##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 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
 
 Not applicable
 
 þ o
 o o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller Reporting Company þ o þ
 Common Stock, $1.00 par value
    
    1,639,951Class
    
    Outstanding at August 7, 2009




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##### 



CENTRAL BANCORP, INC.
 FORM 10-Q
 Table of Contents
 Page No.Part I.
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)
    
    
    1Consolidated Statements of Financial Condition at June 30, 2009 and
March 31, 2009
    
    
    1Consolidated Statements of Income for the Three Months Ended June
30, 2009 and 2008
    
    
    2Consolidated Statements of Changes in Stockholders Equity for the
Three Months Ended June 30, 2009
    
    
    3Consolidated Statements of Cash Flows for the Three Months Ended
June 30, 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
    
    
    29Item 4.
    
    Controls and Procedures
    
    
    29Part II.
    
    Other Information
    
    
    30Item 1.
    
    Legal Proceedings
    
    
    30Item 1A.
    
    Risk Factors
    
    
    30Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3.
    
    Defaults Upon Senior Securities
    
    
    30Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    30Item 5.
    
    Other Information
    
    
    30Item 6.
    
    Exhibits
    
    
    30SignaturesEX-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, 2009
    
    
    March 31, 2009ASSETSCash and due from banks
    
    $
    3,051
    
    
    $
    5,099Short-term investments
    
    
    29,463
    
    
    
    37,323Cash and cash equivalents
    
    
    32,514
    
    
    
    42,422Investment securities available for sale (Note 2)
    
    
    32,692
    
    
    
    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
    
    
    42,786
    
    
    
    45,309Loans held for sale
    
    
    3,735
    
    
    
    3,208Loans (Note 3)
    
    
    457,975
    
    
    
    460,670Less allowance for loan losses
    
    
    (3,064
    )
    
    
    (3,191
    )Loans, net
    
    
    454,911
    
    
    
    457,479Accrued interest receivable
    
    
    1,726
    
    
    
    1,859Banking premises and equipment, net
    
    
    3,163
    
    
    
    3,323Deferred tax asset, net
    
    
    6,713
    
    
    
    7,585Other real estate owned
    
    
    3,063
    
    
    
    2,986Goodwill, net
    
    
    2,232
    
    
    
    2,232Bank owned life insurance (Note 11)
    
    
    6,465
    
    
    
    6,391Other assets
    
    
    2,800
    
    
    
    3,033Total assets
    
    $
    560,108
    
    
    $
    575,827LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 4)
    
    $
    359,745
    
    
    $
    375,074Short-term borrowings
    
    
    2,024
    
    
    
    1,014Federal Home Loan Bank advances
    
    
    141,555
    
    
    
    144,583Subordinated debentures (Note 5)
    
    
    11,341
    
    
    
    11,341Advanced payments by borrowers for taxes and insurance
    
    
    1,458
    
    
    
    1,532Accrued expenses and other liabilities
    
    
    2,196
    
    
    
    2,044Total liabilities
    
    
    518,319
    
    
    
    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 at
June 30, 2009 and March 31, 2009, with a liquidation preference and
redemption value of $10,063,889
    
    
    9,504
    
    
    
    9,476Common stock $1.00 par value; 15,000,000 shares authorized; 1,639,951
shares issued and outstanding at June 30, 2009 and March 31, 2009
    
    
    1,640
    
    
    
    1,640Additional paid-in capital
    
    
    4,314
    
    
    
    4,371Retained income
    
    
    33,466
    
    
    
    33,393Accumulated other comprehensive loss (Note 6)
    
    
    (892
    )
    
    
    (2,226
    )Unearned compensation  ESOP
    
    
    (6,423
    )
    
    
    (6,415
    )Total stockholders equity
    
    
    41,789
    
    
    
    40,239Total liabilities and stockholders equity
    
    $
    560,108
    
    
    $
    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 June 30,2009(In Thousands, Except Share and Per Share Data)
    
    2009
    
    
    2008Interest and dividend income:Mortgage loans
    
    $
    6,698
    
    
    $
    6,853Other loans
    
    
    90
    
    
    
    190Investments
    
    
    380
    
    
    
    765Short-term investments
    
    
    20
    
    
    
    57Total interest and dividend income
    
    
    7,188
    
    
    
    7,865Interest expense:Deposits
    
    
    1,538
    
    
    
    2,007Advances from Federal Home Loan Bank of Boston
    
    
    1,650
    
    
    
    1,763Other borrowings
    
    
    152
    
    
    
    170Total interest expense
    
    
    3,340
    
    
    
    3,940Net interest and dividend income
    
    
    3,848
    
    
    
    3,925Provision for loan losses
    
    
    50
    
    
    
    200Net interest and dividend income after
provision for loan losses
    
    
    3,798
    
    
    
    3,725Noninterest income:Deposit service charges
    
    
    238
    
    
    
    246Net loss from sales and write-downs
of investment securities
    
    
    
    
    
    
    (29
    )Net gains on sales of loans
    
    
    149
    
    
    
    13Bank owned life insurance income
    
    
    75
    
    
    
    78Other income
    
    
    72
    
    
    
    120Total noninterest income
    
    
    534
    
    
    
    428Noninterest expenses:Salaries and employee benefits
    
    
    2,051
    
    
    
    2,218Occupancy and equipment
    
    
    536
    
    
    
    553Data processing fees
    
    
    209
    
    
    
    201Professional fees
    
    
    234
    
    
    
    180FDIC deposit premiums
    
    
    341
    
    
    
    10Advertising and marketing
    
    
    76
    
    
    
    30Other expenses
    
    
    475
    
    
    
    416Total noninterest expenses
    
    
    3,922
    
    
    
    3,608Income before income taxes
    
    
    410
    
    
    
    545Provision for income taxes
    
    
    112
    
    
    
    144Net income
    
    $
    298
    
    
    $
    401Net income available to common shareholders
    
    $
    145
    
    
    $
    401Earnings per common share  basic (Note 9)
    
    $
    0.10
    
    
    $
    0.29Earnings per common share  diluted (Note 9)
    
    $
    0.10
    
    
    $
    0.29Weighted average common shares outstanding  basic
    
    
    1,446,413
    
    
    
    1,385,706Weighted average common and equivalent shares
outstanding diluted
    
    
    1,450,386
    
    
    
    1,385,739
 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)
 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
    
    
    EquityThree Months Ended June 30, 2009Balance at March 31, 2009
    
    $
    9,476
    
    
    $
    1,640
    
    
    $
    4,371
    
    
    $
    33,393
    
    
    $
    (2,226
    )
    
    $
    (6,415
    )
    
    $
    40,239Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    298
    
    
    
    
    
    
    
    
    
    
    
    298Other comprehensive income, net of taxes:Unrealized gain on securities, net
of reclassification adjustment (Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,334
    
    
    
    
    
    
    
    1,334Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,632Dividends paid to common stockholders
($0.05 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72
    )
    
    
    
    
    
    
    
    
    
    
    (72
    )Preferred stock accretion of discount and
issuance costs
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    (28
    )Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (125
    )
    
    
    
    
    
    
    
    
    
    
    (125
    )Stock-based compensation (Note 10)
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80Amortization of unearned compensation 
ESOP
    
    
    
    
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    172
    
    
    
    35Balance at June 30, 2009
    
    $
    9,504
    
    
    $
    1,640
    
    
    $
    4,314
    
    
    $
    33,466
    
    
    $
    (892
    )
    
    $
    (6,243
    )
    
    $
    41,789
 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 30,2009
    
    
    2008(In thousands)Cash flows from operating activities:Net income
    
    $
    298
    
    
    $
    401Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    207
    
    
    
    232Amortization of premiums
    
    
    59
    
    
    
    17Provision for loan losses
    
    
    50
    
    
    
    200Stock-based compensation and amortization of unearned compensation  ESOP
    
    
    115
    
    
    
    172Net losses from sales and write-downs of investment securities
    
    
    
    
    
    
    29Bank-owned life insurance income
    
    
    (75
    )
    
    
    (78
    )Gains (losses) on sales of loans held for sale
    
    
    (149
    )
    
    
    (13
    )Originations of loans held for sale
    
    
    (20,194
    )
    
    
    (1,628
    )Proceeds from sale of loans originated for sale
    
    
    19,816
    
    
    
    1,837Decrease in accrued interest receivable
    
    
    133
    
    
    
    96Decrease (increase) in other assets, net
    
    
    234
    
    
    
    (14
    )Increase in advance payments by borrowers for taxes and insurance
    
    
    (74
    )
    
    
    (52
    )(Decrease) increase in accrued expenses and other liabilities, net
    
    
    152
    
    
    
    87Net cash provided by operating activities
    
    
    572
    
    
    
    1,286Cash flows from investing activities:Loan principal collections (originations), net
    
    
    2,441
    
    
    
    (1,185
    )Principal payments on mortgage-backed securities
    
    
    3,170
    
    
    
    1,358Proceeds from sales of investment securities
    
    
    
    
    
    
    1,070Purchases of investment securities
    
    
    
    
    
    
    (3,002
    )Maturities and calls of investment securities
    
    
    1,500
    
    
    
    2,000Purchase of banking premises and equipment
    
    
    (47
    )
    
    
    (128
    )Net cash provided by investing activities
    
    
    7,064
    
    
    
    113Cash flows from financing activities:Net (decrease) increase in deposits
    
    
    (15,329
    )
    
    
    852Repayment of advances from FHLB of Boston
    
    
    (3,028
    )
    
    
    (7,027
    )Net proceeds (repayments) from (of) short-term borrowings
    
    
    1,010
    
    
    
    (141
    )Cash dividends paid
    
    
    (197
    )
    
    
    (295
    )Net cash used in financing activities
    
    
    (17,544
    )
    
    
    (6,611
    )Net decrease in cash and cash equivalents
    
    
    (9,908
    )
    
    
    (5,212
    )Cash and cash equivalents at beginning of period
    
    
    42,422
    
    
    
    17,725Cash and cash equivalents at end of period
    
    $
    32,514
    
    
    $
    12,513Cash paid during the period for:Interest
    
    $
    3,349
    
    
    $
    3,836Income taxes
    
    $
    
    
    
    $
    115Supplemental disclosure of non-cash investing and financing activities:Loans transferred to other real estate owned
    
    $
    77
    
    
    $
    Accretion of Series A preferred stock issuance costs
    
    $
    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, 2009
 (1) Basis of Presentation
  Consolidation of Variable Interest Entities  an
Interpretation of Accounting Research Bulletin No. 51,
  (2) Investments
  June 30, 2009Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(Dollars in Thousands)Corporate bonds
    
    $
    1,985
    
    
    $
    
    
    
    $
    (902
    )
    
    $
    1,083Mortgage-backed securities
    
    
    24,586
    
    
    
    552
    
    
    
    (17
    )
    
    
    25,121Trust preferred securities
    
    
    1,003
    
    
    
    
    
    
    
    (45
    )
    
    
    958Total debt securities
    
    
    27,574
    
    
    
    552
    
    
    
    (964
    )
    
    
    27,162Preferred stock
    
    
    3,773
    
    
    
    
    
    
    
    (912
    )
    
    
    2,861Common Stock
    
    
    3,159
    
    
    
    74
    
    
    
    (564
    )
    
    
    2,669Total
    
    $
    34,506
    
    
    $
    626
    
    
    $
    (2,440
    )
    
    $
    32,692
 5




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##### Table of Contents



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
    )
    
    
    3,258Total
    
    $
    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
    
    $
    
    
    
    $
    
    
    
    $
    1,083
    
    
    $
    (902
    )Mortgage-backed securities
    
    
    1,655
    
    
    
    (1
    )
    
    
    714
    
    
    
    (16
    )Trust Preferred Securities
    
    
    
    
    
    
    
    
    
    
    958
    
    
    
    (45
    )Preferred stock
    
    
    480
    
    
    
    (227
    )
    
    
    2,381
    
    
    
    (685
    )Common stock
    
    
    410
    
    
    
    (172
    )
    
    
    1,429
    
    
    
    (392
    )Total temporarily impaired securities
    
    $
    2,545
    
    
    $
    (400
    )
    
    $
    6,656
    
    
    $
    (2,040
    )
   6




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##### Table of Contents



Amortized
    
    
    Fair
    
    
    AnnualCost
    
    
    Value
    
    
    Yield(Dollars in Thousands)Due within one year
    
    $
    
    
    
    $
    
    
    
    
    
    %Due after one year but within five years
    
    
    6,882
    
    
    
    7,020
    
    
    
    4.20Due after five years but within ten years
    
    
    1,985
    
    
    
    1,083
    
    
    
    7.02Due after ten years
    
    
    18,707
    
    
    
    19,059
    
    
    
    5.61Total
    
    $
    27,574
    
    
    $
    27,162
  7




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##### Table of Contents



(3) Loans
  June 30,
    
    
    March 31,2009
    
    
    2009Real estate loans:Residential real estate (1-4 family)
    
    $
    191,508
    
    
    $
    183,327Commercial real estate
    
    
    242,014
    
    
    
    249,941Construction
    
    
    10,330
    
    
    
    14,089Home equity lines of credit
    
    
    8,025
    
    
    
    7,347Total real estate loans
    
    
    451,877
    
    
    
    454,704Commercial loans
    
    
    4,983
    
    
    
    4,834Consumer loans
    
    
    1,115
    
    
    
    1,132Total loans
    
    
    457,975
    
    
    
    460,670Less: allowance for loan losses
    
    
    (3,064
    )
    
    
    (3,191
    )Total loans, net
    
    $
    454,911
    
    
    $
    457,479
  Accounting by Creditors for Impairment of a Loan
   Three Months EndedJune 30,2009
    
    
    2008Balance at beginning of period
    
    $
    3,191
    
    
    $
    3,613Provision charged to expense
    
    
    50
    
    
    
    200Less: charge-offs
    
    
    (178
    )
    
    
    (6
    )Add: recoveries
    
    
    1
    
    
    
    2Balance at end of period
    
    $
    3,064
    
    
    $
    3,809
 8




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##### Table of Contents



(4) Deposits
  June 30,
    
    
    March 31,2009
    
    
    2009Demand deposit accounts
    
    $
    44,033
    
    
    $
    46,259NOW accounts
    
    
    29,534
    
    
    
    30,976Passbook and other savings accounts
    
    
    50,986
    
    
    
    50,737Money market deposit accounts
    
    
    75,283
    
    
    
    67,398Total non-certificate accounts
    
    
    199,836
    
    
    
    195,370Term deposit certificates:Certificates of $100,000 and above
    
    
    94,085
    
    
    
    85,497Certificates of less than $100,000
    
    
    65,824
    
    
    
    94,207Total term deposit certificates
    
    
    159,909
    
    
    
    179,704Total deposits
    
    $
    359,745
    
    
    $
    375,074
 (5) Subordinated Debentures
    9




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##### Table of Contents



(6) Other Comprehensive Income
   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
 For the Three Months EndedJune 30, 2008Before-Tax
    
    
    Tax
    
    
    After-TaxAmount
    
    
    Effect
    
    
    AmountUnrealized losses on securities:Unrealized net holding losses during period
    
    $
    (1,595
    )
    
    $
    (610
    )
    
    $
    (985
    )Less: reclassification adjustment for net
losses included in net income
    
    
    (29
    )
    
    
    (8
    )
    
    
    (21
    )Other comprehensive loss
    
    $
    (1,566
    )
    
    $
    (602
    )
    
    $
    (964
    )
 (7) Contingencies
 Legal Proceedings.
 (8) Subsequent Events
  (9) Earnings Per Share (EPS)
  10




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##### Table of Contents



Three Months EndedJune 30,2009
    
    
    2008(Amounts in thousands,except per share amounts)Net income as reported
    
    $
    298
    
    
    $
    401Less preferred dividends and accretion
    
    
    (153
    )
    
    
    Net income available to common stockholders
    
    $
    145
    
    
    $
    401Weighted average number of common shares outstanding
    
    
    1,640
    
    
    
    1,640Weighted average number of unallocated ESOP and
unvested restricted shares
    
    
    (194
    )
    
    
    (254
    )Weighted average number of common shares outstanding
used in calculation of basic earnings per share
    
    
    1,446
    
    
    
    1,386Incremental shares from the assumed exercise of dilutive
securities
    
    
    4
    
    
    
    Weighted average number of common shares outstanding
used in calculating diluted earnings per share
    
    
    1,450
    
    
    
    1,386Earnings per common shareBasic
    
    $
    0.10
    
    
    $
    0.29Diluted
    
    $
    0.10
    
    
    $
    0.29
  (10) Stock-Based Compensation
 Share-Based Payment
   11




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##### Table of Contents



Number of
    
    
    WeightedShares
    
    
    Exercise PriceOutstanding at March 31, 2009
    
    
    68,218
    
    
    $
    25.364Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (865
    )
    
    
    28.990Granted
    
    
    
    
    
    
    Outstanding at June 30, 2009
    
    
    67,353
    
    
    $
    25.317Exercisable at June 30, 2009
    
    
    61,353
    
    
    $
    24.742
 12




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##### Table of Contents



WeightedAverageRemaining
    
    
    WeightedNumber
    
    
    Contractual
    
    
    Average
    
    
    AggregateExercise
    
    
    of Shares
    
    
    Life
    
    
    Exercise
    
    
    IntrinsicPrice
    
    
    Outstanding
    
    
    (Years)
    
    
    Price
    
    
    Value (1)$
    16.625
    
    
    
    12,077
    (2)
    
    
    1.4
    
    
    $
    16.625
    
    
    
    20.250
    
    
    
    13,745
    (2)
    
    
    0.3
    
    
    
    20.250
    
    
    
    28.990
    
    
    
    31,531
    (2)
    
    
    5.6
    
    
    
    28.990
    
    
    
    31.200
    
    
    
    10,000
    (3)
    
    
    7.2
    
    
    
    31.200
    
    
    
    Average/Total
    
    $
    25.317
    
    
    
    67,353
    
    
    
    4.1
    
    
    $
    25.317
    
    
    $
    
 
 (1)
    
    Represents the total intrinsic value, based on the Companys closing stock price of $8.00 on
June 30, 2009, which would have been received by the option holders had all option holders
exercised their options as of that date. As of June 30, 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, 40% vested at June 30, 2009.  Number
    
    
    Weighted Averageof Shares
    
    
    Grant DateShares
    
    
    Fair ValueNon-vested at March 31, 2009
    
    
    29,400
    
    
    $
    31.20Granted
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Non-vested at June 30, 2009
    
    
    29,400
    
    
    $
    31.20
 (11) Bank-Owned Life Insurance
 Accounting
for Purchases of Life Insurance
 (12) Recent Accounting Pronouncements
 Effective Date of FASB Statement No. 157 Fair Value Measurements
 13




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##### Table of Contents



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




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##### 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
 Subsequent Events
 The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles
 15




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##### 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
    
    $
    2,669
    
    
    $
    30,023
    
    
    $
    
    
    
    $
    32,692Assets recorded at fair value on a nonrecurring basis:Impaired loans carried at fair value
    
    $
    
    
    
    $
    
    
    
    $
    1,384
    
    
    $
    1,384OREO
    
    $
    
    
    
    $
    
    
    
    $
    3,063
    
    
    $
    3,063
    16




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##### 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 June 30, 2009
    
    $
    
   Cash and Due from Banks 
 Short-Term Investments 
 Investments and Mortgage-Backed Securities 
 Loans and Loans Held for Sale  Accounting
by Creditors for Impairment of a Loan  an amendment of FASB Statements No. 5 and 15
 Other Real Estate Owned 
 17




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##### Table of Contents



Goodwill Goodwill and
Other Intangible Assets 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




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##### Table of Contents



June 30, 2009
    
    
    March 31, 2009Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueAssetsCash and due from banks
    
    $
    3,051
    
    
    $
    3,051
    
    
    $
    5,099
    
    
    $
    5,099Short-term investments
    
    
    29,463
    
    
    
    29,463
    
    
    
    37,323
    
    
    
    37,323Investment securities
    
    
    32,692
    
    
    
    32,692
    
    
    
    35,215
    
    
    
    35,215Loans held for sale
    
    
    3,735
    
    
    
    3,735
    
    
    
    3,208
    
    
    
    3,208Net loans
    
    
    454,911
    
    
    
    454,794
    
    
    
    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
    
    
    1,726
    
    
    
    1,726
    
    
    
    1,859
    
    
    
    1,859LiabilitiesDeposits
    
    $
    359,745
    
    
    $
    349,008
    
    
    $
    375,074
    
    
    $
    366,052Short-term borrowings
    
    
    2,024
    
    
    
    2,024
    
    
    
    1,014
    
    
    
    1,014Advances from FHLB of Boston
    
    
    141,155
    
    
    
    150,455
    
    
    
    144,583
    
    
    
    153,318Subordinated debentures
    
    
    11,341
    
    
    
    9,072
    
    
    
    11,341
    
    
    
    9,013Advance payments by borrowers for taxes
and insurance
    
    
    1,458
    
    
    
    1,458
    
    
    
    1,532
    
    
    
    1,532Accrued interest payable
    
    
    579
    
    
    
    579
    
    
    
    619
    
    
    
    619Off-Balance Sheet Instruments
    
    $
    44,345
    
    
    $
    44,345
    
    
    $
    43,378
    
    
    $
    43,378
 (14) Troubled Asset Relief Program Capital Purchase Program
   19




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##### Table of Contents



Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own
Stock Accounting for Convertible Debt and Debt Issued with
Stock Purchase Warrants Accounting for the
Issuance of Convertible Preferred Stock and Debt Equities with a Non-Deductible Conversion
Feature. Accounting for Increasing Rate Preferred.
 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



www.sec.gov Part IIItem 1A. Risk Factors
 General
      Critical Accounting Policies
  21




---



##### Table of Contents



Allowance for Loan Losses
 Other Real Estate Owned
 Fair Value of Investments
    Income Taxes.
 22




---



##### Table of Contents



Accounting for Goodwill and Impairment. Goodwill and Other
Intangible Assets e.g
 Comparison of Financial Condition at June 30, 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 June 30, 2009 and 2008
  Interest and Dividend Income.
 24




---



##### Table of Contents



Interest Expense
 25




---



##### Table of Contents



Three Months Ended June 30,2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    457,872
    
    
    $
    6,698
    
    
    
    5.85
    %
    
    $
    461,936
    
    
    $
    6,853
    
    
    
    5.93
    %Other loans
    
    
    6,162
    
    
    
    90
    
    
    
    5.84
    
    
    
    12,041
    
    
    
    190
    
    
    
    6.31Investment securities
    
    
    46,965
    
    
    
    380
    
    
    
    3.24
    
    
    
    64,072
    
    
    
    765
    
    
    
    4.78Short-term investments
    
    
    31,988
    
    
    
    20
    
    
    
    .25
    
    
    
    7,727
    
    
    
    57
    
    
    
    2.95Total interest-earning assets
    
    
    542,987
    
    
    
    7,188
    
    
    
    5.30
    
    
    
    545,776
    
    
    
    7,865
    
    
    
    5.76Allowance for loan losses
    
    
    (3,178
    )
    
    
    
    
    
    
    
    
    
    
    (3,614
    )Noninterest-earning assets
    
    
    28,508
    
    
    
    
    
    
    
    
    
    
    
    23,134Total assets
    
    $
    568,317
    
    
    
    
    
    
    
    
    
    
    $
    565,296Interest-bearing liabilities:Deposits
    
    $
    324,462
    
    
    
    1,538
    
    
    
    1.90
    
    
    $
    321,049
    
    
    
    2,007
    
    
    
    2.50Advances from FHLB of Boston
    
    
    144,498
    
    
    
    1,650
    
    
    
    4.57
    
    
    
    153,043
    
    
    
    1,763
    
    
    
    4.61Other borrowings
    
    
    12,318
    
    
    
    152
    
    
    
    4.94
    
    
    
    11,374
    
    
    
    170
    
    
    
    5.98Total interest-bearing liabilities
    
    
    481,278
    
    
    
    3,340
    
    
    
    2.78
    
    
    
    485,466
    
    
    
    3,940
    
    
    
    3.25Noninterest-bearing liabilities
    
    
    45,917
    
    
    
    
    
    
    
    
    
    
    
    41,075Total liabilities
    
    
    527,195
    
    
    
    
    
    
    
    
    
    
    
    526,541Stockholders equity
    
    
    41,122
    
    
    
    
    
    
    
    
    
    
    
    38,755Total liabilities and stockholders
equity
    
    $
    568,317
    
    
    
    
    
    
    
    
    
    
    $
    565,296Net interest and dividend income
    
    
    
    
    
    $
    3,848
    
    
    
    
    
    
    
    
    
    
    $
    3,925Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.52
    %
    
    
    
    
    
    
    
    
    
    
    2.51
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.83
    %
    
    
    
    
    
    
    
    
    
    
    2.88
    %
 Provision for Loan Losses. Accounting for
Contingencies
  26




---



##### Table of Contents



Noninterest Income.
 Noninterest Expenses
       27




---



##### Table of Contents



Income Taxes
  Liquidity and Capital Resources
    28




---



##### Table of Contents



At June 30, 2009RegulatoryThresholdFor WellActual
    
    CapitalizedCentral Bancorp (1):Tier 1 Leverage
    
    
    8.01
    %
    
    
    5.0
    %Tier 1 Risk-Based Ratio
    
    
    12.30
    %
    
    
    6.0
    %Total Risk-Based Ratio
    
    
    13.14
    %
    
    
    10.0
    %Central Co-operative Bank (1):Tier 1 Leverage
    
    
    6.87
    %
    
    
    5.0
    %Tier 1 Risk-Based Ratio
    
    
    10.52
    %
    
    
    6.0
    %Total Risk-Based Ratio
    
    
    11.36
    %
    
    
    10.0
    %
 Off-Balance Sheet Arrangements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   29




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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
 30




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##### Table of Contents



SIGNATURES
  CENTRAL BANCORP, INC.
              RegistrantAugust 14, 2009
    By:
    /s/ John D. DohertyJohn D. DohertyChairman and Chief Executive OfficerAugust 14, 2009
    By:
    /s/ Paul S. FeeleyPaul S. FeeleySenior Vice President, Treasurer and
Chief Financial Officer