##### 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 December 31, 2009
 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
 (Registrants
telephone number, including area code)
 Not applicable
 (Former
name, former address and former fiscal year, if changed since last
report)
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ
 Common Stock, $1.00 par value
    
    1,637,151Class
    
    Outstanding at February 5, 2010




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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 December 31, 2009 and
March 31, 2009
    
    
    1Consolidated Statements of Income for the Three and Nine Months Ended December 31, 2009
and 2008
    
    
    2Consolidated Statements of Changes in Stockholders Equity for the Nine Months Ended
December 31, 2009
    
    
    3Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2009 and 2008
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4(T).
    
    Controls and Procedures
    
    
    32Part II.
    
    Other Information
    
    
    33Item 1.
    
    Legal Proceedings
    
    
    33Item 1A.
    
    Risk Factors
    
    
    33Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3.
    
    Defaults Upon Senior Securities
    
    
    33Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    33Item 5.
    
    Other Information
    
    
    33Item 6.
    
    Exhibits
    
    
    33Signatures
    
    
    34EX-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)
    
    December 31, 2009
    
    
    March 31, 2009ASSETSCash and due from banks
    
    $
    5,054
    
    
    $
    5,099Short-term investments
    
    
    13,420
    
    
    
    37,323Cash and cash equivalents
    
    
    18,474
    
    
    
    42,422Investment securities available for sale (Note 2)
    
    
    37,805
    
    
    
    35,215Stock 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
    
    
    47,899
    
    
    
    45,309Loans held for sale
    
    
    3,212
    
    
    
    3,208Loans (Note 3)
    
    
    467,599
    
    
    
    460,670Less allowance for loan losses
    
    
    (2,788
    )
    
    
    (3,191
    )Loans, net
    
    
    464,811
    
    
    
    457,479Accrued interest receivable
    
    
    1,766
    
    
    
    1,859Banking premises and equipment, net
    
    
    2,807
    
    
    
    3,323Deferred tax asset, net
    
    
    5,987
    
    
    
    7,585Other real estate owned
    
    
    77
    
    
    
    2,986Goodwill, net
    
    
    2,232
    
    
    
    2,232Bank owned life insurance (Note 11)
    
    
    6,616
    
    
    
    6,391Other assets
    
    
    4,530
    
    
    
    3,033Total assets
    
    $
    558,411
    
    
    $
    575,827LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 4)
    
    $
    344,481
    
    
    $
    375,074Short-term borrowings
    
    
    
    
    
    
    1,014Federal Home Loan Bank advances
    
    
    155,498
    
    
    
    144,583Subordinated debentures (Note 5)
    
    
    11,341
    
    
    
    11,341Advanced payments by borrowers for taxes and insurance
    
    
    1,659
    
    
    
    1,532Accrued expenses and other liabilities
    
    
    1,860
    
    
    
    2,044Total liabilities
    
    
    514,839
    
    
    
    535,588Commitments 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 December 31, 2009 and March 31, 2009
    
    
    9,559
    
    
    
    9,476Common stock $1.00 par value; 15,000,000 shares authorized; 1,637,151 and 1,639,951
shares issued and outstanding at December 31, 2009 and March 31, 2009, respectively
    
    
    1,637
    
    
    
    1,640Additional paid-in capital
    
    
    4,214
    
    
    
    4,371Retained income
    
    
    33,984
    
    
    
    33,393Accumulated other comprehensive income (loss) (Note 6)
    
    
    76
    
    
    
    (2,226
    )Unearned compensation  ESOP
    
    
    (5,898
    )
    
    
    (6,415
    )Total stockholders equity
    
    
    43,572
    
    
    
    40,239Total liabilities and stockholders equity
    
    $
    558,411
    
    
    $
    575,827
 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
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,(In Thousands, Except Share and Per Share Data)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Interest and dividend income:Mortgage loans
    
    $
    6,689
    
    
    $
    6,836
    
    
    $
    20,101
    
    
    $
    20,573Other loans
    
    
    74
    
    
    
    105
    
    
    
    249
    
    
    
    435Investments
    
    
    317
    
    
    
    454
    
    
    
    1,109
    
    
    
    1,942Short-term investments
    
    
    8
    
    
    
    23
    
    
    
    41
    
    
    
    132Total interest and dividend income
    
    
    7,088
    
    
    
    7,418
    
    
    
    21,500
    
    
    
    23,082Interest expense:Deposits
    
    
    896
    
    
    
    1,656
    
    
    
    3,696
    
    
    
    5,400Advances from Federal Home Loan Bank of Boston
    
    
    1,675
    
    
    
    1,670
    
    
    
    4,954
    
    
    
    5,124Other borrowings
    
    
    140
    
    
    
    177
    
    
    
    440
    
    
    
    520Total interest expense
    
    
    2,711
    
    
    
    3,503
    
    
    
    9,090
    
    
    
    11,044Net interest and dividend income
    
    
    4,377
    
    
    
    3,915
    
    
    
    12,410
    
    
    
    12,038Provision for loan losses
    
    
    100
    
    
    
    
    
    
    
    350
    
    
    
    1,100Net interest and dividend income after
provision for loan losses
    
    
    4,277
    
    
    
    3,915
    
    
    
    12,060
    
    
    
    10,938Noninterest income:Deposit service charges
    
    
    265
    
    
    
    259
    
    
    
    752
    
    
    
    758Net loss from sales and write-downs
of investment securities other than FNMA and
FHLMC
    
    
    (81
    )
    
    
    
    
    
    
    (81
    )
    
    
    (144
    )Net loss from sales and write-downs
of FNMA and FHLMC securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,394
    )Net gains on sales of loans
    
    
    63
    
    
    
    30
    
    
    
    244
    
    
    
    45Bank owned life insurance income
    
    
    76
    
    
    
    78
    
    
    
    228
    
    
    
    236Other income
    
    
    56
    
    
    
    65
    
    
    
    181
    
    
    
    265Total noninterest income
    
    
    379
    
    
    
    432
    
    
    
    1,324
    
    
    
    (8,234
    )Noninterest expenses:Salaries and employee benefits
    
    
    2,021
    
    
    
    1,995
    
    
    
    5,969
    
    
    
    6,293Occupancy and equipment
    
    
    552
    
    
    
    579
    
    
    
    1,639
    
    
    
    1,704Data processing fees
    
    
    222
    
    
    
    196
    
    
    
    637
    
    
    
    596Professional fees
    
    
    201
    
    
    
    211
    
    
    
    569
    
    
    
    595FDIC deposit premiums
    
    
    489
    
    
    
    16
    
    
    
    969
    
    
    
    43Advertising and marketing
    
    
    70
    
    
    
    158
    
    
    
    154
    
    
    
    247Other expenses
    
    
    428
    
    
    
    636
    
    
    
    1,453
    
    
    
    1,527Total noninterest expenses
    
    
    3,983
    
    
    
    3,791
    
    
    
    11,390
    
    
    
    11,005Income (loss) before income taxes
    
    
    673
    
    
    
    556
    
    
    
    1,994
    
    
    
    (8,301
    )Provision (benefit) for income taxes
    
    
    307
    
    
    
    (3,361
    )
    
    
    726
    
    
    
    (3,153
    )Net income (loss)
    
    $
    366
    
    
    $
    3,917
    
    
    $
    1,268
    
    
    $
    (5,148
    )Net income (loss) available to common shareholders
    
    $
    213
    
    
    $
    3,872
    
    
    $
    809
    
    
    $
    (5,193
    )Earnings (loss) per common share  basic (Note 9)
    
    $
    0.15
    
    
    $
    2.76
    
    
    $
    0.56
    
    
    $
    (3.73
    )Earnings (loss) per common share  diluted (Note 9)
    
    $
    0.14
    
    
    $
    2.76
    
    
    $
    0.54
    
    
    $
    (3.73
    )Weighted average common shares outstanding  basic
    
    
    1,457,136
    
    
    
    1,404,342
    
    
    
    1,451,780
    
    
    
    1,393,720Weighted average common and equivalent shares
outstanding diluted
    
    
    1,511,806
    
    
    
    1,404,342
    
    
    
    1,487,318
    
    
    
    1,393,720
 See accompanying notes to unaudited consolidated financial statements.
 2




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CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders Equity
(Unaudited)
 AccumulatedSeries A
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    Unearned
    
    
    TotalPreferred
    
    
    Common
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Compensation
    
    
    Stockholders(In Thousands, Except Per Share Data)
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Loss
    
    
    ESOP
    
    
    EquityNine Months Ended December 31, 2009Balance at March 31, 2009
    
    $
    9,476
    
    
    $
    1,640
    
    
    $
    4,371
    
    
    $
    33,393
    
    
    $
    (2,226
    )
    
    $
    (6,415
    )
    
    $
    40,239Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,268
    
    
    
    
    
    
    
    
    
    
    
    1,268Other comprehensive income, net of taxes of
$1,503:Unrealized gain on securities, net
of reclassification adjustment (Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,302
    
    
    
    
    
    
    
    2,302Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,570Dividends paid to common stockholders
($0.15 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (219
    )
    
    
    
    
    
    
    
    
    
    
    (219
    )Preferred stock accretion of discount and
issuance costs
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    (83
    )
    
    
    
    
    
    
    
    
    
    
    Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (375
    )
    
    
    
    
    
    
    
    
    
    
    (375
    )Forfeiture of restricted common stock
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation (Note 10)
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    237Amortization of unearned compensation 
ESOP
    
    
    
    
    
    
    
    
    
    
    (397
    )
    
    
    
    
    
    
    
    
    
    
    517
    
    
    
    120Balance at December 31, 2009
    
    $
    9,559
    
    
    $
    1,637
    
    
    $
    4,214
    
    
    $
    33,984
    
    
    $
    76
    
    
    $
    (5,898
    )
    
    $
    43,572
 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)
 Nine Months EndedDecember 31,(In thousands)
    
    2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    1,268
    
    
    $
    (5,148
    )Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    597
    
    
    
    685Amortization of premiums
    
    
    250
    
    
    
    38Provision for loan losses
    
    
    350
    
    
    
    1,100Stock-based compensation and amortization of unearned compensation  ESOP
    
    
    357
    
    
    
    430Decrease (increase) in deferred tax asset
    
    
    92
    
    
    
    (3,830
    )Net losses from sales and write-downs of investment securities
    
    
    81
    
    
    
    9,538Bank-owned life insurance income
    
    
    (228
    )
    
    
    (236
    )Loss on sale of OREO
    
    
    60
    
    
    
    Gains on sales of loans held for sale
    
    
    (244
    )
    
    
    (45
    )Originations of loans held for sale
    
    
    (31,673
    )
    
    
    (4,683
    )Proceeds from sale of loans originated for sale
    
    
    31,913
    
    
    
    4,573Decrease in accrued interest receivable
    
    
    93
    
    
    
    136Increase in other assets, net
    
    
    (1,494
    )
    
    
    (306
    )Increase in advance payments by borrowers for taxes and insurance
    
    
    127
    
    
    
    159(Decrease) increase in accrued expenses and other liabilities, net
    
    
    (184
    )
    
    
    233Net cash provided by operating activities
    
    
    1,365
    
    
    
    2,178Cash flows from investing activities:Loan principal collections (originations), net
    
    
    (7,758
    )
    
    
    18,703Principal payments on mortgage-backed securities
    
    
    10,412
    
    
    
    3,965Proceeds from sales of investment securities
    
    
    
    
    
    
    3,616Purchases of investment securities
    
    
    (11,026
    )
    
    
    (9,017
    )Maturities and calls of investment securities
    
    
    1,500
    
    
    
    6,000Proceeds from sales of OREO
    
    
    2,926
    
    
    
    Purchase of banking premises and equipment
    
    
    (81
    )
    
    
    (246
    )Net cash (used in) provided by investing activities
    
    
    (4,027
    )
    
    
    23,021Cash flows from financing activities:Net decrease in deposits
    
    
    (30,593
    )
    
    
    (11,547
    )Proceeds from advances from FHLB of Boston
    
    
    20,000
    
    
    
    Repayment of advances from FHLB of Boston
    
    
    (9,085
    )
    
    
    (12,081
    )(Repayments) net proceeds (of) from short-term borrowings
    
    
    (1,014
    )
    
    
    1,504Cash dividends paid
    
    
    (594
    )
    
    
    (771
    )Issuance of Series A preferred stock and warrants
    
    
    
    
    
    
    9,970Net cash used in financing activities
    
    
    (21,286
    )
    
    
    (12,925
    )Net (decrease) increase in cash and cash equivalents
    
    
    (23,948
    )
    
    
    12,274Cash and cash equivalents at beginning of period
    
    
    42,422
    
    
    
    17,725Cash and cash equivalents at end of period
    
    $
    18,474
    
    
    $
    29,999Cash paid during the period for:Interest
    
    $
    9,097
    
    
    $
    11,091Income taxes
    
    
    
    
    
    
    935Supplemental disclosure of non-cash investing and financing activities:Loans transferred to other real estate owned
    
    
    77
    
    
    
    191Accretion of Series A preferred stock issuance costs
    
    
    83
    
    
    
    9
 See accompanying notes to unaudited consolidated financial statements.
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##### Table of Contents



CENTRAL BANCORP AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2009
 (1) Basis of Presentation
  Consolidation of
Variable Interest Entities  an Interpretation of Accounting Research Bulletin No. 51, Transfers and Servicing The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles
  (2) Investments
  December 31, 2009Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value( In Thousands)Corporate bonds
    
    $
    1,986
    
    
    $
    
    
    
    $
    (597
    )
    
    $
    1,389Mortgage-backed securities
    
    
    28,183
    
    
    
    800
    
    
    
    (20
    )
    
    
    28,963Trust preferred securities
    
    
    1,003
    
    
    
    24
    
    
    
    
    
    
    
    1,027Total debt securities
    
    
    31,172
    
    
    
    824
    
    
    
    (617
    )
    
    
    31,379Preferred stock
    
    
    3,769
    
    
    
    18
    
    
    
    (567
    )
    
    
    3,220Common stock
    
    
    3,077
    
    
    
    335
    
    
    
    (206
    )
    
    
    3,206Total
    
    $
    38,018
    
    
    $
    1,177
    
    
    $
    (1,390
    )
    
    $
    37,805
 5




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March 31, 2009Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In Thousands)U.S. Government and agency obligations
    
    $
    1,500
    
    
    $
    3
    
    
    $
    
    
    
    $
    1,503Corporate bonds
    
    
    1,984
    
    
    
    
    
    
    
    (1,283
    )
    
    
    701Mortgage-backed securities
    
    
    27,813
    
    
    
    572
    
    
    
    (32
    )
    
    
    28,353Trust preferred securities
    
    
    1,003
    
    
    
    
    
    
    
    (253
    )
    
    
    750Total debt securities
    
    
    32,300
    
    
    
    575
    
    
    
    (1,568
    )
    
    
    31,307Preferred stock
    
    
    3,775
    
    
    
    
    
    
    
    (2,125
    )
    
    
    1,650Common stock
    
    
    3,158
    
    
    
    3
    
    
    
    (903
    )
    
    
    2,258Total
    
    $
    39,233
    
    
    $
    578
    
    
    $
    (4,596
    )
    
    $
    35,215
   Less Than or Equal to
    
    
    Greater Than12 Months
    
    
    12 MonthsFair
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In Thousands)Corporate bonds
    
    $
    
    
    
    $
    
    
    
    $
    1,389
    
    
    $
    (597
    )Mortgage-backed securities
    
    
    3,322
    
    
    
    (6
    )
    
    
    633
    
    
    
    (14
    )Preferred stock
    
    
    266
    
    
    
    (160
    )
    
    
    1,903
    
    
    
    (407
    )Common stock
    
    
    
    
    
    
    
    
    
    
    1,713
    
    
    
    (206
    )Total temporarily impaired securities
    
    $
    3,588
    
    
    $
    (166
    )
    
    $
    5,638
    
    
    $
    (1,224
    )
   6




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##### Table of Contents



Amortized
    
    
    Fair
    
    
    AnnualCost
    
    
    Value
    
    
    Yield(Dollars in Thousands)Due after one year but within five years
    
    $
    5,651
    
    
    $
    5,799
    
    
    
    4.20
    %Due after five years but within ten years
    
    
    1,998
    
    
    
    1,401
    
    
    
    7.00Due after ten years
    
    
    23,523
    
    
    
    24,179
    
    
    
    5.46Total
    
    $
    31,172
    
    
    $
    31,379
  7




---



##### Table of Contents



(3) Loans
  December 31,
    
    
    March 31,2009
    
    
    2009Real estate loans:Residential real estate (1- 4 family)
    
    $
    220,744
    
    
    $
    183,327Commercial real estate
    
    
    229,900
    
    
    
    249,941Construction
    
    
    3,656
    
    
    
    14,089Home equity lines of credit
    
    
    8,533
    
    
    
    7,347Total real estate loans
    
    
    462,833
    
    
    
    454,704Commercial loans
    
    
    3,848
    
    
    
    4,834Consumer loans
    
    
    918
    
    
    
    1,132Total loans
    
    
    467,599
    
    
    
    460,670Less: allowance for loan losses
    
    
    (2,788
    )
    
    
    (3,191
    )Total loans, net
    
    $
    464,811
    
    
    $
    457,479
  Receivables
  Three Months EndedDecember 31,2009
    
    
    2008Balance at beginning of period
    
    $
    2,719
    
    
    $
    4,674Provision charged to expense
    
    
    100
    
    
    
    Less: charge-offs
    
    
    (44
    )
    
    
    (77
    )Add: recoveries
    
    
    13
    
    
    
    3Balance at end of period
    
    $
    2,788
    
    
    $
    4,600
 Nine Months EndedDecember 31,2009
    
    
    2008Balance at beginning of period
    
    $
    3,191
    
    
    $
    3,613Provision charged to expense
    
    
    350
    
    
    
    1,100Less: charge-offs
    
    
    (770
    )
    
    
    (124
    )Add: recoveries
    
    
    17
    
    
    
    Balance at end of period
    
    $
    2,788
    
    
    $
    4,600
 8




---



##### Table of Contents



(4) Deposits
  December 31,
    
    
    March 31,2009
    
    
    2009Demand deposit accounts
    
    $
    42,810
    
    
    $
    46,259NOW accounts
    
    
    28,963
    
    
    
    30,976Passbook and other savings accounts
    
    
    52,127
    
    
    
    50,737Money market deposit accounts
    
    
    81,020
    
    
    
    67,398Total non-certificate accounts
    
    
    204,920
    
    
    
    195,370Term deposit certificates:Certificates of $100,000 and above
    
    
    54,855
    
    
    
    85,497Certificates of less than $100,000
    
    
    84,706
    
    
    
    94,207Total term deposit certificates
    
    
    139,561
    
    
    
    179,704Total deposits
    
    $
    344,481
    
    
    $
    375,074
 (5) Subordinated Debentures
    9




---



##### Table of Contents



(6) Other Comprehensive Income
   For the Nine Months EndedDecember 31, 2009Before-Tax
    
    
    Tax
    
    
    After-TaxAmount
    
    
    Effect
    
    
    AmountUnrealized gains on securities:Unrealized
net holding gains during period
    
    $
    3,724
    
    
    $
    1,470
    
    
    $
    2,254Less: reclassification adjustment for net
losses included in net income
    
    
    (81
    )
    
    
    (33
    )
    
    
    (48
    )Other comprehensive income
    
    $
    3,805
    
    
    $
    1,503
    
    
    $
    2,302
 For the Nine Months EndedDecember 31, 2008Before-Tax
    
    
    Tax
    
    
    After-TaxAmount
    
    
    Effect
    
    
    AmountUnrealized losses on securities:Unrealized net holding losses during period
    
    $
    (12,093
    )
    
    $
    (4,410
    )
    
    $
    (7,683
    )Less: reclassification adjustment for net
losses included in net loss
    
    
    (9,538
    )
    
    
    (3,364
    )
    
    
    (6,174
    )Other comprehensive loss
    
    $
    (2,555
    )
    
    $
    (1,046
    )
    
    $
    (1,509
    )
 (7) Contingencies
 Legal Proceedings.
 (8) Subsequent Events
   (9) Earnings (Loss) Per Share (EPS)
  10




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(Amounts in thousands, except per share amounts)Net income (loss) as reported
    
    $
    366
    
    
    $
    3,917
    
    
    $
    1,268
    
    
    $
    (5,148
    )Less preferred dividends and accretion
    
    
    (153
    )
    
    
    (45
    )
    
    
    (459
    )
    
    
    (45
    )Net income (loss) available to common stockholders
    
    $
    213
    
    
    $
    3,872
    
    
    $
    809
    
    
    $
    (5,193
    )Weighted average number of common shares outstanding
    
    
    1,640
    
    
    
    1,640
    
    
    
    1,640
    
    
    
    1,640Weighted average number of unallocated ESOP and
unvested restricted shares
    
    
    (183
    )
    
    
    (236
    )
    
    
    (188
    )
    
    
    (246
    )Weighted average number of common shares outstanding
used in calculation of basic earnings per share
    
    
    1,457
    
    
    
    1,404
    
    
    
    1,452
    
    
    
    1,394Incremental shares from the assumed exercise of dilutive
securities
    
    
    55
    
    
    
    
    
    
    
    35
    
    
    
    Weighted average number of common shares outstanding
used in calculating diluted earnings per share
    
    
    1,512
    
    
    
    1,404
    
    
    
    1,487
    
    
    
    1,394Earnings (loss) per common shareBasic
    
    $
    0.15
    
    
    $
    2.76
    
    
    $
    0.56
    
    
    $
    (3.73
    )Diluted
    
    $
    0.14
    
    
    $
    2.76
    
    
    $
    0.54
    
    
    $
    (3.73
    )
  (10) Stock-Based Compensation
   11




---



##### Table of Contents



Compensation  Stock Compensation
  Number of
    
    
    Weighted AverageShares
    
    
    Exercise PriceOutstanding at March 31, 2009
    
    
    68,218
    
    
    $
    25.364Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (865
    )
    
    
    28.990Expired
    
    
    (13,745
    )
    
    
    20.250Outstanding at December 31, 2009
    
    
    53,608
    
    
    $
    26.617Exercisable at December 31, 2009
    
    
    49,608
    
    
    $
    26.247
 12




---



##### Table of Contents



WeightedAverageRemainingNumber
    
    
    Contractual
    
    
    AggregateExercise
    
    
    of Shares
    
    
    Life
    
    
    IntrinsicPrice
    
    
    Outstanding
    
    
    (Years)
    
    
    Value (1)$
    16.625
    
    
    
    12,077
    (2)
    
    
    0.9
    
    
    
    28.990
    
    
    
    31,531
    (2)
    
    
    5.1
    
    
    
    31.200
    
    
    
    10,000
    (3)
    
    
    6.7
    
    
    
    Average/Total
    
    $
    26.617
    
    
    
    53,608
    
    
    
    4.6
    
    
    $
    
 
 (1)
    
    Represents the total intrinsic value, based on the Companys closing stock price of $8.30 on
December 31, 2009, which would have been received by the option holders had all option holders
exercised their options as of that date. As of December 31, 2009, 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 December 31, 2009.  Number
    
    
    Weighted Averageof Restricted
    
    
    Grant DateShares
    
    
    Fair ValueNon-vested at March 31, 2009
    
    
    29,400
    
    
    $
    31.20GrantedVested
    
    
    (9,800
    )
    
    
    31.20Forfeited
    
    
    (2,800
    )
    
    
    31.20Non-vested at December 31, 2009
    
    
    16,800
    
    
    $
    31.20
 (11) Bank-Owned Life Insurance
 Investments- Other
 (12) Recent Accounting Pronouncements
 Effective Date of FASB Statement No. 157
 13




---



##### Table of Contents



Financial Instruments Fair Value Measurements
 Disclosures about Derivative Instruments and Hedging Activities Derivatives and
Hedgin Accounting
for Derivative Instruments and Hedging Activities
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Earnings Per Share Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share
 Interim Disclosures about Fair
Value of Financial Instruments Financial Instruments . Disclosures
about Fair Value of Financial Instruments Interim Financial Reporting
 Recognition and
Presentation of Other- Than-Temporary Impairments Investments-Debt and Equity Securities
 14




---



##### Table of Contents



Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability have Significantly Decreased and Identifying
Transactions that are not Orderly Fair Value Measurements and Disclosures
 Subsequent Events Subsequent Events
 The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles  A replacement of FASB Statement
No. 162 Generally Accepted Accounting Principles Financial
Accounting Standards Board Accounting Standards Codification
 Improving
Disclosures About Fair Value Measurements
 15




---



##### Table of Contents



(13) 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
    
    TotalAssets recorded at fair value on a recurring basis:Securities available for sale
    
    $
    3,206
    
    
    $
    34,599
    
    
    
    
    
    
    $
    37,805Assets recorded at fair value on a nonrecurring basis:Impaired loans carried at fair value
    
    
    
    
    
    
    
    
    
    $
    6,874
    
    
    $
    6,874OREO
    
    
    
    
    
    
    
    
    
    $
    77
    
    
    $
    77
    16




---



##### Table of Contents



InvestmentSecuritiesAvailable for SaleBalance at March 31, 2009
    
    $
    1,012Total realized and unrealized gains (losses) included in income
    
    
    Total unrealized losses included in other comprehensive income
    
    
    Net accretion of discount and repayment of principal
    
    
    Net transfers in/out of Level 3
    
    
    (1,012
    )Balance at December 31, 2009
    
    $
    
   Cash and Due from Banks 
 Short-Term Investments 
 Investments and Mortgage-Backed Securities 
 Loans and Loans Held for Sale 
 17




---



##### Table of Contents



Goodwill Intangibles-Goodwill and Other e.g
 Accrued Interest Receivable 
 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 
 18




---



##### Table of Contents



December 31, 2009
    
    March 31, 2009Carrying
    
    Estimated
    
    Carrying
    
    EstimatedAmount
    
    Fair Value
    
    Amount
    
    Fair ValueAssetsCash and due from banks
    
    $
    5,054
    
    
    $
    5,054
    
    
    $
    5,099
    
    
    $
    5,099Short-term investments
    
    
    13,420
    
    
    
    13,420
    
    
    
    37,323
    
    
    
    37,323Investment securities
    
    
    37,805
    
    
    
    37,805
    
    
    
    35,215
    
    
    
    35,215Loans held for sale
    
    
    3,212
    
    
    
    3,212
    
    
    
    3,208
    
    
    
    3,208Net loans
    
    
    464,811
    
    
    
    460,868
    
    
    
    457,479
    
    
    
    453,974Stock 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
    
    
    1,766
    
    
    
    1,766
    
    
    
    1,859
    
    
    
    1,859LiabilitiesDeposits
    
    $
    344,481
    
    
    $
    334,139
    
    
    $
    375,074
    
    
    $
    366,052Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    1,014
    
    
    
    1,014Advances from FHLB of Boston
    
    
    155,498
    
    
    
    163,006
    
    
    
    144,583
    
    
    
    153,318Subordinated debentures
    
    
    11,341
    
    
    
    8,967
    
    
    
    11,341
    
    
    
    9,013Advance payments by borrowers for taxes and insurance
    
    
    1,659
    
    
    
    1,659
    
    
    
    1,532
    
    
    
    1,532Accrued interest payable
    
    
    621
    
    
    
    621
    
    
    
    619
    
    
    
    619Off-Balance Sheet Instruments
    
    $
    28,123
    
    
    $
    28,123
    
    
    $
    43,378
    
    
    $
    43,378
 (14) Troubled Asset Relief Program Capital Purchase Program
   19




---



##### 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
  20




---



##### Table of Contents



Part IIItem 1A. Risk Factors
 General
      Critical Accounting Policies
  Allowance for Loan Losses
 21




---



##### Table of Contents



Contingencies
 Other Real Estate Owned
 Fair Value of Investments
    Income Taxes.
 Accounting for Goodwill and Impairment. Intangibles  Goodwill and Other
 22




---



##### Table of Contents



e.g
 Comparison of Financial Condition at December 31, 2009 and March 31, 2009
  -Provision for Loan Losses.
   23




---



##### Table of Contents



Bank-Owned Life Insurance
    Comparison of Operating Results for the Quarters Ended December 31, 2009 and 2008
  24




---



##### Table of Contents



Interest and Dividend Income.
 Interest Expense
 25




---



##### Table of Contents



Three Months Ended December 31,2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    458,887
    
    
    $
    6,689
    
    
    
    5.83
    %
    
    $
    453,209
    
    
    $
    6,836
    
    
    
    6.03
    %Other loans
    
    
    5,199
    
    
    
    74
    
    
    
    5.69
    
    
    
    6,713
    
    
    
    105
    
    
    
    6.26Investment securities
    
    
    47,137
    
    
    
    317
    
    
    
    2.69
    
    
    
    43,476
    
    
    
    454
    
    
    
    4.18Short-term investments
    
    
    12,063
    
    
    
    8
    
    
    
    0.27
    
    
    
    16,290
    
    
    
    23
    
    
    
    0.56Total interest-earning assets
    
    
    523,286
    
    
    
    7,088
    
    
    
    5.42
    
    
    
    519,688
    
    
    
    7,418
    
    
    
    5.71Allowance for loan losses
    
    
    (2,756
    )
    
    
    
    
    
    
    
    
    
    
    (4,673
    )Noninterest-earning assets
    
    
    27,691
    
    
    
    
    
    
    
    
    
    
    
    25,781Total assets
    
    $
    548,221
    
    
    
    
    
    
    
    
    
    
    $
    540,796Interest-bearing liabilities:Deposits
    
    $
    298,688
    
    
    
    896
    
    
    
    1.20
    
    
    $
    310,361
    
    
    
    1,656
    
    
    
    2.13Advances from FHLB of Boston
    
    
    149,334
    
    
    
    1,675
    
    
    
    4.49
    
    
    
    144,620
    
    
    
    1,670
    
    
    
    4.62Other borrowings
    
    
    11,357
    
    
    
    140
    
    
    
    4.93
    
    
    
    12,343
    
    
    
    177
    
    
    
    5.74Total interest-bearing liabilities
    
    
    459,379
    
    
    
    2,711
    
    
    
    2.36
    
    
    
    467,324
    
    
    
    3,503
    
    
    
    3.00Noninterest-bearing liabilities
    
    
    45,473
    
    
    
    
    
    
    
    
    
    
    
    40,152Total liabilities
    
    
    504,852
    
    
    
    
    
    
    
    
    
    
    
    507,476Stockholders equity
    
    
    43,369
    
    
    
    
    
    
    
    
    
    
    
    33,320Total liabilities and stockholders
equity
    
    $
    548,221
    
    
    
    
    
    
    
    
    
    
    $
    540,796Net interest and dividend income
    
    
    
    
    
    $
    4,377
    
    
    
    
    
    
    
    
    
    
    $
    3,915Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.06
    %
    
    
    
    
    
    
    
    
    
    
    2.71
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.35
    %
    
    
    
    
    
    
    
    
    
    
    3.01
    %
 Provision for Loan Losses.
 26




---



##### Table of Contents



Noninterest Income.
 Noninterest Expenses
        27




---



##### Table of Contents



Income Taxes
  Comparison of Operating Results for the Nine Months Ended December 31, 2009 and 2008
  Interest and Dividend Income.
 28




---



##### Table of Contents



Interest Expense.
  Nine Months Ended December 31,2009
    
    
    2008Average
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    457,505
    
    
    $
    20,101
    
    
    
    5.86
    %
    
    $
    457,478
    
    
    $
    20,573
    
    
    
    6.00
    %Other loans
    
    
    5,746
    
    
    
    249
    
    
    
    5.78
    
    
    
    9,176
    
    
    
    435
    
    
    
    6.32Investment securities
    
    
    44,884
    
    
    
    1,109
    
    
    
    3.29
    
    
    
    57,328
    
    
    
    1,942
    
    
    
    4.52Short-term investments
    
    
    21,650
    
    
    
    41
    
    
    
    .25
    
    
    
    11,678
    
    
    
    132
    
    
    
    1.51Total interest-earning assets
    
    
    529,785
    
    
    
    21,500
    
    
    
    5.41
    
    
    
    535,660
    
    
    
    23,082
    
    
    
    5.75Allowance for loan losses
    
    
    (3,008
    )
    
    
    
    
    
    
    
    
    
    
    (4,091
    )Noninterest-earning assets
    
    
    29,400
    
    
    
    
    
    
    
    
    
    
    
    22,407Total assets
    
    $
    556,177
    
    
    
    
    
    
    
    
    
    
    $
    553,976Interest-bearing liabilities:Deposits
    
    $
    311,360
    
    
    
    3,696
    
    
    
    1.58
    
    
    $
    316,759
    
    
    
    5,400
    
    
    
    2.27Advances from FHLB of Boston
    
    
    145,125
    
    
    
    4,954
    
    
    
    4.55
    
    
    
    147,943
    
    
    
    5,124
    
    
    
    4.62Other borrowings
    
    
    12,072
    
    
    
    440
    
    
    
    4.86
    
    
    
    11,907
    
    
    
    520
    
    
    
    5.82Total interest-bearing liabilities
    
    
    468,557
    
    
    
    9,090
    
    
    
    2.59
    
    
    
    476,609
    
    
    
    11,044
    
    
    
    3.09Noninterest-bearing liabilities
    
    
    45,287
    
    
    
    
    
    
    
    
    
    
    
    41,259Total liabilities
    
    
    513,844
    
    
    
    
    
    
    
    
    
    
    
    517,868Stockholders equity
    
    
    42,333
    
    
    
    
    
    
    
    
    
    
    
    36,108Total liabilities and stockholders
equity
    
    $
    556,177
    
    
    
    
    
    
    
    
    
    
    $
    553,976Net interest and dividend income
    
    
    
    
    
    $
    12,410
    
    
    
    
    
    
    
    
    
    
    $
    12,038Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.82
    %
    
    
    
    
    
    
    
    
    
    
    2.66
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.12
    %
    
    
    
    
    
    
    
    
    
    
    3.00
    %
 Provision for Loan Losses.
 29




---



##### Table of Contents



Noninterest Income.
 Noninterest Expenses.
     30




---



##### Table of Contents



Income Taxes
 Liquidity and Capital Resources
   ,
  31




---



##### Table of Contents



At December 31, 2009RegulatoryThresholdFor WellActual
    
    CapitalizedCentral Bancorp:Tier 1 Leverage
    
    
    8.84
    %
    
    
    5.0
    %Tier 1 Risk-Based Ratio
    
    
    13.26
    %
    
    
    6.0
    %Total Risk-Based Ratio
    
    
    14.04
    %
    
    
    10.0
    %Central Co-operative Bank:Tier 1 Leverage
    
    
    7.65
    %
    
    
    5.0
    %Tier 1 Risk-Based Ratio
    
    
    11.50
    %
    
    
    6.0
    %Total Risk-Based Ratio
    
    
    12.27
    %
    
    
    10.0
    %
 Off-Balance Sheet Arrangements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4(T). Controls and Procedures
   32




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity 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
 31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer32
    
    Section 1350 Certifications
 33




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##### Table of Contents



SIGNATURES
  CENTRAL BANCORP, INC.
RegistrantFebruary 12, 2010
    By:
    /s/ John D. DohertyJohn D. DohertyChairman and Chief Executive OfficerFebruary 12, 2010
    By:

/s/
Paul S. FeeleyPaul S. FeeleySenior Vice President, Treasurer
and
Chief Financial Officer 34