##### 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 September 30, 2006
 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)
 N/A  (Former name, former address and former fiscal year, if changed since last report)
 þ o
  o o þ
 o þ
 Common Stock, $1.00 par value
    
    1,639,951 sharesClass
    
    Outstanding at November 3, 2006




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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 September 30, 2006 and
March 31, 2006
    
    
    1Consolidated Statements of Income for the Three and Six Months Ended
September 30, 2006 and 2005
    
    
    2Consolidated Statements of Changes in Stockholders Equity for the Six
Months Ended September 30, 2006
    
    
    3Consolidated Statements of Cash Flows for the Six Months Ended
September 30, 2006 and 2005
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    20Part II. Other InformationItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    21SignaturesEX-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




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
  
   September 30,
    
    
    March 31,(Dollars in Thousands)
    
    2006
    
    
    2006ASSETSCash and due from banks
    
    $
    5,249
    
    
    $
    6,590Short-term investments
    
    
    4,665
    
    
    
    8,673Cash and cash equivalents
    
    
    9,914
    
    
    
    15,263Certificates of deposit
    
    
    642
    
    
    
    627Investment securities available for sale (amortized cost of $94,463
at September 30, 2006 and $99,159 at March 31, 2006)
    
    
    93,582
    
    
    
    97,195Stock in Federal Home Loan Bank of Boston, at cost
    
    
    6,318
    
    
    
    8,300The Co-operative Central Bank Reserve Fund
    
    
    1,576
    
    
    
    1,576Total investments
    
    
    101,476
    
    
    
    107,071Loans held for sale
    
    
    
    
    
    
    45Loans (Note 2)
    
    
    434,700
    
    
    
    415,318Less allowance for loan losses
    
    
    3,850
    
    
    
    3,788Net loans
    
    
    430,850
    
    
    
    411,530Accrued interest receivable
    
    
    2,555
    
    
    
    2,678Banking premises and equipment, net
    
    
    4,920
    
    
    
    3,870Deferred tax asset, net
    
    
    1,957
    
    
    
    2,347Goodwill, net
    
    
    2,232
    
    
    
    2,232Other assets
    
    
    1,536
    
    
    
    1,612Total assets
    
    $
    556,082
    
    
    $
    547,275LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 3)
    
    $
    388,747
    
    
    $
    393,413Short-term borrowings
    
    
    6
    
    
    
    Federal Home Loan Bank advances
    
    
    116,500
    
    
    
    103,500Subordinated debenture (Note 4)
    
    
    5,258
    
    
    
    5,258ESOP Loan
    
    
    2,337
    
    
    
    2,532Advanced payments by borrowers for taxes and insurance
    
    
    1,371
    
    
    
    1,277Accrued expenses and other liabilities
    
    
    1,762
    
    
    
    2,106Total liabilities
    
    
    515,981
    
    
    
    508,086Commitments and Contingencies (Note 6)Stockholders equity (Note 7):Preferred stock $1.00 par value; authorized 5,000,000 shares;
none issued or outstanding
    
    
    
    
    
    
    Common stock $1.00 par value; authorized 15,000,000 shares;
1,590,951 shares issued at September 30, 2006 and 1,590,181
shares issued at March 31, 2006
    
    
    2,033
    
    
    
    2,033Additional paid-in capital
    
    
    2,952
    
    
    
    2,938Retained income
    
    
    40,367
    
    
    
    40,421Accumulated other comprehensive loss (Note 5)
    
    
    (588
    )
    
    
    (1,281
    )Unearned compensation  ESOP
    
    
    (4,663
    )
    
    
    (4,922
    )Total stockholders equity
    
    
    40,101
    
    
    
    39,189Total liabilities and stockholders equity
    
    $
    556,082
    
    
    $
    547,275
  1




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest and dividend income:Mortgage loans
    
    $
    6,630
    
    
    $
    6,087
    
    
    $
    12,771
    
    
    $
    11,972Other loans
    
    
    146
    
    
    
    104
    
    
    
    273
    
    
    
    207Short-term investments
    
    
    121
    
    
    
    53
    
    
    
    216
    
    
    
    66Investments
    
    
    1,344
    
    
    
    1,327
    
    
    
    2,470
    
    
    
    2,694Total interest and dividend income
    
    
    8,241
    
    
    
    7,571
    
    
    
    15,730
    
    
    
    14,939Interest expense:Deposits
    
    
    2,877
    
    
    
    1,507
    
    
    
    5,409
    
    
    
    2,859Advances from Federal Home Loan Bank of Boston
    
    
    1,329
    
    
    
    1,718
    
    
    
    2,557
    
    
    
    3,441Other borrowings
    
    
    159
    
    
    
    132
    
    
    
    310
    
    
    
    266Total interest expense
    
    
    4,365
    
    
    
    3,357
    
    
    
    8,276
    
    
    
    6,566Net interest and dividend income
    
    
    3,876
    
    
    
    4,214
    
    
    
    7,454
    
    
    
    8,373Provision for loan losses
    
    
    
    
    
    
    50
    
    
    
    50
    
    
    
    100Net interest and dividend income after
provision for loan losses
    
    
    3,876
    
    
    
    4,164
    
    
    
    7,404
    
    
    
    8,273Non-interest income:Deposit service charges
    
    
    249
    
    
    
    235
    
    
    
    505
    
    
    
    467Net gains from sales of investment securities
    
    
    116
    
    
    
    96
    
    
    
    228
    
    
    
    213Net gains on sales of loans
    
    
    25
    
    
    
    85
    
    
    
    59
    
    
    
    140Other income
    
    
    57
    
    
    
    190
    
    
    
    145
    
    
    
    280Total non-interest income
    
    
    447
    
    
    
    606
    
    
    
    937
    
    
    
    1,100Non-interest expenses:Salaries and employee benefits
    
    
    2,177
    
    
    
    2,374
    
    
    
    4,356
    
    
    
    4,440Occupancy and equipment
    
    
    543
    
    
    
    381
    
    
    
    1,047
    
    
    
    763Data processing fees
    
    
    254
    
    
    
    240
    
    
    
    487
    
    
    
    478Professional fees
    
    
    220
    
    
    
    199
    
    
    
    457
    
    
    
    406Advertising and marketing
    
    
    100
    
    
    
    161
    
    
    
    322
    
    
    
    344Other expenses
    
    
    493
    
    
    
    450
    
    
    
    964
    
    
    
    888Total non-interest expenses
    
    
    3,787
    
    
    
    3,805
    
    
    
    7,633
    
    
    
    7,319Income before income taxes
    
    
    536
    
    
    
    965
    
    
    
    708
    
    
    
    2,054Provision for income taxes (Note 6)
    
    
    185
    
    
    
    341
    
    
    
    244
    
    
    
    724Net income
    
    $
    351
    
    
    $
    624
    
    
    $
    464
    
    
    $
    1,330Earnings per common share  basic (Note 8)
    
    $
    0.24
    
    
    $
    0.44
    
    
    $
    0.32
    
    
    $
    0.93Earnings per common share  diluted (Note 8)
    
    $
    0.24
    
    
    $
    0.43
    
    
    $
    0.32
    
    
    $
    0.93Weighted average common shares outstanding  basic
    
    
    1,444
    
    
    
    1,427
    
    
    
    1,442
    
    
    
    1,425Weighted average common and equivalent shares
outstanding  diluted
    
    
    1,457
    
    
    
    1,436
    
    
    
    1,455
    
    
    
    1,433
  2




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##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    Unearned
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Compensation
    
    
    Stockholders(In Thousands)
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Income
    
    
    ESOP
    
    
    EquitySix Months Ended September 30, 2006Balance at March 31, 2006
    
    $
    2,033
    
    
    $
    2,938
    
    
    $
    40,421
    
    
    $
    (1,281
    )
    
    $
    (4,922
    )
    
    $
    39,189Net income
    
    
    
    
    
    
    
    
    
    
    464
    
    
    
    
    
    
    
    
    
    
    
    464Other comprehensive income net of tax:Unrealized gain on securities, net
of reclassification adjustment (Note 5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    693
    
    
    
    
    
    
    
    693Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,157Proceeds from exercise of stock options
(770 shares)
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Tax benefit of stock option exercises
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Dividends paid ($0.36 per share)
    
    
    
    
    
    
    
    
    
    
    (518
    )
    
    
    
    
    
    
    
    
    
    
    (518
    )Amortization of unearned compensation  ESOP
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    259
    
    
    
    256Balance at September 30, 2006
    
    $
    2,033
    
    
    $
    2,952
    
    
    $
    40,367
    
    
    $
    (588
    )
    
    $
    (4,663
    )
    
    $
    40,101
  3




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##### Table of Contents



Six Months EndedSeptember 30,(In thousands)
    
    2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    464
    
    
    $
    1,330Adjustments to reconcile net income to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    379
    
    
    
    277Amortization of premiums
    
    
    49
    
    
    
    65Provision for loan losses
    
    
    50
    
    
    
    100Stock-based compensation
    
    
    256
    
    
    
    221Net gains from sales and write-downs of investment securities
    
    
    (228
    )
    
    
    (213
    )Gain on sales of loans held for sale
    
    
    (59
    )
    
    
    (140
    )Originations of loans held for sale
    
    
    (5,266
    )
    
    
    (10,367
    )Proceeds from sale of loans originated for sale
    
    
    5,370
    
    
    
    12,464Decrease in accrued interest receivable
    
    
    123
    
    
    
    1Decrease in other assets, net
    
    
    76
    
    
    
    48Increase in advance payments by borrowers for taxes and insurance
    
    
    94
    
    
    
    207Increase (decrease) in accrued expenses and other liabilities, net
    
    
    (344
    )
    
    
    318Net cash provided by operating activities
    
    
    964
    
    
    
    4,311Cash flows from investing activities:Increase in loans
    
    
    (19,370
    )
    
    
    (27,189
    )Principal payments on mortgage-backed securities
    
    
    4,430
    
    
    
    6,053Proceeds from the redemption of FHLB stock (net)
    
    
    1,982
    
    
    
    Proceeds from sales of investment securities
    
    
    3,550
    
    
    
    2,727Purchases of investment securities
    
    
    (10,020
    )
    
    
    (3,061
    )Maturities and calls of investment securities
    
    
    6,900
    
    
    
    1,500Purchase of banking premises and equipment
    
    
    (1,429
    )
    
    
    (428
    )Net cash used in investing activities
    
    
    (13,957
    )
    
    
    (20,398
    )Cash flows from financing activities:Increase (decrease) in deposits
    
    
    (4,666
    )
    
    
    17,066Proceeds from advances from FHLB of Boston
    
    
    56,000
    
    
    
    84,000Repayment of advances from FHLB of Boston
    
    
    (43,000
    )
    
    
    (83,335
    )Increase (decrease) in short-term borrowings
    
    
    6
    
    
    
    (141
    )Repayment of ESOP loan
    
    
    (195
    )
    
    
    (194
    )Proceeds from exercise of stock options
    
    
    13
    
    
    
    25Tax benefit from exercise of stock options
    
    
    4
    
    
    
    5Dividends paid, net
    
    
    (518
    )
    
    
    (421
    )Net directors deferred compensation
    
    
    
    
    
    
    (3
    )Net cash provided by financing activities
    
    
    7,644
    
    
    
    17,002Net increase (decrease) in cash and cash equivalents
    
    
    (5,349
    )
    
    
    915Cash and cash equivalents at beginning of year
    
    
    15,263
    
    
    
    6,383Cash and cash equivalents at end of period
    
    $
    9,914
    
    
    $
    7,298Supplementary disclosure of cash flows information:Cash paid during the period for:Interest
    
    $
    8,287
    
    
    $
    6,589Income taxes
    
    $
    578
    
    
    $
    798
  4




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Notes to Unaudited Consolidated Financial Statements
 September 30, 2006
 (1) Basis of Presentation
    (2) Loans
  September 30,
    
    
    March 31,2006
    
    
    2006Real estate loans:Residential real estate (1-4 family)
    
    $
    176,586
    
    
    $
    160,381Commercial real estate
    
    
    206,831
    
    
    
    213,935Construction
    
    
    37,172
    
    
    
    27,680Home equity lines of credit
    
    
    6,986
    
    
    
    7,505Total real estate loans
    
    
    427,575
    
    
    
    409,501Commercial loans
    
    
    5,882
    
    
    
    4,457Consumer loans
    
    
    1,243
    
    
    
    1,360Total loans
    
    
    434,700
    
    
    
    415,318Less: allowance for loan losses
    
    
    (3,850
    )
    
    
    (3,788
    )Total loans, net
    
    $
    430,850
    
    
    $
    411,530
   5




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
September 30, 2006
  Three Months EndedSeptember 30,2006
    
    
    2005Balance at beginning of period
    
    $
    3,843
    
    
    $
    3,731Provision charged to expense
    
    
    
    
    
    
    50Less: charge-offs
    
    
    (12
    )
    
    
    (11
    )Add: recoveries
    
    
    19
    
    
    
    13Balance at end of period
    
    $
    3,850
    
    
    $
    3,783
 Six Months EndedSeptember 30,2006
    
    
    2005Balance at beginning of period
    
    $
    3,788
    
    
    $
    3,681Provision charged to expense
    
    
    50
    
    
    
    100Less: charge-offs
    
    
    (20
    )
    
    
    (20
    )Add: recoveries
    
    
    32
    
    
    
    23Balance at end of period
    
    $
    3,850
    
    
    $
    3,783
 (3) Deposits
  September 30,
    
    
    March 31,2006
    
    
    2006Demand deposit accounts
    
    $
    39,781
    
    
    $
    40,871NOW accounts
    
    
    29,266
    
    
    
    29,902Passbook and other savings accounts
    
    
    58,908
    
    
    
    65,546Money market deposit accounts
    
    
    34,800
    
    
    
    36,051Total non-certificate accounts
    
    
    162,755
    
    
    
    172,370Term deposit certificates:Certificates of $100,000 and above
    
    
    84,536
    
    
    
    84,028Certificates of less than $100,000
    
    
    141,456
    
    
    
    137,015Total term deposit certificates
    
    
    225,992
    
    
    
    221,043Total deposits
    
    $
    388,747
    
    
    $
    393,413
 (4) Subordinated Debenture
  6




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
September 30, 2006
  (5) Other Comprehensive Income (Loss)
   For the Six Months EndedSeptember 30, 2006Before-Tax
    
    
    Tax
    
    
    After-TaxAmount
    
    
    Effect
    
    
    AmountUnrealized gains on securities:Unrealized net holding losses during period
    
    $
    1,311
    
    
    $
    469
    
    
    $
    842Less: reclassification adjustment for net
gains included in net income
    
    
    228
    
    
    
    79
    
    
    
    149Other comprehensive gain
    
    $
    1,083
    
    
    $
    390
    
    
    $
    693
 For the Six Months EndedSeptember 30, 2005Before-Tax
    
    
    Tax
    
    
    After-TaxAmount
    
    
    Effect
    
    
    AmountUnrealized losses on securities:Unrealized net holding losses during period
    
    $
    (346
    )
    
    $
    125
    
    
    $
    (221
    )Less: reclassification adjustment for net
gains included in net income
    
    
    213
    
    
    
    72
    
    
    
    141Other comprehensive loss
    
    $
    (559
    )
    
    $
    (197
    )
    
    $
    (362
    )
 7




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
September 30, 2006
 (6) Contingencies
 Legal Proceedings
  (7) Subsequent Event
  (8) Earnings per Share (EPS)
   Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Amounts in thousands, except per share amounts)Net income available to common shareholders
    
    $
    351
    
    
    $
    624
    
    
    $
    464
    
    
    $
    1,330Weighted average number of common shares outstanding
    
    
    1,591
    
    
    
    1,590
    
    
    
    1,591
    
    
    
    1,590Weighted average number of unallocated ESOP shares
    
    
    (147
    )
    
    
    (163
    )
    
    
    (149
    )
    
    
    (165
    )Weighted average number of common shares outstanding
used in calculation of basic earnings per share
    
    
    1,444
    
    
    
    1,427
    
    
    
    1,442
    
    
    
    1,425Incremental shares from the assumed exercise of dilutive
stock options
    
    
    13
    
    
    
    9
    
    
    
    13
    
    
    
    8Weighted average number of common shares outstanding
used in calculating diluted earnings per share
    
    
    1,457
    
    
    
    1,436
    
    
    
    1,455
    
    
    
    1,433Earnings per shareBasic
    
    $
    0.24
    
    
    $
    0.44
    
    
    $
    0.32
    
    
    $
    0.93Diluted
    
    $
    0.24
    
    
    $
    0.43
    
    
    $
    0.32
    
    
    $
    0.93
  8




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
September 30, 2006
 (9) Stock Compensation
      WeightedNumber of
    
    AverageShares
    
    Exercise PriceBalance March 31, 2006
    
    
    59,891
    
    
    $
    24.356Granted
    
    
    
    
    
    
    Exercised
    
    
    (770
    )
    
    
    18.490CanceledBalance September 30, 2006
    
    
    59,121
    
    
    
    24.430
  9




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
September 30, 2006
  WeightedAverageRemaining
    
    
    WeightedNumber
    
    
    Contractual
    
    
    Average
    
    
    AggregateExercise
    
    
    of Shares
    
    
    Life
    
    
    Exercise
    
    
    IntrinsicPrice
    
    
    Outstanding
    
    
    (Years)
    
    
    Price
    
    
    Value$
    16.625
    
    
    
    12,077
    
    
    
    4.2
    
    
    $
    16.625
    
    
    $
    182,06120.250
    
    
    
    13,745
    
    
    
    3.0
    
    
    
    20.250
    
    
    
    157,38028.990
    
    
    
    33,299
    
    
    
    8.3
    
    
    
    28.990
    
    
    
    90,240Average/Total
    
    $
    24.432
    
    
    
    59,121
    
    
    
    6.3
    
    
    $
    24.432
    
    
    $
    429,681
 (10) Recent Accounting Pronouncements
    10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Forward-Looking Statements
  General
      11




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##### Table of Contents



Critical Accounting Policies
   Comparison of Financial Condition at September 30, 2006 and March 31, 2006
   12




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##### Table of Contents



Comparison of Operating Results for the Quarters Ended September 30, 2006 and 2005
  Net Interest Income.
 13




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##### Table of Contents



Interest Income.
 Interest Expense.
 14




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##### Table of Contents



Three Months Ended September 30,2006
    
    
    2005Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    415,562
    
    
    $
    6,630
    
    
    
    6.38
    %
    
    $
    397,706
    
    
    $
    6,087
    
    
    
    6.12
    %Other loans
    
    
    7,228
    
    
    
    146
    
    
    
    8.08
    
    
    
    5,852
    
    
    
    104
    
    
    
    7.18Investment securities
    
    
    100,303
    
    
    
    1,344
    
    
    
    5.36
    
    
    
    113,816
    
    
    
    1,327
    
    
    
    4.66Short-term investments
    
    
    9,004
    
    
    
    121
    
    
    
    5.38
    
    
    
    6,450
    
    
    
    53
    
    
    
    3.29Total interest-earning assets
    
    
    532,097
    
    
    
    8,241
    
    
    
    6.20
    
    
    
    523,824
    
    
    
    7,571
    
    
    
    5.78Allowance for loan losses
    
    
    (3,844
    )
    
    
    
    
    
    
    
    
    
    
    (3,747
    )Non-interest-earning assets
    
    
    18,632
    
    
    
    
    
    
    
    
    
    
    
    17,251Total assets
    
    $
    546,885
    
    
    
    
    
    
    
    
    
    
    $
    537,328Interest-bearing liabilities:Deposits
    
    $
    360,475
    
    
    
    2,877
    
    
    
    3.19
    
    
    $
    304,262
    
    
    
    1,507
    
    
    
    1.98Advances from FHLB of Boston
    
    
    93,176
    
    
    
    1,329
    
    
    
    5.71
    
    
    
    141,507
    
    
    
    1,718
    
    
    
    4.86Other borrowings
    
    
    8,486
    
    
    
    159
    
    
    
    7.49
    
    
    
    8,560
    
    
    
    132
    
    
    
    6.15Total interest-bearing liabilities
    
    
    462,137
    
    
    
    4,365
    
    
    
    3.78
    
    
    
    454,419
    
    
    
    3,357
    
    
    
    2.96Non-interest-bearing liabilities
    
    
    45,213
    
    
    
    
    
    
    
    
    
    
    
    43,780Total liabilities
    
    
    507,350
    
    
    
    
    
    
    
    
    
    
    
    498,189Stockholders equity
    
    
    39,535
    
    
    
    
    
    
    
    
    
    
    
    39,129Total liabilities and stockholders
Equity
    
    $
    546,885
    
    
    
    
    
    
    
    
    
    
    $
    537,328Net interest and dividend income
    
    
    
    
    
    $
    3,876
    
    
    
    
    
    
    
    
    
    
    $
    4,214Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.42
    %
    
    
    
    
    
    
    
    
    
    
    2.82
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.91
    %
    
    
    
    
    
    
    
    
    
    
    3.22
    %
 Provision for Loan Losses.
  15




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Non-Interest Income.
 Non-Interest Expense.
      Income Taxes.
 Comparison of Operating Results for the Six Months Ended September 30, 2006 and 2005
  Interest Income.
 Interest Expense.
 16




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##### Table of Contents



Six Months Ended September 30,2006
    
    
    2005Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    410,871
    
    
    $
    12,771
    
    
    
    6.22
    
    
    $
    393,648
    
    
    $
    11,972
    
    
    
    6.08
    %Other loans
    
    
    6,826
    
    
    
    273
    
    
    
    8.00
    
    
    
    5,999
    
    
    
    207
    
    
    
    6.90Investment securities
    
    
    101,159
    
    
    
    2,470
    
    
    
    4.88
    
    
    
    115,611
    
    
    
    2,694
    
    
    
    4.66Short-term investments
    
    
    9,085
    
    
    
    216
    
    
    
    4.76
    
    
    
    4,484
    
    
    
    66
    
    
    
    2.94Total interest-earning assets
    
    
    527,941
    
    
    
    15,730
    
    
    
    5.96
    
    
    
    519,742
    
    
    
    14,939
    
    
    
    5.75Allowance for loan losses
    
    
    (3,825
    )
    
    
    
    
    
    
    
    
    
    
    (3,722
    )Noninterest-earning assets
    
    
    19,001
    
    
    
    
    
    
    
    
    
    
    
    16,873Total assets
    
    $
    543,117
    
    
    
    
    
    
    
    
    
    
    $
    532,893Interest-bearing liabilities:Deposits
    
    
    358,489
    
    
    
    5,409
    
    
    
    3.02
    
    
    $
    301,724
    
    
    
    2,859
    
    
    
    1.90Advances from FHLB of Boston
    
    
    95,146
    
    
    
    2,557
    
    
    
    5.37
    
    
    
    142,275
    
    
    
    3,442
    
    
    
    4.84Other borrowings
    
    
    8,199
    
    
    
    310
    
    
    
    7.56
    
    
    
    9,197
    
    
    
    266
    
    
    
    5.78Total interest-bearing liabilities
    
    
    461,834
    
    
    
    8,276
    
    
    
    3.58
    
    
    
    453,196
    
    
    
    6,567
    
    
    
    2.90Non-interest-bearing liabilities
    
    
    41,863
    
    
    
    
    
    
    
    
    
    
    
    40,865Total liabilities
    
    
    503,697
    
    
    
    
    
    
    
    
    
    
    
    494,061Stockholders equity
    
    
    39,420
    
    
    
    
    
    
    
    
    
    
    
    38,832Total liabilities and stockholders
equity
    
    $
    543,117
    
    
    
    
    
    
    
    
    
    
    $
    532,893Net interest and dividend income
    
    
    
    
    
    $
    7,454
    
    
    
    
    
    
    
    
    
    
    $
    8,372Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.38
    %
    
    
    
    
    
    
    
    
    
    
    2.85
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.82
    %
    
    
    
    
    
    
    
    
    
    
    3.22
    %
 Provision for Loan Losses.
  17




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##### Table of Contents



Non-interest Income.
  Non-interest Expense.
       Income Taxes.
 Liquidity and Capital Resources
  18




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##### Table of Contents



Company
    
    BankTier 1 Capital (to average assets)
    
    
    8.00
    %
    
    
    7.37
    %Tier 1 Capital (to risk-weighted assets)
    
    
    11.92
    %
    
    
    10.99
    %Total Capital (to risk-weighted assets)
    
    
    12.99
    %
    
    
    12.06
    %
  Off-Balance Sheet Arrangements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
     19




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September 30,
    
    March 31,2006
    
    2006Amount
    
    % Change
    
    Amount
    
    % Change(Dollars in thousands)200 basis point increase in rates
    
    $
    (1,939
    )
    
    
    (13.3
    )%
    
    $
    (1,530
    )
    
    
    (10.0
    )%200 basis point decrease in rates
    
    
    669
    
    
    
    4.6
    
    
    
    611
    
    
    
    4.0
  
 Item 4. Controls and Procedures
   20




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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
 Exhibits31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer32
    
    Section 1350 Certifications
 21




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##### Table of Contents



SIGNATURES
  CENTRAL BANCORP,
INC.RegistrantNovember 13, 2006
    
    By:
    
    /s/ John D. DohertyJohn D. DohertyChairman, President and Chief Executive OfficerNovember 13, 2006
    
    By:
    
    /s/ Paul S. FeeleyPaul S. FeeleySenior Vice President, Treasurer andChief Financial Officer