##### 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, 2010
 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
    
    (I.R.S. Employer Identification No.)organization)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
    
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
 o þ
 Common Stock, $1.00 par value
    
    1,667,151Class
    
    Outstanding at November 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 September 30, 2010 and
March 31, 2010
    
    
    1Consolidated Statements of Income for the Three and Six Months Ended
September 30, 2010 and 2009
    
    
    2Consolidated Statements of Changes in Stockholders Equity for the Six
Months Ended September 30, 2010 and 2009
    
    
    3Consolidated Statements of Cash Flows for the Six Months Ended
September 30, 2010 and 2009
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4(T). Controls and Procedures
    
    
    31Part II. Other InformationItem 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4. [Removed and Reserved]
    
    
    32Item 5. Other Information
    
    
    32Item 6. Exhibits
    
    
    32SignaturesEX-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)
    
    September 30, 2010
    
    
    March 31, 2010ASSETSCash and due from banks
    
    $
    4,761
    
    
    $
    4,328Short-term investments
    
    
    33,741
    
    
    
    12,208Cash and cash equivalents
    
    
    38,502
    
    
    
    16,536Investment securities available for sale, at fair value (Note 2)
    
    
    27,007
    
    
    
    34,368Stock in Federal Home Loan Bank of Boston, at cost (Note 2)
    
    
    8,518
    
    
    
    8,518The Co-operative Central Bank Reserve Fund, at cost
    
    
    1,576
    
    
    
    1,576Total investments
    
    
    37,101
    
    
    
    44,462Loans held for sale, at fair value
    
    
    3,629
    
    
    
    392Loans (Note 3)
    
    
    428,040
    
    
    
    461,510Less allowance for loan losses
    
    
    (3,633
    )
    
    
    (3,038
    )Loans, net
    
    
    424,407
    
    
    
    458,472Accrued interest receivable
    
    
    1,604
    
    
    
    1,896Banking premises and equipment, net
    
    
    2,888
    
    
    
    2,759Deferred tax asset, net
    
    
    4,756
    
    
    
    4,681Other real estate owned
    
    
    
    
    
    
    60Goodwill, net
    
    
    2,232
    
    
    
    2,232Bank owned life insurance (Note 11)
    
    
    6,831
    
    
    
    6,686Other assets
    
    
    3,918
    
    
    
    4,268Total assets
    
    $
    525,868
    
    
    $
    542,444LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 4)
    
    $
    336,144
    
    
    $
    339,169Federal Home Loan Bank advances
    
    
    128,411
    
    
    
    143,469Subordinated debentures (Note 5)
    
    
    11,341
    
    
    
    11,341Advanced payments by borrowers for taxes and insurance
    
    
    1,739
    
    
    
    1,649Accrued expenses and other liabilities
    
    
    2,035
    
    
    
    1,703Total liabilities
    
    
    479,670
    
    
    
    497,331Commitments and Contingencies (Note 7)Stockholders equity:Preferred stock  Series A Cumulative Perpetual, $1.00 par value;
5,000,000 shares authorized; 10,000 shares issued and outstanding, with
a liquidation preference and redemption value of $10,063,889 at
September 30, 2010 and March 31, 2010
    
    
    9,648
    
    
    
    9,589Common stock $1.00 par value; 15,000,000 shares authorized; 1,667,151
shares issued and outstanding at September 30, 2010 and March 31, 2010
    
    
    1,667
    
    
    
    1,667Additional paid-in capital
    
    
    4,264
    
    
    
    4,291Retained income
    
    
    35,164
    
    
    
    34,482Accumulated other comprehensive income (Note 6)
    
    
    837
    
    
    
    810Unearned compensation  ESOP
    
    
    (5,382
    )
    
    
    (5,726
    )Total stockholders equity
    
    
    46,198
    
    
    
    45,113Total liabilities and stockholders equity
    
    $
    525,868
    
    
    $
    542,444
 See accompanying notes to unaudited consolidated financial statements.
 1




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Income
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,(In Thousands, Except Share and Per Share Data)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Interest and dividend income:Mortgage loans
    
    $
    6,211
    
    
    $
    6,714
    
    
    $
    12,677
    
    
    $
    13,412Other loans
    
    
    65
    
    
    
    86
    
    
    
    134
    
    
    
    176Investments
    
    
    316
    
    
    
    412
    
    
    
    619
    
    
    
    792Short-term investments
    
    
    13
    
    
    
    13
    
    
    
    20
    
    
    
    33Total interest and dividend income
    
    
    6,605
    
    
    
    7,225
    
    
    
    13,450
    
    
    
    14,413Interest expense:Deposits
    
    
    674
    
    
    
    1,262
    
    
    
    1,390
    
    
    
    2,800Advances from Federal Home Loan Bank of Boston
    
    
    1,254
    
    
    
    1,629
    
    
    
    2,611
    
    
    
    3,279Other borrowings
    
    
    142
    
    
    
    148
    
    
    
    279
    
    
    
    300Total interest expense
    
    
    2,070
    
    
    
    3,039
    
    
    
    4,280
    
    
    
    6,379Net interest and dividend income
    
    
    4,535
    
    
    
    4,186
    
    
    
    9,170
    
    
    
    8.034Provision for loan losses
    
    
    300
    
    
    
    200
    
    
    
    600
    
    
    
    250Net interest and dividend income after
provision for loan losses
    
    
    4,235
    
    
    
    3,986
    
    
    
    8,570
    
    
    
    7,784Noninterest income:Deposit service charges
    
    
    258
    
    
    
    248
    
    
    
    512
    
    
    
    487Net loss from sales and write-downs
of investment securities
    
    
    (226
    )
    
    
    
    
    
    
    (184
    )
    
    
    Net gains on sales of loans
    
    
    87
    
    
    
    32
    
    
    
    129
    
    
    
    181Bank owned life insurance
    
    
    75
    
    
    
    76
    
    
    
    149
    
    
    
    151Other
    
    
    97
    
    
    
    54
    
    
    
    213
    
    
    
    125Total noninterest income
    
    
    291
    
    
    
    410
    
    
    
    819
    
    
    
    944Noninterest expenses:Salaries and employee benefits
    
    
    2,306
    
    
    
    1,897
    
    
    
    4,493
    
    
    
    3,948Occupancy and equipment
    
    
    518
    
    
    
    552
    
    
    
    1,024
    
    
    
    1,088Data processing fees
    
    
    213
    
    
    
    205
    
    
    
    417
    
    
    
    415Professional fees
    
    
    255
    
    
    
    134
    
    
    
    497
    
    
    
    368FDIC deposit premiums
    
    
    147
    
    
    
    138
    
    
    
    287
    
    
    
    480Advertising and marketing
    
    
    33
    
    
    
    8
    
    
    
    97
    
    
    
    84Other expenses
    
    
    455
    
    
    
    551
    
    
    
    865
    
    
    
    1,025Total noninterest expenses
    
    
    3,927
    
    
    
    3,485
    
    
    
    7,680
    
    
    
    7,408Income before income taxes
    
    
    599
    
    
    
    911
    
    
    
    1,709
    
    
    
    1,320Provision for income taxes
    
    
    198
    
    
    
    307
    
    
    
    570
    
    
    
    419Net income
    
    $
    401
    
    
    $
    604
    
    
    $
    1,139
    
    
    $
    901Net income available to common shareholders
    
    $
    246
    
    
    $
    451
    
    
    $
    830
    
    
    $
    596Earnings per common share  basic (Note 9)
    
    $
    0.16
    
    
    $
    0.31
    
    
    $
    0.55
    
    
    $
    0.41Earnings per common share  diluted (Note 9)
    
    $
    0.15
    
    
    $
    0.30
    
    
    $
    0.52
    
    
    $
    0.40Weighted average common shares outstanding  basic
    
    
    1,500,497
    
    
    
    1,451,790
    
    
    
    1,497,808
    
    
    
    1,449,101Weighted average common and equivalent shares
outstanding diluted
    
    
    1,602,963
    
    
    
    1,498,326
    
    
    
    1,594,935
    
    
    
    1,473,465
 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)
(In Thousands, Except Share and Per Share Data)
 Number ofShares of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedSeries A
    
    
    Series A
    
    
    Shares of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    Unearned
    
    
    TotalPreferred
    
    
    Preferred
    
    
    Common
    
    
    Common
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Compensation-
    
    
    StockholdersStock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Income
    
    
    ESOP
    
    
    EquitySix Months Ended September 30, 2009Balance at March 31, 2009
    
    
    10,000
    
    
    $
    9,476
    
    
    
    1,639,951
    
    
    $
    1,640
    
    
    $
    4,371
    
    
    $
    33,393
    
    
    $
    (2,226
    )
    
    $
    (6,415
    )
    
    $
    40,239Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    901
    
    
    
    
    
    
    
    
    
    
    
    901Other comprehensive income, net of taxes:Unrealized gain on securities, net
of reclassification adjustment (Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,147
    
    
    
    
    
    
    
    2,147Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,048Dividends paid to common stockholders
($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (146
    )
    
    
    
    
    
    
    
    
    
    
    (146
    )Preferred stock accretion of discount and
issuance costs
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (250
    )
    
    
    
    
    
    
    
    
    
    
    (250
    )Stock-based compensation (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161Amortization of unearned compensation  ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (267
    )
    
    
    
    
    
    
    
    
    
    
    345
    
    
    
    78Balance at September 30, 2009
    
    
    10,000
    
    
    $
    9,531
    
    
    
    1,639,951
    
    
    $
    1,640
    
    
    $
    4,265
    
    
    $
    33,843
    
    
    $
    (79
    )
    
    $
    (6,070
    )
    
    $
    43,130Six Months Ended September 30, 2010Balance at March 31, 2010
    
    
    10,000
    
    
    $
    9,589
    
    
    
    1,667,151
    
    
    $
    1,667
    
    
    $
    4,291
    
    
    $
    34,482
    
    
    $
    810
    
    
    $
    (5,726
    )
    
    $
    45,113Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,139
    
    
    
    
    
    
    
    
    
    
    
    1,139Other comprehensive gain, net of
tax benefit of $21:Unrealized loss on securities, net
of reclassification adjustment (Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    27Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,166Dividends paid to common stockholders
($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148
    )
    
    
    
    
    
    
    
    
    
    
    (148
    )Preferred stock accretion of discount and
issuance costs
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    
    
    
    
    Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (250
    )
    
    
    
    
    
    
    
    
    
    
    (250
    )Stock-based compensation (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201Amortization of unearned compensation  ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (228
    )
    
    
    
    
    
    
    
    
    
    
    344
    
    
    
    116Balance at September 30, 2010
    
    
    10,000
    
    
    $
    9,648
    
    
    
    1,667,151
    
    
    $
    1,667
    
    
    $
    4,264
    
    
    $
    35,164
    
    
    $
    837
    
    
    $
    (5,382
    )
    
    $
    46,198
 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)
 Six Months EndedSeptember 30,(In thousands)
    
    2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    1,139
    
    
    $
    901Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    319
    
    
    
    406Amortization of premiums
    
    
    132
    
    
    
    129Provision for loan losses
    
    
    600
    
    
    
    250Deferred tax benefit
    
    
    (94
    )
    
    
    Stock-based compensation and amortization of unearned compensation  ESOP
    
    
    317
    
    
    
    239Net losses from sales and write-downs of investment securities
    
    
    184
    
    
    
    Bank-owned life insurance income
    
    
    (149
    )
    
    
    (151
    )Gain on sale of OREO
    
    
    (2
    )
    
    
    (12
    )Gains on sales of loans held for sale
    
    
    (129
    )
    
    
    (181
    )Originations of loans held for sale
    
    
    (15,262
    )
    
    
    (23,122
    )Proceeds from sale of loans originated for sale
    
    
    12,158
    
    
    
    25,779Decrease (increase) in accrued interest receivable
    
    
    292
    
    
    
    (16
    )Decrease in other assets, net
    
    
    350
    
    
    
    855Increase in advance payments by borrowers for taxes and insurance
    
    
    90
    
    
    
    198Increase (decrease) in accrued expenses and other liabilities, net
    
    
    332
    
    
    
    (457
    )Net cash provided by operating activities
    
    
    278
    
    
    
    4,842Cash flows from investing activities:Loan principal collections, net
    
    
    33,465
    
    
    
    1,293Principal payments on mortgage-backed securities
    
    
    5,089
    
    
    
    6,475Proceeds from sales of investment securities
    
    
    2,002
    
    
    
    Purchases of investment securities
    
    
    
    
    
    
    (5,351
    )Maturities and calls of investment securities
    
    
    
    
    
    
    1,500Proceeds from sales of OREO
    
    
    62
    
    
    
    2,715Purchase of banking premises and equipment
    
    
    (448
    )
    
    
    (61
    )Net cash provided by investing activities
    
    
    40,170
    
    
    
    6,571Cash flows from financing activities:Net decrease in deposits
    
    
    (3,025
    )
    
    
    (33,856
    )Repayment of advances from FHLB of Boston
    
    
    (15,058
    )
    
    
    (3,056
    )Repayments of short-term borrowings
    
    
    
    
    
    
    (873
    )Cash dividends paid
    
    
    (398
    )
    
    
    (396
    )Net cash used in financing activities
    
    
    18,481
    
    
    
    (38,181
    )Net increase (decrease) in cash and cash equivalents
    
    
    21,966
    
    
    
    (26,758
    )Cash and cash equivalents at beginning of period
    
    
    16,536
    
    
    
    42,422Cash and cash equivalents at end of period
    
    $
    38,502
    
    
    $
    15,654Cash paid during the period for:Interest
    
    $
    4,378
    
    
    $
    6,426Income taxes
    
    $
    125
    
    
    $
    Supplemental disclosure of non-cash investing and financing activities:Loans transferred to other real estate owned
    
    $
    
    
    
    $
    77Accretion of Series A preferred stock issuance costs
    
    $
    59
    
    
    $
    55
 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
 September 30, 2010
 (1) Basis of Presentation
  Consolidation of
Variable Interest Entities  an Interpretation of Accounting Research Bulletin No. 51, Transfers and Servicing
  (2) Investments
  September 30, 2010Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In Thousands)Government agency and government sponsored
agency mortgage-backed securities
    
    $
    19,036
    
    
    $
    823
    
    
    $
    (10
    )
    
    $
    19,849Trust preferred securities
    
    
    1,002
    
    
    
    80
    
    
    
    
    
    
    
    1,082Total debt securities
    
    
    20,038
    
    
    
    903
    
    
    
    (10
    )
    
    
    20,931Preferred stock
    
    
    3,141
    
    
    
    67
    
    
    
    (56
    )
    
    
    3,152Common stock
    
    
    2,780
    
    
    
    276
    
    
    
    (132
    )
    
    
    2,924Total
    
    $
    25,959
    
    
    $
    1,246
    
    
    $
    (198
    )
    
    $
    27,007
 5




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##### Table of Contents



March 31, 2010Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In Thousands)Corporate bonds
    
    $
    1,752
    
    
    $
    
    
    
    $
    
    
    
    $
    1,752Government agency and government sponsored
agency mortgage-backed securities
    
    
    24,253
    
    
    
    752
    
    
    
    (12
    )
    
    
    24,993Trust preferred securities
    
    
    1,002
    
    
    
    43
    
    
    
    
    
    
    
    1,045Total debt securities
    
    
    27,007
    
    
    
    795
    
    
    
    (12
    )
    
    
    27,790Preferred stock
    
    
    3,394
    
    
    
    56
    
    
    
    (195
    )
    
    
    3,255Common stock
    
    
    2,967
    
    
    
    508
    
    
    
    (152
    )
    
    
    3,323Total
    
    $
    33,368
    
    
    $
    1,359
    
    
    $
    (359
    )
    
    $
    34,368
   Less Than or Equal to
    
    
    Greater Than12 Months
    
    
    12 MonthsFair
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In Thousands)Government agency and government sponsored
agency mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    328
    
    
    $
    (10
    )Preferred stock
    
    
    
    
    
    
    
    
    
    
    963
    
    
    
    (56
    )Common stock
    
    
    731
    
    
    
    (71
    )
    
    
    491
    
    
    
    (61
    )Total temporarily impaired securities
    
    $
    731
    
    
    $
    (71
    )
    
    $
    1,782
    
    
    $
    (127
    )
    6




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##### Table of Contents



Amortized
    
    
    Fair
    
    
    AnnualCost
    
    
    Value
    
    
    Yield(Dollars in Thousands)Government agency and government sponsored
agency mortgage-backed securitiesDue after one year but within five years
    
    $
    3,996
    
    
    $
    4,118
    
    
    
    4.18
    %Due after five years but within ten years
    
    
    8
    
    
    
    8
    
    
    
    3.25Due after ten years
    
    
    15,032
    
    
    
    15,723
    
    
    
    5.11$
    19,036
    
    
    $
    19,849Trust preferred securities:Due after ten years
    
    $
    1,002
    
    
    $
    1,082
    
    
    
    7.78
    %Total
    
    $
    20,038
    
    
    $
    20,931
    7




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##### Table of Contents



(3) Loans
  September 30,
    
    
    March 31,2010
    
    
    2010Real estate loans:Residential real estate (1- 4 family)
    
    $
    198,438
    
    
    $
    217,053Commercial real estate
    
    
    215,607
    
    
    
    227,938Construction
    
    
    908
    
    
    
    2,722Home equity lines of credit
    
    
    8,572
    
    
    
    8,817Total real estate loans
    
    
    423,525
    
    
    
    456,530Commercial loans
    
    
    3,391
    
    
    
    4,037Consumer loans
    
    
    1,124
    
    
    
    943Total loans
    
    
    428,040
    
    
    
    461,510Less: allowance for loan losses
    
    
    (3,633
    )
    
    
    (3,038
    )Total loans, net
    
    $
    424,407
    
    
    $
    458,472
 Receivables
    8




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##### Table of Contents



At September 30,
    
    
    At March 31,2010
    
    
    2010Impaired loans with a valuation allowance
    
    $
    3,606
    
    
    $
    3,009Impaired loans without a valuation allowance
    
    
    15,004
    
    
    
    13,506Total impaired loans
    
    $
    18,610
    
    
    $
    16,515Specific valuation allowance related to impaired loans
    
    $
    1,094
    
    
    $
    354
  Three Months EndedSeptember 30,2010
    
    
    2009Balance at beginning of period
    
    $
    3,336
    
    
    $
    3,064Provision charged to expense
    
    
    300
    
    
    
    200Less: charge-offs
    
    
    (5
    )
    
    
    (548
    )Add: recoveries
    
    
    2
    
    
    
    3Balance at end of period
    
    $
    3,633
    
    
    $
    2,719
 Six Months EndedSeptember 30,2010
    
    
    2009Balance at beginning of period
    
    $
    3,038
    
    
    $
    3,191Provision charged to expense
    
    
    600
    
    
    
    250Less: charge-offs
    
    
    (7
    )
    
    
    (726
    )Add: recoveries
    
    
    2
    
    
    
    4Balance at end of period
    
    $
    3,633
    
    
    $
    2,719
 9




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##### Table of Contents



(4) Deposits
  September 30,
    
    
    March 31,2010
    
    
    2010Demand deposit accounts
    
    $
    42,850
    
    
    $
    41,959NOW accounts
    
    
    30,872
    
    
    
    29,358Passbook and other savings accounts
    
    
    54,198
    
    
    
    53,544Money market deposit accounts
    
    
    79,506
    
    
    
    79,745Total non-certificate accounts
    
    
    207,427
    
    
    
    204,606Term deposit certificates:Certificates of $100,000 and above
    
    
    50,349
    
    
    
    51,695Certificates of less than $100,000
    
    
    78,368
    
    
    
    82,868Total term deposit certificates
    
    
    128,717
    
    
    
    134,563Total deposits
    
    $
    336,144
    
    
    $
    339,169
 (5) Subordinated Debentures
    10




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##### Table of Contents



(6) Other Comprehensive Income
   For the Three Months Ended
    
    
    For the Three Months EndedSeptember 30, 2010
    
    
    September 30, 2009Before
    
    
    
    
    
    
    After
    
    
    Before
    
    
    
    
    
    
    AfterTax
    
    
    Tax
    
    
    Tax
    
    
    Tax
    
    
    Tax
    
    
    TaxAmount
    
    
    Effect
    
    
    Amount
    
    
    Amount
    
    
    Effect
    
    
    AmountUnrealized gains on securities:Unrealized net holding
gains during period
    
    $
    406
    
    
    $
    168
    
    
    $
    238
    
    
    $
    1,358
    
    
    $
    545
    
    
    $
    813Less: reclassification
adjustment for net
losses included in net
income
    
    
    (226
    )
    
    
    (93
    )
    
    
    (133
    )
    
    
    
    
    
    
    
    
    
    
    Other comprehensive gain
    
    $
    632
    
    
    $
    261
    
    
    $
    371
    
    
    $
    1,358
    
    
    $
    545
    
    
    $
    813
 For the Six Months Ended
    
    
    For the Six Months EndedSeptember 30, 2010
    
    
    September 30, 2009Before
    
    
    
    
    
    
    After
    
    
    Before
    
    
    
    
    
    
    AfterTax
    
    
    Tax
    
    
    Tax
    
    
    Tax
    
    
    Tax
    
    
    TaxAmount
    
    
    Effect
    
    
    Amount
    
    
    Amount
    
    
    Effect
    
    
    AmountUnrealized (losses) gains on securities:Unrealized net holding
losses during period
    
    $
    (136
    )
    
    $
    (57
    )
    
    $
    (79
    )
    
    $
    3,562
    
    
    $
    1,415
    
    
    $
    2,147Less: reclassification
adjustment for net
losses included in net
income
    
    
    (184
    )
    
    
    (78
    )
    
    
    (106
    )
    
    
    
    
    
    
    
    
    
    
    Other comprehensive gain
    
    $
    48
    
    
    $
    21
    
    
    $
    27
    
    
    $
    3,562
    
    
    $
    1,415
    
    
    $
    2,147
 11




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##### Table of Contents



(7) Contingencies
 Legal Proceedings.
 (8) Subsequent Events
   (9) Earnings Per Share (EPS)
   Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Amounts in thousands except
    
    
    (Amounts in thousands exceptper share amounts)
    
    
    per share amounts)Net income as reported
    
    $
    401
    
    
    $
    604
    
    
    $
    1,139
    
    
    $
    901Less preferred dividends and accretion
    
    
    (155
    )
    
    
    (153
    )
    
    
    (309
    )
    
    
    (305
    )Net income available to common stockholders
    
    $
    246
    
    
    $
    451
    
    
    $
    830
    
    
    $
    596Weighted average number of common shares
outstanding
    
    
    1,667,151
    
    
    
    1,639,951
    
    
    
    1,667,151
    
    
    
    1,639,951Weighted average number of unallocated ESOP shares
    
    
    (166,654
    )
    
    
    (188,161
    )
    
    
    (169,343
    )
    
    
    (190,850
    )Weighted average number of common shares
outstanding
used in calculation of basic earnings per share
    
    
    1,500,497
    
    
    
    1,451,790
    
    
    
    1,497,808
    
    
    
    1,449,101Incremental shares from the assumed exercise of
dilutive
securities
    
    
    102,467
    
    
    
    46,536
    
    
    
    97,127
    
    
    
    24,363Weighted average number of common shares
outstanding
used in calculating diluted earnings per share
    
    
    1,602,963
    
    
    
    1,498,326
    
    
    
    1,594,935
    
    
    
    1,473,465Earnings per common shareBasic
    
    $
    0.16
    
    
    $
    0.31
    
    
    $
    0.55
    
    
    $
    0.41Diluted
    
    $
    0.15
    
    
    $
    0.30
    
    
    $
    0.52
    
    
    $
    0.40
  12




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##### Table of Contents



(10) Stock-Based Compensation
 Compensation  Stock
Compensation
     Number of
    
    
    WeightedShares
    
    
    Exercise PriceOutstanding at March 31, 2010
    
    
    53,608
    
    
    $
    26.62Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (11,939
    )
    
    $
    23.40ExpiredOutstanding at September 30, 2010
    
    
    41,669
    
    
    $
    27.54Exercisable at September 30, 2010
    
    
    37,669
    
    
    $
    27.15
  13




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##### Table of Contents



WeightedAverageRemainingNumber
    
    
    Contractual
    
    
    AggregateExercise
    
    
    of Shares
    
    
    Life
    
    
    IntrinsicPrice
    
    
    Outstanding
    
    
    (Years)
    
    
    Value (1)$
    16.63
    
    
    
    6,684
    (2)
    
    
    0.2
    
    
    $
    28.99
    
    
    
    24,985
    (2)
    
    
    4.4
    
    
    
    31.20
    
    
    
    10,000
    (3)
    
    
    6.0
    
    
    
    Average/Total
    
    $
    27.54
    
    
    
    41,669
    
    
    
    4.2
    
    
    $
    
 
 (1)
    
    Represents the total intrinsic value, based on the Companys closing stock price of $12.46 on
September 30, 2010, which would have been received by the option holders had all option
holders exercised their options as of that date. As of September 30, 2010, the intrinsic
value of outstanding stock options and exercisable stock options was $0.(2)
    
    Fully vested and exercisable at the time of grant.(3)
    
    Subject to vesting over five years, 60% vested at September 30, 2010.  Number
    
    
    Weighted Averageof Restricted
    
    
    Grant DateShares
    
    
    Fair ValueNon-vested at March 31, 2010
    
    
    46,800
    
    
    $
    16.51Granted
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Non-vested at September 30, 2010
    
    
    46,800
    
    
    $
    16.51
 (11) Bank-Owned Life Insurance
 Investments  Other
 (12) Recent Accounting Pronouncements
 Accounting for Transfers of Financial Assets Transfers and Servicing,
 14




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##### Table of Contents



Amendments to
FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities,
 Improving
Disclosures About Fair Value Measurements
 Disclosures about the Credit Quality of Financing
Receivables Receivables
 (13) Fair Value Disclosures
 Fair Value Measurements and Disclosures
 Level 1 -
    
    Quoted prices for identical instruments in active marketsLevel 2 -
    
    Quoted prices for similar instruments in active or non-active
markets and model-derived valuations in which all significant
inputs and value drivers are observable in active marketsLevel 3 -
    
    Valuation derived from significant unobservable inputs
   15




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##### Table of Contents



Carrying Value (In Thousands)Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAt September 30, 2010Assets recorded at fair value on a recurring basis:Securities available for saleGovernment agency and government sponsored
agency mortgage-backed securities
    
    $
    
    
    
    $
    19,849
    
    
    $
    
    
    
    $
    19,849Trust preferred securities
    
    
    
    
    
    
    1,082
    
    
    
    
    
    
    
    1,082Preferred stock
    
    
    
    
    
    
    3,152
    
    
    
    
    
    
    
    3,152Common stock
    
    
    2,924
    
    
    
    
    
    
    
    
    
    
    
    2,924Assets recorded at fair value on a nonrecurring basis:Impaired loans carried at fair value
    
    
    
    
    
    
    
    
    
    
    5,357
    
    
    
    5,357
 Carrying Value (In Thousands)Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAt March 31, 2010Assets recorded at fair value on a recurring basis:Securities available for saleCorporate bonds
    
    $
    
    
    
    $
    1,752
    
    
    $
    
    
    
    $
    1,752Government agency and government sponsored
agency mortgage-backed securities
    
    
    
    
    
    
    24,993
    
    
    
    
    
    
    
    24,993Trust preferred securities
    
    
    
    
    
    
    1,045
    
    
    
    
    
    
    
    1,045Preferred stock
    
    
    
    
    
    
    3,255
    
    
    
    
    
    
    
    3,255Common stock
    
    
    3,323
    
    
    
    
    
    
    
    
    
    
    
    3,323Assets recorded at fair value on a nonrecurring basis:Impaired loans carried at fair value
    
    
    
    
    
    
    
    
    
    
    7,203
    
    
    
    7,203OREO
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    60
      Cash and Due from Banks 
 16




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##### Table of Contents



Short-Term Investments 
 Investment Securities Available for Sale 
 Loans and Loans Held for Sale 
 Accrued Interest Receivable 
 Stock in FHLBB 
 The Co-operative Central Bank Reserve Fund 
 Deposits 
 Advances from FHLBB 
 Subordinated Debentures 
 Short-Term Borrowings, Advance Payments by Borrowers for Taxes and Insurance and Accrued
Interest Payable 
 Off-Balance Sheet Instruments 
 17




---



##### Table of Contents



September 30, 2010
    
    
    March 31, 2010Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueAssetsCash and due from banks
    
    $
    4,761
    
    
    $
    4,761
    
    
    $
    4,328
    
    
    $
    4,328Short-term investments
    
    
    33,741
    
    
    
    33,741
    
    
    
    12,208
    
    
    
    12,208Investment securities
    
    
    27,007
    
    
    
    27,007
    
    
    
    34,368
    
    
    
    34,368Loans held for sale
    
    
    3,629
    
    
    
    3,629
    
    
    
    392
    
    
    
    392Net loans
    
    
    424,407
    
    
    
    424,371
    
    
    
    458,472
    
    
    
    458,557Stock in Federal Home Loan Bank of Boston
    
    
    8,518
    
    
    
    8,518
    
    
    
    8,518
    
    
    
    8,518The Co-operative Central Bank Reserve Fund
    
    
    1,576
    
    
    
    1,576
    
    
    
    1,576
    
    
    
    1,576Accrued interest receivable
    
    
    1,604
    
    
    
    1,604
    
    
    
    1,896
    
    
    
    1,896LiabilitiesDeposits
    
    $
    336,144
    
    
    $
    336,906
    
    
    $
    339,169
    
    
    $
    329,749Advances from FHLB of Boston
    
    
    128,411
    
    
    
    140,118
    
    
    
    143,469
    
    
    
    150,949Subordinated debentures
    
    
    11,341
    
    
    
    8,160
    
    
    
    11,341
    
    
    
    8,226Advance payments by borrowers for taxes and insurance
    
    
    1,739
    
    
    
    1,739
    
    
    
    1,649
    
    
    
    1,649Accrued interest payable
    
    
    424
    
    
    
    424
    
    
    
    517
    
    
    
    517Off-Balance Sheet Instruments
    
    $
    22,822
    
    
    $
    22,822
    
    
    $
    27,257
    
    
    $
    27,257
 (14) Troubled Asset Relief Program Capital Purchase Program
    18




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##### Table of Contents



Derivatives and
Hedging Debt Equity
 Expected life in years
    
    
    10.00Expected volatility
    
    
    54.76
    %Dividend yield
    
    
    3.00
    %Risk-free interest rate
    
    
    2.67
    %
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Forward-Looking Statements
  19




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##### Table of Contents



www.sec.gov
 General
      Critical Accounting Policies
  Allowance for Loan Losses
 20




---



##### Table of Contents



Receivables Contingencies
 Fair Value of Other Real Estate Owned
 Fair Value of Investments
    Income Taxes.
 Accounting for Goodwill and Impairment. Intangibles  Goodwill and Other
 21




---



##### Table of Contents



e.g
 Stock-Based Compensation. Compensation-Stock Compensation
   Comparison of Financial Condition at September 30, 2010 and March 31, 2010
   22




---



##### Table of Contents



Comparison of Operating Results for the Quarters Ended September 30, 2010 and
2009  Provision for Loan Losses.
       Bank-Owned Life Insurance
    23




---



##### Table of Contents



Comparison of Operating Results for the Quarters Ended September 30, 2010 and 2009
  Interest and Dividend Income.
 Interest Expense
 24




---



##### Table of Contents



Three Months Ended September 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    437,772
    
    
    $
    6,211
    
    
    
    5.68
    %
    
    $
    455,760
    
    
    $
    6,714
    
    
    
    5.89
    %Other loans
    
    
    4,457
    
    
    
    65
    
    
    
    5.83
    
    
    
    5,881
    
    
    
    86
    
    
    
    5.85Investment securities
    
    
    30,118
    
    
    
    316
    
    
    
    4.20
    
    
    
    45,171
    
    
    
    412
    
    
    
    4.69Federal Home Loan Bank Stock
    
    
    8,518
    
    
    
    
    
    
    
    
    
    
    
    8,518
    
    
    
    
    
    
    
    Short-term investments
    
    
    19,981
    
    
    
    13
    
    
    
    0.26
    
    
    
    19,573
    
    
    
    13
    
    
    
    0.27Total interest-earning assets
    
    
    500,868
    
    
    
    6,605
    
    
    
    5.27
    
    
    
    524,903
    
    
    
    7,225
    
    
    
    5.51Allowance for loan losses
    
    
    (3,403
    )
    
    
    
    
    
    
    
    
    
    
    (3,092
    )Noninterest-earning assets
    
    
    27,707
    
    
    
    
    
    
    
    
    
    
    
    30,314Total assets
    
    $
    525,150
    
    
    
    
    
    
    
    
    
    
    $
    552,125Interest-bearing liabilities:Deposits
    
    $
    293,220
    
    
    
    674
    
    
    
    0.92
    
    
    $
    311,074
    
    
    
    1,262
    
    
    
    1.62Advances from FHLB of Boston
    
    
    130,120
    
    
    
    1,254
    
    
    
    3.85
    
    
    
    141,537
    
    
    
    1,629
    
    
    
    4.60Other borrowings
    
    
    11,341
    
    
    
    142
    
    
    
    5.01
    
    
    
    12,541
    
    
    
    148
    
    
    
    4.72Total interest-bearing liabilities
    
    
    434,681
    
    
    
    2,070
    
    
    
    1.90
    
    
    
    465,152
    
    
    
    3,039
    
    
    
    2.61Noninterest-bearing liabilities
    
    
    44,618
    
    
    
    
    
    
    
    
    
    
    
    44,403Total liabilities
    
    
    479,299
    
    
    
    
    
    
    
    
    
    
    
    509,555Stockholders equity
    
    
    45,851
    
    
    
    
    
    
    
    
    
    
    
    42,570Total liabilities and stockholders
equity
    
    $
    525,150
    
    
    
    
    
    
    
    
    
    
    $
    552,125Net interest and dividend income
    
    
    
    
    
    $
    4,535
    
    
    
    
    
    
    
    
    
    
    $
    4,186Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.37
    %
    
    
    
    
    
    
    
    
    
    
    2.90
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.62
    %
    
    
    
    
    
    
    
    
    
    
    3.19
    %
 Provision for Loan Losses.
  25




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Noninterest Income.
 Noninterest Expenses
        26




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##### Table of Contents



Income Taxes
 Comparison of Operating Results for the Six Months Ended September 30, 2010 and 2009
  Interest and Dividend Income.
 Interest Expense.
 27




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Six Months Ended September 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    444,378
    
    
    $
    12,677
    
    
    
    5.71
    %
    
    $
    453,819
    
    
    $
    13,412
    
    
    
    5.91
    %Other loans
    
    
    4,605
    
    
    
    134
    
    
    
    5.82
    
    
    
    6,021
    
    
    
    176
    
    
    
    5.85Investment securities
    
    
    31,821
    
    
    
    619
    
    
    
    3.89
    
    
    
    35,233
    
    
    
    792
    
    
    
    4.50Federal Home Loan Bank Stock
    
    
    8,518
    
    
    
    
    
    
    
    
    
    
    
    8,518
    
    
    
    
    
    
    
    Short-term investments
    
    
    16,536
    
    
    
    20
    
    
    
    0.24
    
    
    
    25,780
    
    
    
    33
    
    
    
    0.26Total interest-earning assets
    
    
    505,869
    
    
    
    13,450
    
    
    
    5.32
    
    
    
    529,371
    
    
    
    14,413
    
    
    
    5.45Allowance for loan losses
    
    
    (3,272
    )
    
    
    
    
    
    
    
    
    
    
    (3,135
    )Noninterest-earning assets
    
    
    27,825
    
    
    
    
    
    
    
    
    
    
    
    33,941Total assets
    
    $
    530,422
    
    
    
    
    
    
    
    
    
    
    $
    560,177Interest-bearing liabilities:Deposits
    
    $
    293,588
    
    
    
    1,390
    
    
    
    .95
    
    
    $
    317,731
    
    
    
    2,800
    
    
    
    1.76Advances from FHLB of Boston
    
    
    134,071
    
    
    
    2,611
    
    
    
    3.89
    
    
    
    143,009
    
    
    
    3,279
    
    
    
    4.59Other borrowings
    
    
    11,341
    
    
    
    279
    
    
    
    4.92
    
    
    
    12,431
    
    
    
    300
    
    
    
    4.83Total interest-bearing liabilities
    
    
    439,000
    
    
    
    4,280
    
    
    
    1.95
    
    
    
    473,171
    
    
    
    6,379
    
    
    
    2.70Noninterest-bearing liabilities
    
    
    45,809
    
    
    
    
    
    
    
    
    
    
    
    45,142Total liabilities
    
    
    484,809
    
    
    
    
    
    
    
    
    
    
    
    518,313Stockholders equity
    
    
    45,613
    
    
    
    
    
    
    
    
    
    
    
    41,864Total liabilities and stockholders
equity
    
    $
    530,422
    
    
    
    
    
    
    
    
    
    
    $
    560,177Net interest and dividend income
    
    
    
    
    
    $
    9,170
    
    
    
    
    
    
    
    
    
    
    $
    8,034Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.37
    %
    
    
    
    
    
    
    
    
    
    
    2.75
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.63
    %
    
    
    
    
    
    
    
    
    
    
    3.04
    %
 Provision for Loan Losses.
  28




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Noninterest Income.
 Noninterest Expenses.
      Income Taxes
 29




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Liquidity and Capital Resources
   
  30




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##### Table of Contents



At September 30, 2010RegulatoryThresholdFor WellActual
    
    
    CapitalizedCentral Bancorp:Tier 1 Leverage
    
    
    9.88
    %
    
    
    5.0
    %Tier 1 Risk-Based Ratio
    
    
    15.61
    %
    
    
    6.0
    %Total Risk-Based Ratio
    
    
    16.71
    %
    
    
    10.0
    %Central Co-operative Bank:Tier 1 Leverage
    
    
    8.75
    %
    
    
    5.0
    %Tier 1 Risk-Based Ratio
    
    
    13.81
    %
    
    
    6.0
    %Total Risk-Based Ratio
    
    
    14.94
    %
    
    
    10.0
    %
 Off-Balance Sheet Arrangements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4(T). Controls and Procedures
  31




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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. [Removed and Reserved]
 
 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
 32




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##### Table of Contents



SIGNATURES
  CENTRAL BANCORP, INC.
RegistrantNovember 12, 2010
    
    By:
    
    /s/  John D. DohertyJohn D. DohertyChairman and Chief Executive Officer(Principal Executive Officer)November 12, 2010
    
    By:
    
    /s/  Paul S. FeeleyPaul S. FeeleySenior Vice President, Treasurer andChief Financial Officer(Principal Financial and Accounting Officer)