)
    

    
    6,758
    
    

    
    6,686Other assets
    

    
    4,159
    
    

    
    4,268Total assets
    

    $
    526,747
    
    

    $
    542,444LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 4)
    

    $
    333,912
    
    

    $
    339,169Federal Home Loan Bank advances
    

    
    132,440
    
    

    
    143,469Subordinated debentures (Note 5)
    

    
    11,341
    
    

    
    11,341Advanced payments by borrowers for taxes and insurance
    

    
    1,588
    
    

    
    1,649Accrued expenses and other liabilities
    

    
    2,003
    
    

    
    1,703Total liabilities
    

    
    481,284
    
    

    
    497,331Commitments and Contingencies (Note 7)Stockholders equity:Preferred stock  Series A Cumulative Perpetual, $1.00 par value;
5,000,000 shares authorized; 10,000 shares issued and outstanding,
with a liquidation preference and redemption value of $10,063,889 at
June 30, 2010 and March 31, 2010
    

    
    9,618
    
    

    
    9,589Common stock $1.00 par value; 15,000,000 shares authorized; 1,667,151
shares issued and outstanding at June 30, 2010 and March 31, 2010
    

    
    1,667
    
    

    
    1,667Additional paid-in capital
    

    
    4,274
    
    

    
    4,291Retained income
    

    
    34,992
    
    

    
    34,482Accumulated other comprehensive income (Note 6)
    

    
    466
    
    

    
    810Unearned compensation  ESOP
    

    
    (5,554
    )
    

    
    (5,726
    )Total stockholders equity
    

    
    45,463
    
    

    
    45,113Total liabilities and stockholders equity
    

    $
    526,747
    
    

    $
    542,444
 See accompanying notes to unaudited consolidated financial statements.
 1




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Income
(Unaudited)
 Three Months Ended(In Thousands, Except Share and Per Share Data)
    

    June 30,2010

    

    2009Interest and dividend income:Mortgage loans
    

    $
    6,466
    
    

    $
    6,697Other loans
    

    
    68
    
    

    
    90Investments
    

    
    303
    
    

    
    380Short-term investments
    

    
    8
    
    

    
    20Total interest and dividend income
    

    
    6,845
    
    

    
    7,188Interest expense:Deposits
    

    
    715
    
    

    
    1,538Advances from Federal Home Loan Bank of Boston
    

    
    1,357
    
    

    
    1,650Other borrowings
    

    
    138
    
    

    
    152Total interest expense
    

    
    2,210
    
    

    
    3,340Net interest and dividend income
    

    
    4,635
    
    

    
    3,848Provision for loan losses
    

    
    300
    
    

    
    50Net interest and dividend income after
provision for loan losses
    

    
    4,335
    
    

    
    3,798Noninterest income:Deposit service charges
    

    
    253
    
    

    
    238Net gain from sales and write-downs
of investment securities
    

    
    43
    
    

    
    --Net gains on sales of loans
    

    
    42
    
    

    
    149Bank owned life insurance
    

    
    72
    
    

    
    75Other
    

    
    118
    
    

    
    72Total noninterest income
    

    
    528
    
    

    
    534Noninterest expenses:Salaries and employee benefits
    

    
    2,133
    
    

    
    2,051Occupancy and equipment
    

    
    506
    
    

    
    536Data processing fees
    

    
    204
    
    

    
    209Professional fees
    

    
    295
    
    

    
    234FDIC deposit premiums
    

    
    140
    
    

    
    341Advertising and marketing
    

    
    64
    
    

    
    76Other expenses
    

    
    410
    
    

    
    475Total noninterest expenses
    

    
    3,752
    
    

    
    3,922Income before income taxes
    

    
    1,111
    
    

    
    410Provision for income taxes
    

    
    372
    
    

    
    112Net income
    

    $
    739
    
    

    $
    298Net income available to common shareholders
    

    $
    585
    
    

    $
    145Earnings per common share  basic (Note 9)
    

    $
    0.39
    
    

    $
    0.10Earnings per common share  diluted (Note 9)
    

    $
    0.37
    
    

    $
    0.10Weighted average common shares outstanding  basic
    

    1,495,120
    
    

    1,446,413Weighted average common and equivalent shares
outstanding diluted
    

    1,584,794
    
    

    1,450,386
 See accompanying notes to unaudited consolidated financial statements.
 2




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Changes in Stockholders Equity
(Unaudited)
  Number ofShares of
    
    
    
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedSeries A
    
    Series A
    
    Shares of
    
    
    
    
    
    Additional
    
    
    
    
    
    Other
    
    Unearned
    
    TotalPreferred
    
    Preferred
    
    Common
    
    Common
    
    Paid-In
    
    Retained
    
    Comprehensive
    
    Compensation
    
    StockholdersStock
    
    Stock
    
    Stock
    
    Stock
    
    Capital
    
    Income
    
    Income
    
    ESOP
    
    EquityThree Months Ended June 30, 2010Balance at March 31, 2010
    
    
    10,000
    
    
    $
    9,589
    
    
    
    1,667,151
    
    
    $
    1,667
    
    
    $
    4,291
    
    
    $
    34,482
    
    
    $
    810
    
    
    $
    (5,726
    )
    
    $
    45,113Net income
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    739
    
    
    
    --
    
    
    
    --
    
    
    
    739Other comprehensive loss, net of
tax benefit of $240:Unrealized loss on securities, net
of reclassification adjustment (Note 6)
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    (344
    )
    
    
    --
    
    
    
    (344
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,508Dividends paid to common stockholders
($0.05 per share)
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    (75
    )
    
    
    --
    
    
    
    --
    
    
    
    (75
    )Preferred stock accretion of discount and
issuance costs
    
    
    --
    
    
    
    29
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    (29
    )
    
    
    --
    
    
    
    --
    
    
    
    --Dividends paid on preferred stock
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    (125
    )
    
    
    --
    
    
    
    --
    
    
    
    (125
    )Stock-based compensation (Note 10)
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    100
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    100Amortization of unearned compensation  ESOP
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    (117
    )
    
    
    --
    
    
    
    --
    
    
    
    172
    
    
    
    55Balance at June 30, 2010
    
    
    10,000
    
    
    $
    9,618
    
    
    
    1,667,151
    
    
    $
    1,667
    
    
    $
    4,274
    
    
    $
    34,992
    
    
    $
    466
    
    
    $
    (5,554
    )
    
    $
    45,463
 See accompanying notes to unaudited consolidated financial statements.
 3




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows
(Unaudited)
 Three Months EndedJune 30,(In thousands)
    
    2010
    
    
    2009Cash flows from operating activities:Net income
    
    
    $739
    
    
    
    $298Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    162
    
    
    
    207Amortization of premiums
    
    
    57
    
    
    
    59Provision for loan losses
    
    
    300
    
    
    
    50Stock-based compensation and amortization of unearned compensation - ESOP
    
    
    155
    
    
    
    115Net gains from sales and write-downs of investment securities
    
    
    (43
    )
    
    
    --Bank-owned life insurance income
    
    
    (72
    )
    
    
    (75
    )Gain on sale of OREO
    
    
    (2
    )
    
    
    --Gains on sales of loans held for sale
    
    
    (42
    )
    
    
    (149
    )Originations of loans held for sale
    
    
    (5,626
    )
    
    
    (20,194
    )Proceeds from sale of loans originated for sale
    
    
    5,053
    
    
    
    19,816Decrease in accrued interest receivable
    
    
    248
    
    
    
    133Decrease in other assets, net
    
    
    109
    
    
    
    234Decrease in advance payments by borrowers for taxes and insurance
    
    
    (61
    )
    
    
    (74
    )Increase in accrued expenses and other liabilities, net
    
    
    395
    
    
    
    152Net cash provided by operating activities
    
    
    1,372
    
    
    
    572Cash flows from investing activities:Loan principal collections, net
    
    
    13,294
    
    
    
    2,441Principal payments on mortgage-backed securities
    
    
    2,241
    
    
    
    3,170Proceeds from sales of investment securities
    
    
    2,002
    
    
    
    --Maturities and calls of investment securities
    
    
    --
    
    
    
    1,500Proceeds from sales of OREO
    
    
    62
    
    
    
    --Purchase of banking premises and equipment
    
    
    (244
    )
    
    
    (47
    )Net cash provided by investing activities
    
    
    17,355
    
    
    
    7,064Cash flows from financing activities:Net decrease in deposits
    
    
    (5,257
    )
    
    
    (15,329
    )Repayment of advances from FHLB of Boston
    
    
    (11,029
    )
    
    
    (3,028
    )Proceeds from short-term borrowings
    
    
    --
    
    
    
    1,010Cash dividends paid
    
    
    (200
    )
    
    
    (197
    )Net cash used in financing activities
    
    
    (16,486
    )
    
    
    (17,544
    )Net increase (decrease) in cash and cash equivalents
    
    
    2,241
    
    
    
    (9,908
    )Cash and cash equivalents at beginning of period
    
    
    16,536
    
    
    
    42,422Cash and cash equivalents at end of period
    
    $
    18,777
    
    
    $
    32,514Cash paid during the period for:Interest
    
    $
    2,285
    
    
    $
    3,349Income taxes
    
    
    --
    
    
    
    --Supplemental disclosure of non-cash investing and financing activities:Loans transferred to other real estate owned
    
    
    --
    
    
    
    77Accretion of Series A preferred stock issuance costs
    
    
    29
    
    
    
    27
 See accompanying notes to unaudited consolidated financial statements
 4




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##### Table of Contents



CENTRAL BANCORP AND SUBSIDIARY
 
 Notes to Unaudited Consolidated Financial Statements
 June 30, 2010
 (1) Basis of Presentation
  Consolidation of
Variable Interest Entities  an Interpretation of Accounting Research Bulletin No. 51, Transfers and Servicing
  (2) Investments
  June 30, 2010Amortized
    
    Gross Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    Value(In Thousands)Mortgage-backed securities
    
    $
    21,957
    
    
    $
    970
    
    
    $
    (10
    )
    
    $
    22,917Trust preferred securities
    
    
    1,002
    
    
    
    24
    
    
    
    --
    
    
    
    1,026Total debt securities
    
    
    22,959
    
    
    
    994
    
    
    
    (10
    )
    
    
    23,943Preferred stock
    
    
    3,372
    
    
    
    18
    
    
    
    (481
    )
    
    
    2,909Common stock
    
    
    2,780
    
    
    
    165
    
    
    
    (270
    )
    
    
    2,675Total
    
    $
    29,111
    
    
    $
    1,177
    
    
    $
    (761
    )
    
    $
    29,527
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##### Table of Contents



March 31, 2010Amortized
    
    Gross Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    Value(In Thousands)Corporate bonds
    
    $
    1,752
    
    
    $
    --
    
    
    $
    --
    
    
    $
    1,752Mortgage-backed securities
    
    
    24,253
    
    
    
    752
    
    
    
    (12
    )
    
    
    24,993Trust preferred securities
    
    
    1,002
    
    
    
    43
    
    
    
    --
    
    
    
    1,045Total debt securities
    
    
    27,007
    
    
    
    795
    
    
    
    (12
    )
    
    
    27,790Preferred stock
    
    
    3,394
    
    
    
    56
    
    
    
    (195
    )
    
    
    3,255Common stock
    
    
    2,967
    
    
    
    508
    
    
    
    (152
    )
    
    
    3,323Total
    
    $
    33,368
    
    
    $
    1,359
    
    
    $
    (359
    )
    
    $
    34,368
   Less Than or Equal to

    
    Greater Than12 Months

    
    12 MonthsFair

    
    Unrealized

    
    
    
    
    
    UnrealizedValue

    
    Losses

    
    Fair Value

    
    Losses(In Thousands)Mortgage-backed securities
    
    $
    --
    
    
    $
    --
    
    
    $
    369
    
    
    $
    (10)Preferred stock
    
    
    72
    
    
    
    (242)
    
    
    
    1,806
    
    
    
    (239)Common stock
    
    
    878
    
    
    
    (141)
    
    
    
    564
    
    
    
    (129)Total temporarily impaired securities
    
    $
    950
    
    
    $
    (383)
    
    
    $
    2,739
    
    
    $
    (378)
    6




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##### Table of Contents



Amortized

    
    Fair

    
    AnnualCost

    
    Value

    
    Yield(Dollars in Thousands)Mortgage backed securitiesDue after one year but within five years
    
    $
    4,571
    
    
    $
    4,690
    
    
    
    4.19
    %Due after five years but within ten years
    
    
    6
    
    
    
    6
    
    
    
    1.50Due after ten years
    
    
    17,380
    
    
    
    18,221
    
    
    
    5.39$
    21,957
    
    
    $
    22,917Trust preferred securitiesDue after ten years
    
    $
    1,002
    
    
    $
    1,026
    
    
    
    7.78
    %Total
    
    $
    22,959
    
    
    $
    23,943
  (3)
    
    Loans
  June 30,
    
    March 31,2010
    
    2010Real estate loans:Residential real estate (1- 4 family)
    
    
    $  209,529
    
    
    
    $  217,053Commercial real estate
    
    
    223,292
    
    
    
    227,938Construction
    
    
    2,369
    
    
    
    2,722Home equity lines of credit
    
    
    8,511
    
    
    
    8,817Total real estate loans
    
    
    443,701
    
    
    
    456,530Commercial loans
    
    
    3,363
    
    
    
    4,037Consumer loans
    
    
    1,150
    
    
    
    943Total loans
    
    
    448,214
    
    
    
    461,510Less: allowance for loan losses
    
    
    (3,336
    )
    
    
    (3,038
    )Total loans, net
    
    
    $  444,878
    
    
    
    $  458,472
 7




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##### Table of Contents



Receivables
  Three Months EndedJune 30,2010
    
    2009Balance at beginning of period
    
    
    $3,038
    
    
    
    $3,191Provision charged to expense
    
    
    300
    
    
    
    50Less: charge-offs
    
    
    (3
    )
    
    
    (178
    )Add: recoveries
    
    
    1
    
    
    
    1Balance at end of period
    
    
    $3,336
    
    
    
    $3,064
 (4)
    
    Deposits
  June 30,

    
    March 31,2010

    
    2010Demand deposit accounts
    
    
    $42,801
    
    
    
    $41,959NOW accounts
    
    
    27,875
    
    
    
    29,358Passbook and other savings accounts
    
    
    55,282
    
    
    
    53,544Money market deposit accounts
    
    
    79,930
    
    
    
    79,745Total non-certificate accounts
    
    
    205,888
    
    
    
    204,606Term deposit certificates:Certificates of $100,000 and above
    
    
    49,219
    
    
    
    51,695Certificates of less than $100,000
    
    
    78,805
    
    
    
    82,868Total term deposit certificates
    
    
    128,024
    
    
    
    134,563Total deposits
    
    
    $333,912
    
    
    
    $339,169
 (5)
    
    Subordinated Debentures
  8




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##### Table of Contents



(6)
    
    Other Comprehensive Income
   For the Three Months EndedJune 30, 2010Before-Tax
    
    Tax
    
    After-TaxAmount
    
    Effect
    
    AmountUnrealized losses on securities:Unrealized net holding losses during period
    
    $
    (541
    )
    
    $
    (222
    )
    
    $
    (319
    )Less: reclassification adjustment for net gains included in net income
    
    
    43
    
    
    
    18
    
    
    
    25Other comprehensive loss
    
    $
    (584
    )
    
    $
    (240
    )
    
    $
    (344
    )For the Three Months EndedJune 30, 2009Before-Tax
    
    Tax

    
    After-TaxAmount
    
    Effect
    
    AmountUnrealized gains on securities:Unrealized net holding gains during period
    
    
    $   2,204
    
    
    
    $  870
    
    
    
    $  1,334Less: reclassification adjustment for net
gains included in net income
    
    
    --
    
    
    
    --
    
    
    
    --Other comprehensive gain
    
    
    $   2,204
    
    
    
    $  870
    
    
    
    $  1,334
 9




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##### Table of Contents



(7)
    
    Contingencies
 Legal Proceedings.
 (8)
    
    Subsequent Events
   (9)
    
    Earnings Per Share (EPS)
   Three Months EndedJune 30,2010
    
    2009(Amounts in thousands, exceptshare and per share amounts)Net income as reported
    
    
    $   739
    
    
    
    $   298Less preferred dividends and accretion
    
    
    (154)
    
    
    
    (153)Net income available to common stockholders
    
    
    $  585
    
    
    
    $  145Weighted average number of common shares outstanding
    
    1,667,151
    
    
    1,639,951Weighted average number of unallocated ESOP and
unvested restricted shares
    
    (172,031)
    
    
    (193,538)Weighted average number of common shares outstanding
used in calculation of basic earnings per share
    
    1,495,120
    
    
    1,446,413Incremental shares from the assumed exercise of dilutive
securities
    
    89,674
    
    
    3,973Weighted average number of common shares outstanding
used in calculating diluted earnings per share
    
    1,584,794
    
    
    1,450,386Earnings per common shareBasic
    
    
    $  0.39
    
    
    
    $  0.10Diluted
    
    
    $  0.37
    
    
    
    $  0.10
 10




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##### Table of Contents



(10)
    
    Stock-Based Compensation
 Compensation  Stock
Compensation
     Number of
    
    Weighted AverageShares
    
    Exercise PriceOutstanding at March 31, 2010
    
    
    53,608
    
    
    
    $ 26.62Exercised
    
    
    --
    
    
    
    --Forfeited
    
    
    (11,939)
    
    
    
    $ 23.40Expired
    
    
    --
    
    
    
    --Outstanding at June 30, 2010
    
    
    41,669
    
    
    
    $ 27.54Exercisable at June 30, 2010
    
    
    37,669
    
    
    
    $ 27.15
   11




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##### Table of Contents



WeightedAverageRemainingNumber
    
    Contractual
    
    AggregateExercise

    
    of Shares

    
    Life

    
    IntrinsicPrice
    
    Outstanding
    
    (Years)
    
    Value (1)$16.63
    
    
    
    6,684
    (2)
    
    
    0.4
    
    
    
    $  --28.99
    
    
    
    24,985
    (2)
    
    
    4.6
    
    
    
    --31.20
    
    
    
    10,000
    (3)
    
    
    6.2
    
    
    
    --Average/Total
    
    
    $26.62
    
    
    
    41,669
    
    
    
    4.4
    
    
    
    $  --
 
 (1)
    
    Represents the total intrinsic value, based on the Companys closing stock price of $10.60 on
June 30, 2010, which would have been received by the option holders had all option holders
exercised their options as of that date. As of June 30, 2010, the intrinsic value of
outstanding stock options and exercisable stock options was $0.(2)
    
    Fully vested and exercisable at the time of grant.(3)
    
    Subject to vesting over five years, 60% vested at June 30, 2010.  Number
    
    Weighted Averageof Restricted

    
    Grant DateShares

    
    Fair ValueNon-vested at March 31, 2010
    
    
    46,800
    
    
    
    $ 16.51Granted
    
    
    --
    
    
    
    --Vested
    
    
    --
    
    
    
    --Forfeited
    
    
    --
    
    
    
    --Non-vested at June 30, 2010
    
    
    46,800
    
    
    
    $ 16.51
 (11)
    
    Bank-Owned Life Insurance
 Investments  Other
 (12)
    
    Recent Accounting Pronouncements
 Amendments to
FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities,
 Improving
Disclosures About Fair Value Measurements
 12




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##### Table of Contents



Disclosures about the Credit Quality of Financing
Receivables Receivables
 (13)
    
    Fair Value Disclosures
 Fair Value Measurements and 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
   At June 30, 2010
    
    Carrying Value (In Thousands)Level 1
    
    Level 2
    
    Level 3
    
    TotalAssets recorded at fair value on a recurring basis:Securities available for sale
    
    $
    2,675
    
    
    $
    26,852
    
    
    $
    --
    
    
    $
    29,527Assets recorded at fair value on a nonrecurring basis:Impaired loans carried at fair value
    
    
    --
    
    
    
    --
    
    
    
    7,395
    
    
    
    7,395
 13




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##### Table of Contents



At March 31, 2010
    
    Carrying Value (In Thousands)Level 1
    
    Level 2
    
    Level 3
    
    TotalAssets recorded at fair value on a recurring basis:Securities available for sale
    
    $
    3,323
    
    
    $
    31,045
    
    
    $
    --
    
    
    $
    34,368Assets recorded at fair value on a nonrecurring basis:Impaired loans carried at fair value
    
    
    --
    
    
    
    --
    
    
    
    8,617
    
    
    
    8,617OREO
    
    
    --
    
    
    
    --
    
    
    
    60
    
    
    
    60
      Cash and Due from Banks -
 Short-Term Investments -
 Investments and Mortgage-Backed Securities -
 Loans and Loans Held for Sale -
 Accrued Interest Receivable -
 14




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##### Table of Contents



Stock in FHLB of Boston -
 The Co-operative Central Bank Reserve Fund -
 Deposits -
 Advances from FHLB of Boston -
 Subordinated Debentures -
 Short-Term Borrowings, Advance Payments by Borrowers for Taxes and Insurance and Accrued
Interest Payable -
 Off-Balance Sheet Instruments -
 15




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##### Table of Contents



June 30, 2010
    
    March 31, 2010Carrying
    
    Estimated
    
    Carrying

    
    EstimatedAmount
    
    Fair Value
    
    Amount

    Fair ValueAssetsCash and due from banks
    
    $
    4,739
    
    
    $
    4,739
    
    
    $
    4,328
    
    
    $
    4,328Short-term investments
    
    
    14,038
    
    
    
    14,038
    
    
    
    12,208
    
    
    
    12,208Investment securities
    
    
    29,527
    
    
    
    29,527
    
    
    
    34,368
    
    
    
    34,368Loans held for sale
    
    
    1,007
    
    
    
    1,007
    
    
    
    392
    
    
    
    392Net loans
    
    
    444,878
    
    
    
    444,829
    
    
    
    458,472
    
    
    
    458,557Stock in Federal Home Loan Bank of Boston
    
    
    8,518
    
    
    
    8,518
    
    
    
    8,518
    
    
    
    8,518The Co-operative Central Bank Reserve Fund
    
    
    1,576
    
    
    
    1,576
    
    
    
    1,576
    
    
    
    1,576Accrued interest receivable
    
    
    1,648
    
    
    
    1,648
    
    
    
    1,896
    
    
    
    1,896LiabilitiesDeposits
    
    $
    333,912
    
    
    $
    326,460
    
    
    $
    339,169
    
    
    $
    329,749Advances from FHLB of Boston
    
    
    132,440
    
    
    
    142,396
    
    
    
    143,469
    
    
    
    150,949Subordinated debentures
    
    
    11,341
    
    
    
    8,193
    
    
    
    11,341
    
    
    
    8,226Advance payments by borrowers for taxes and insurance
    
    
    1,588
    
    
    
    1,588
    
    
    
    1,649
    
    
    
    1,649Accrued interest payable
    
    
    460
    
    
    
    460
    
    
    
    517
    
    
    
    517Off-Balance Sheet Instruments
    
    $
    21,902
    
    
    $
    21,902
    
    
    $
    27,257
    
    
    $
    27,257
 (14)
    
    Troubled Asset Relief Program Capital Purchase Program
    16




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##### Table of Contents



Derivatives and
Hedging Debt Equity
 Expected life in years
    
    
    10.00Expected volatility
    
    
    54.76
    %Dividend yield
    
    
    3.00
    %Risk-free interest rate
    
    
    2.67
    %
  
 Item 2.   Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
  17




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##### Table of Contents



www.sec.gov Part
IIItem 1A. Risk Factors
 General
      Critical Accounting Policies
  Allowance for Loan Losses Receivables
 18




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##### Table of Contents



Contingencies
 Fair Value of Other Real Estate Owned
 Fair Value of Investments
    Income Taxes.
 Accounting for Goodwill and Impairment. Intangibles  Goodwill and Other e.g
 19




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##### Table of Contents



Stock-Based Compensation. Compensation-Stock Compensation
   Comparison of Financial Condition at June 30, 2010 and March 31, 2010
  Comparison of Operating Results for the Quarters Ended
June 30, 2010 and 2009  Provision for Loan Losses.
  20




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##### Table of Contents



Bank-Owned Life Insurance
    Comparison of Operating Results for the Quarters Ended June 30, 2010 and 2009
  21




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##### Table of Contents



Interest and Dividend Income.
 Interest Expense
 22




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##### Table of Contents



Three Months Ended June 30,2010
    
    2009Average
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    AverageBalance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    
    $452,006
    
    
    
    $6,466
    
    
    
    5.72
    %
    
    
    $457,872
    
    
    
    $6,698
    
    
    
    5.85
    %Other loans
    
    
    4,754
    
    
    
    68
    
    
    
    5.72
    
    
    
    6,162
    
    
    
    90
    
    
    
    5.84Investment securities
    
    
    32,745
    
    
    
    303
    
    
    
    3.70
    
    
    
    38,447
    
    
    
    380
    
    
    
    3.95Federal Home Loan Bank Stock
    
    
    8,518
    
    
    
    --
    
    
    
    0.00
    
    
    
    8,518
    
    
    
    --
    
    
    
    0.00Short-term investments
    
    
    12,081
    
    
    
    8
    
    
    
    0.26
    
    
    
    31,988
    
    
    
    20
    
    
    
    0.25Total interest-earning assets
    
    
    510,104
    
    
    
    6,845
    
    
    
    5.37
    
    
    
    542,987
    
    
    
    7,188
    
    
    
    5.30Allowance for loan losses
    
    
    (3,140
    )
    
    
    
    
    
    
    
    
    
    
    (3,178
    )Noninterest-earning assets
    
    
    28,420
    
    
    
    
    
    
    
    
    
    
    
    28,508Total assets
    
    
    $535,384
    
    
    
    
    
    
    
    
    
    
    
    $568,317Interest-bearing liabilities:Deposits
    
    
    $293,961
    
    
    
    715
    
    
    
    0.97
    
    
    
    $324,462
    
    
    
    1,538
    
    
    
    1.90Advances from FHLB of Boston
    
    
    138,066
    
    
    
    1,357
    
    
    
    3.93
    
    
    
    144,498
    
    
    
    1,650
    
    
    
    4.57Other borrowings
    
    
    11,341
    
    
    
    138
    
    
    
    4.87
    
    
    
    12,318
    
    
    
    152
    
    
    
    4.94Total interest-bearing liabilities
    
    
    443,368
    
    
    
    2,210
    
    
    
    1.99
    
    
    
    481,278
    
    
    
    3,340
    
    
    
    2.78Noninterest-bearing liabilities
    
    
    46,680
    
    
    
    
    
    
    
    
    
    
    
    45,917Total liabilities
    
    
    490,048
    
    
    
    
    
    
    
    
    
    
    
    527,195Stockholders equity
    
    
    45,336
    
    
    
    
    
    
    
    
    
    
    
    41,122Total liabilities and stockholders
equity
    
    
    $535,384
    
    
    
    
    
    
    
    
    
    
    
    $568,317Net interest and dividend income
    
    
    
    
    
    
    $4,635
    
    
    
    
    
    
    
    
    
    
    
    $3,848Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.38
    %
    
    
    
    
    
    
    
    
    
    
    2.52
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.63
    %
    
    
    
    
    
    
    
    
    
    
    2.83
    %
 Provision for Loan Losses.
  23




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Noninterest Income.
 Noninterest Expenses
        24




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##### Table of Contents



Income Taxes
 Liquidity and Capital Resources
   ,
  25




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##### Table of Contents



At June 30, 2010RegulatoryThresholdFor WellActual
    
    CapitalizedCentral Bancorp:Tier 1 Leverage
    
    
    9.54%
    
    
    
    5.0
    %Tier 1 Risk-Based Ratio
    
    
    14.73%
    
    
    
    6.0
    %Total Risk-Based Ratio
    
    
    15.71%
    
    
    
    10.0
    %Central Co-operative Bank:Tier 1 Leverage
    
    
    8.38%
    
    
    
    5.0
    %Tier 1 Risk-Based Ratio
    
    
    12.96%
    
    
    
    6.0
    %Total Risk-Based Ratio
    
    
    13.94%
    
    
    
    10.0
    %
 Off-Balance Sheet Arrangements
   
 Item 3.     Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4(T).   Controls and Procedures
   26




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##### Table of Contents



PART II.  OTHER INFORMATION
 
 Item 1.  Legal Proceedings
  
 Item 1A.  Risk Factors
  Recently enacted regulatory reform legislation may have a material impact on our operations.
  
 Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.  Defaults Upon Senior Securities
  
 Item 4.  [Removed and Reserved]
 
 Item 5.  Other Information
  27




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##### Table of Contents



Item 6.  Exhibits
 10.1
    
    Central Co-operative Bank 2011 Senior Management Incentive Compensation Plan31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer32
    
    Section 1350 Certifications
 28




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##### Table of Contents



SIGNATURES
  CENTRAL BANCORP, INC.
RegistrantAugust 13, 2010
    By:
    /s/ John D. DohertyJohn D. DohertyChairman and Chief Executive Officer
(Principal Executive Officer)August 13, 2010
    By:
    /s/ Paul S. FeeleyPaul S. FeeleySenior Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)