##### 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, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND 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)
 N/A  (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 þ o
 o þ
 Common Stock, $1.00 par value
    
    1,590,181Class
    
    Outstanding at August 9, 2005




---



CENTRAL BANCORP, INC.
 Table of Contents
 Page No.Part I. Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Statements of Financial Condition at June 30, 2005 and
March 31, 2005
    
    
    1Consolidated Statements of Income for the three months ended
June 30, 2005 and 2004
    
    
    2Consolidated Statements of Changes in Stockholders Equity for the three
months ended June 30, 2005
    
    
    3Consolidated Statements of Cash Flows for the three months ended
June 30, 2005 and 2004
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    14Item 4. Controls and Procedures
    
    
    15Part II. Other InformationItem 1. Legal Proceedings
    
    
    15Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 3. Defaults Upon Senior Securities
    
    
    15Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15Item 5. Other Information
    
    
    15Item 6. Exhibits
    
    
    15SignaturesEX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32 SECTION 902 CERTIFICATION OF CEO AND CFO




---



##### Table of Contents



Part I. Financial Information
 
   
 
 June 30,
    
    March 31,(Dollars in Thousands)
    
    2005
    
    2005ASSETSCash and due from banks
    
    $
    5,631
    
    
    $
    6,158Short-term investments
    
    
    678
    
    
    
    225Cash and cash equivalents
    
    
    6,309
    
    
    
    6,383Certificate of deposit
    
    
    606
    
    
    
    606Investment securities available for sale (amortized cost of $105,115
at June 30, 2005 and $108,690 at March 31, 2005)
    
    
    105,518
    
    
    
    108,616Stock in Federal Home Loan Bank of Boston, at cost
    
    
    8,300
    
    
    
    8,300The Co-operative Central Bank Reserve Fund
    
    
    1,576
    
    
    
    1,576Total investments
    
    
    115,394
    
    
    
    118,492Loans held for sale
    
    
    2,935
    
    
    
    2,221Loans (Note 2)
    
    
    399,746
    
    
    
    386,382Less allowance for loan losses
    
    
    3,731
    
    
    
    3,681Net loans
    
    
    396,015
    
    
    
    382,701Accrued interest receivable
    
    
    2,324
    
    
    
    2,444Banking premises and equipment, net
    
    
    2,975
    
    
    
    2,807Deferred tax asset, net
    
    
    1,475
    
    
    
    1,639Goodwill, net
    
    
    2,232
    
    
    
    2,232Other assets
    
    
    1,598
    
    
    
    1,546Total assets
    
    $
    531,863
    
    
    $
    521,071LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 3)
    
    $
    339,488
    
    
    $
    333,215Short-term borrowings
    
    
    
    
    
    
    141Federal Home Loan Bank advances (Note 4)
    
    
    141,800
    
    
    
    138,135Subordinated debenture
    
    
    5,258
    
    
    
    5,258ESOP Loan
    
    
    2,824
    
    
    
    2,921Advance payments by borrowers for taxes and insurance
    
    
    1,183
    
    
    
    1,168Accrued expenses and other liabilities
    
    
    2,087
    
    
    
    1,994Total liabilities
    
    
    492,640
    
    
    
    482,832Commitments 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;
2,032,609 shares issued at June 30, 2005 and 2,031,026
shares issued at March 31, 2005
    
    
    2,033
    
    
    
    2,031Additional paid-in capital
    
    
    12,905
    
    
    
    12,883Retained income
    
    
    39,265
    
    
    
    38,728Treasury stock (442,428 shares at June 30, 2005 and
at March 31, 2005), at cost
    
    
    (9,924
    )
    
    
    (9,907
    )Accumulated other comprehensive income (loss) (Note 5)
    
    
    255
    
    
    
    (56
    )Unearned compensation  ESOP
    
    
    (5,311
    )
    
    
    (5,440
    )Total stockholders equity
    
    
    39,223
    
    
    
    38,239Total liabilities and stockholders equity
    
    $
    531,863
    
    
    $
    521,071
  1




---



##### Table of Contents



Three Months EndedJune 30, 2005,2005
    
    2004Interest and dividend income:Mortgage loans
    
    $
    5,885
    
    
    $
    5,383Other loans
    
    
    103
    
    
    
    79Short-term investments
    
    
    13
    
    
    
    64Investments
    
    
    1,367
    
    
    
    1,088Total interest and dividend income
    
    
    7,368
    
    
    
    6,614Interest expense:Deposits
    
    
    1,352
    
    
    
    1,150Advances from Federal Home Loan Bank of Boston
    
    
    1,724
    
    
    
    1,718Other borrowings
    
    
    133
    
    
    
    39Total interest expense
    
    
    3,209
    
    
    
    2,907Net interest and dividend income
    
    
    4,159
    
    
    
    3,707Provision for loan losses
    
    
    50
    
    
    
    50Net interest and dividend income after
provision for loan losses
    
    
    4,109
    
    
    
    3,657Non-interest income:Deposit service charges
    
    
    232
    
    
    
    145Net gains from sales of investment securities
    
    
    117
    
    
    
    134Gain on sales of loans
    
    
    55
    
    
    
    63Other income
    
    
    90
    
    
    
    106Total non-interest income
    
    
    494
    
    
    
    448Non-interest expenses:Salaries and employee benefits
    
    
    2,066
    
    
    
    1,903Occupancy and equipment
    
    
    382
    
    
    
    322Data processing service fees
    
    
    238
    
    
    
    280Professional fees
    
    
    207
    
    
    
    268Advertising and marketing
    
    
    183
    
    
    
    138Other expenses
    
    
    439
    
    
    
    483Total non-interest expenses
    
    
    3,515
    
    
    
    3,394Income before income taxes
    
    
    1,088
    
    
    
    711Provision for income taxes (Note 6)
    
    
    382
    
    
    
    257Net income
    
    $
    706
    
    
    $
    454Earnings per common share  basic (Note 8)
    
    $
    0.50
    
    
    $
    0.29Earnings per common share  diluted (Note 8)
    
    $
    0.49
    
    
    $
    0.29Weighted average common shares outstanding  basic
    
    
    1,423
    
    
    
    1,559Weighted average common and equivalent shares
outstanding  diluted
    
    
    1,431
    
    
    
    1,573
  2




---



##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    Other
    
    Unearned
    
    TotalCommon
    
    Paid-In
    
    Retained
    
    Treasury
    
    Comprehensive
    
    Compensation
    
    Stockholders(In Thousands)
    
    Stock
    
    Capital
    
    Income
    
    Stock
    
    Income
    
    ESOP
    
    EquityThree Months Ended June 30, 2005Balance at March 31, 2005
    
    $
    2,031
    
    
    $
    12,883
    
    
    $
    38,728
    
    
    $
    (9,907
    )
    
    $
    (56
    )
    
    $
    (5,440
    )
    
    $
    38,239Net income
    
    
    
    
    
    
    
    
    
    
    706
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    706Other comprehensive income net of tax:Unrealized gain on securities, net
of reclassification adjustment (Note
5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    311
    
    
    
    
    
    
    
    311Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,017Proceeds from exercise
of stock options (1,583 shares)
    
    
    2
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Tax benefit of stock option exercises
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Director deferred compensation
transactions
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    (2
    )Dividends paid ($0.12 per share)
    
    
    
    
    
    
    
    
    
    
    (169
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (169
    )Amortization
of unearned compensation 
ESOP
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129
    
    
    
    108Balance at June 30, 2005
    
    $
    2,033
    
    
    $
    12,905
    
    
    $
    39,265
    
    
    $
    (9,924
    )
    
    $
    255
    
    
    $
    (5,311
    )
    
    $
    39,223
  3




---



##### Table of Contents



Three Months EndedJune 30,(In thousands)
    
    2005
    
    2004Cash flows from operating activities:Net income
    
    $
    706
    
    
    $
    454Adjustments to reconcile net income to net cash provided
by (used in) operating activitiesDepreciation and amortization
    
    
    137
    
    
    
    92Amortization of premiums
    
    
    38
    
    
    
    51Provision for loan losses
    
    
    50
    
    
    
    50Stock-based compensation
    
    
    108
    
    
    
    112Net gains from sales and write-downs of
investment securities
    
    
    (117
    )
    
    
    (134
    )Gain on sales of loans held for sale
    
    
    (55
    )
    
    
    (63
    )Originations of loans held for sale
    
    
    (5,474
    )
    
    
    (5,818
    )Proceeds from sale of loans originated for sale
    
    
    4,815
    
    
    
    5,755Decrease in accrued interest receivable
    
    
    120
    
    
    
    95(Increase) decrease in other assets, net
    
    
    (53
    )
    
    
    87Increase (decrease) in advance payments by borrowers for taxes and insurance
    
    
    15
    
    
    
    (87
    )Increase in accrued expenses and other liabilities, net
    
    
    93
    
    
    
    140Net cash provided by operating activities
    
    
    383
    
    
    
    734Cash flows from investing activities:(Increase) decrease in loans
    
    
    (13,364
    )
    
    
    1,769Principal payments on mortgage-backed securities
    
    
    2,510
    
    
    
    1,516Purchases of investment securities
    
    
    (1,695
    )
    
    
    (26,844
    )Maturities and calls of investment securities
    
    
    1,000
    
    
    
    2,971Proceeds from sales of investment securities
    
    
    1,838
    
    
    
    593Purchase of banking premises and equipment
    
    
    (305
    )
    
    
    (125
    )Net cash used in investing activities
    
    
    (10,016
    )
    
    
    (20,120
    )Cash flows from financing activities:Increase in deposits
    
    
    6,273
    
    
    
    18,247Proceeds from advances from FHLB of Boston
    
    
    49,000
    
    
    
    Repayment of advances from FHLB of Boston
    
    
    (41,000
    )
    
    
    (3,000
    )Increase (decrease) in short-term borrowings
    
    
    (4,476
    )
    
    
    83Repayment of ESOP loan
    
    
    (97
    )
    
    
    (97
    )Proceeds from exercise of stock options
    
    
    25
    
    
    
    Tax benefit from exercise of stock option
    
    
    5
    
    
    
    Dividends paid
    
    
    (169
    )
    
    
    (186
    )Net directors deferred compensation
    
    
    (2
    )
    
    
    11Net cash provided by financing activities
    
    
    9,559
    
    
    
    15,058Net decrease in cash and cash equivalents
    
    
    (74
    )
    
    
    (4,328
    )Cash and cash equivalents at beginning of year
    
    
    6,383
    
    
    
    34,337Cash and cash equivalents at end of period
    
    $
    6,309
    
    
    $
    30,009Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    3,218
    
    
    $
    2,901Income taxes
    
    $
    278
    
    
    $
    25
  4




---



##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Notes to Unaudited Consolidated Financial Statements
June 30, 2005
 (1) Basis of Presentation
    (2) Loans
  June 30,
    
    March 31,2005
    
    2005Real estate loans:Residential real estate
    
    $
    163,198
    
    
    $
    159,838Commercial real estate
    
    
    200,640
    
    
    
    194,326Construction
    
    
    20,047
    
    
    
    17,187Home equity lines of credit
    
    
    9,278
    
    
    
    9,194Total real estate loans
    
    
    393,163
    
    
    
    380,545Commercial loans
    
    
    5,578
    
    
    
    4,786Consumer loans
    
    
    1,005
    
    
    
    1,051Total loans
    
    
    399,746
    
    
    
    386,382Less: allowance for loan losses
    
    
    (3,731
    )
    
    
    (3,681
    )Total loans, net
    
    $
    396,015
    
    
    $
    382,701
   5




---



##### Table of Contents



CENTRAL
BANCORP, INC. AND SUBSIDIARY
 Notes to Unaudited Consolidated Financial Statements
June 30, 2005
  Three Months EndedJune 30,2005
    
    2004Balance at beginning of period
    
    $
    3,681
    
    
    $
    3,537Provision charged to expense
    
    
    50
    
    
    
    50Less: charge-offs
    
    
    (10
    )
    
    
    Add: recoveries
    
    
    10
    
    
    
    12Balance at end of period
    
    $
    3,731
    
    
    $
    3,599
 (3) Deposits
  June 30, 2005
    
    March 31, 2005Demand deposit accounts
    
    $
    39,622
    
    
    $
    33,982NOW accounts
    
    
    39,169
    
    
    
    39,205Passbook and other savings accounts
    
    
    72,390
    
    
    
    74,316Money market deposit accounts
    
    
    48,473
    
    
    
    50,051Total non certificate accounts
    
    
    199,654
    
    
    
    197,554Term deposit certificatesCertificates of $100,000 and above
    
    
    47,892
    
    
    
    47,270Certificates less than $100,000
    
    
    91,942
    
    
    
    88,391Total term deposit certificates
    
    
    139,834
    
    
    
    135,661Total deposits
    
    $
    339,488
    
    
    $
    333,215
 (4) Subordinated Debenture
   6




---



##### Table of Contents



CENTRAL
BANCORP, INC. AND SUBSIDIARY
 Notes to Unaudited Consolidated Financial Statements
June 30, 2005
  (5) Other Comprehensive Income (Loss)
   For the Three Months EndedJune 30, 2005Before-Tax
    
    Tax
    
    After-TaxAmount
    
    Effect
    
    AmountUnrealized gains on securities:Unrealized net holding gains during period
    
    $
    360
    
    
    $
    123
    
    
    $
    237Add: reclassification adjustment for net
gains included in net income
    
    
    117
    
    
    
    43
    
    
    
    74Other comprehensive income
    
    $
    477
    
    
    $
    166
    
    
    $
    311
 For the Three Months EndedJune 30, 2004Before-Tax
    
    Tax
    
    After-TaxAmount
    
    Effect
    
    AmountUnrealized gains on securities:Unrealized net holding losses during period
    
    $
    (1,755
    )
    
    $
    (632
    )
    
    $
    (1,123
    )Less: reclassification adjustment for net
gains included in net income
    
    
    134
    
    
    
    46
    
    
    
    88Other comprehensive loss
    
    $
    (1,889
    )
    
    $
    (678
    )
    
    $
    (1,211
    )
 (6) Contingencies
 Legal Proceedings
  7




---



##### Table of Contents



CENTRAL
BANCORP, INC. AND SUBSIDIARY
 Notes to Unaudited Consolidated Financial Statements
June 30, 2005
 (7) Subsequent Event
  (8) Earnings per Share (EPS)
   2005
    
    2004(Amounts in thousands, except per share amounts)Net income available to common shareholders
    
    $
    706
    
    
    $
    454Weighted average number of common shares outstanding
    
    
    1,590
    
    
    
    1,665Weighted average number of unallocated ESOP shares
    
    
    (167
    )
    
    
    (106
    )Weighted average number of common shares outstanding
used in calculation of basic earnings per share
    
    
    1,423
    
    
    
    1,559Incremental shares from the assumed exercise of dilutive
stock options
    
    
    8
    
    
    
    14Weighted average number of common shares outstanding
used in calculating diluted earnings per share
    
    
    1,431
    
    
    
    1,573Earnings per shareBasic
    
    $
    .50
    
    
    $
    .29Diluted
    
    $
    .49
    
    
    $
    .29
 (9) Recent Accounting Pronouncements
  8




---



##### Table of Contents



9




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
   Critical Accounting Policies
   Comparison of Financial Condition at June 30, 2005 and March 31, 2005
  10




---



##### Table of Contents



Comparison of Operating Results for the Quarters Ended June 30, 2005 and 2004
  Net Interest Income.
  Interest Income.
 Interest Expense.
 11




---



##### Table of Contents



Three Months Ended June 30,2005
    
    2004Average
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    AverageBalance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    389,546
    
    
    $
    5,885
    
    
    
    6.04
    %
    
    $
    351,421
    
    
    $
    5,383
    
    
    
    6.13
    %Other loans
    
    
    6,149
    
    
    
    103
    
    
    
    6.70
    
    
    
    4,949
    
    
    
    79
    
    
    
    6.39Investment securities
    
    
    117,287
    
    
    
    1,367
    
    
    
    4.66
    
    
    
    94,092
    
    
    
    1,088
    
    
    
    4.63Short-term investments
    
    
    2,496
    
    
    
    13
    
    
    
    2.08
    
    
    
    27,217
    
    
    
    64
    
    
    
    0.94Total interest-earning assets
    
    
    515,478
    
    
    
    7,368
    
    
    
    5.72
    
    
    
    477,679
    
    
    
    6,614
    
    
    
    5.54Allowance for loan losses
    
    
    (3,697
    )
    
    
    
    
    
    
    
    
    
    
    (3,557
    )Noninterest-earning assets
    
    
    16,628
    
    
    
    
    
    
    
    
    
    
    
    19,000Total assets
    
    $
    528,409
    
    
    
    
    
    
    
    
    
    
    $
    493,122Interest-bearing liabilities:Deposits
    
    $
    299,158
    
    
    
    1,352
    
    
    
    1.81
    
    
    $
    272,264
    
    
    
    1,150
    
    
    
    1.69Advances from FHLB of Boston
    
    
    143,053
    
    
    
    1,724
    
    
    
    4.82
    
    
    
    141,067
    
    
    
    1,718
    
    
    
    4.87Other borrowings
    
    
    9,751
    
    
    
    133
    
    
    
    5.46
    
    
    
    3,955
    
    
    
    39
    
    
    
    3.94Total interest-bearing liabilities
    
    
    451,962
    
    
    
    3,209
    
    
    
    2.84
    
    
    
    417,286
    
    
    
    2,907
    
    
    
    2.79Noninterest-bearing liabilities
    
    
    37,793
    
    
    
    
    
    
    
    
    
    
    
    32,803Total liabilities
    
    
    489,755
    
    
    
    
    
    
    
    
    
    
    
    450,089Stockholders equity
    
    
    38,654
    
    
    
    
    
    
    
    
    
    
    
    43,033Total liabilities and
stockholders equity
    
    $
    528,409
    
    
    
    
    
    
    
    
    
    
    $
    493,122Net interest and dividend income
    
    
    
    
    
    $
    4,159
    
    
    
    
    
    
    
    
    
    
    $
    3,707Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.88
    %
    
    
    
    
    
    
    
    
    
    
    2.75
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.23
    %
    
    
    
    
    
    
    
    
    
    
    3.10
    %
 Provisions for Loan Losses.
  Non-interest Income.
 12




---



##### Table of Contents



Non-interest Expenses.
       Income Taxes.
 Liquidity and Capital Resources
    Company
    
    BankTier 1 Capital (to average assets)
    
    
    7.95
    %
    
    
    7.29
    %Tier 1 Capital (to risk-weighted assets)
    
    
    12.04
    
    
    
    11.03Total Capital (to risk-weighted assets)
    
    
    13.11
    
    
    
    12.11
  13




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
      June 30,
    
    March 31,2005
    
    2005Amount
    
    % Change
    
    Amount
    
    % Change(Dollars in thousands)300 basis point increase in rates
    
    $
    (2,196
    )
    
    
    (12.9
    )%
    
    $
    (2,361
    )
    
    
    (13.8
    )%150 basis point decrease in rates
    
    
    
    
    
    
    
    %
    
    
    (455
    )
    
    
    (2.7
    )200 basis point decrease in rates
    
    
    (136
    )
    
    
    (0.8
    )%
    
    
    
    
    
    
    
 14




---



##### Table of Contents



Item 4. Controls and Procedures
   
 Part II. Other Information
 
 Item 1. Legal Proceedings
  
 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
 15




---



##### Table of Contents



SIGNATURES
  CENTRAL BANCORP, INC.RegistrantAugust 12, 2005
    
    By:
    
    /s/  John D. DohertyJohn D. DohertyChairman, President and Chief Executive OfficerAugust 12, 2005
    
    By:
    
    /s/  Paul S. FeeleyPaul S. FeeleySenior Vice President, Treasurer and Chief Financial Officer