##### 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 endedDecember 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission
file number: 0-25251
 CENTRAL BANCORP, INC.
 
 Massachusetts
    
    04-3447594(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)399 Highland Avenue, Somerville, Massachusetts
    
    02144(Address of principal executive offices)
    
    (Zip Code)
 (617) 628-4000
 N/A
 þ o
  o o þ
 o þ
 Common Stock, $1.00 par value
    
    1,639,951Class
    
    Outstanding at February 12, 2007




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##### 



CENTRAL BANCORP, INC.
 Form 10-Q
 Table of Contents
 Page No.Part I. Financial InformationItem 1.
    
    Financial Statements
(Unaudited)Consolidated Statements of Financial Condition at December 31, 2006 andMarch 31, 2006
    
    1Consolidated Statements of Income for the Three and Nine Months EndedDecember 31, 2006 and 2005
    
    2Consolidated
Statements of Changes in Stockholders Equity for the NineMonths Ended December 31, 2006
    
    3Consolidated Statements of Cash Flows for the Nine Months EndedDecember 31, 2006 and 2005
    
    4Notes to Unaudited Consolidated Financial Statements
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Resultsof Operations
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    22Item 4.
    
    Controls and Procedures
    
    23Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    24Item 1A.
    
    Risk Factors
    
    24Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    24Item 3.
    
    Defaults Upon Senior Securities
    
    24Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    24Item 5.
    
    Other Information
    
    24Item 6.
    
    Exhibits
    
    24SignaturesEX-31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICEREX-31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICEREX-32 SECTION 1350 CERTIFICATIONS




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
 
 
 December 31,
    
    March 31,(Dollars in Thousands)
    
    2006
    
    2006ASSETSCash and due from banks
    
    $
    4,301
    
    
    $
    6,590Short-term investments
    
    
    1,502
    
    
    
    8,673Cash and cash equivalents
    
    
    5,803
    
    
    
    15,263Certificates of deposit
    
    
    
    
    
    
    627Investment securities available for sale (amortized cost of $85,488
at December 31, 2006 and $99,159 at March 31, 2006)
    
    
    85,030
    
    
    
    97,195Stock in Federal Home Loan Bank of Boston, at cost
    
    
    6,909
    
    
    
    8,300The Co-operative Central Bank Reserve Fund
    
    
    1,576
    
    
    
    1,576Total investments
    
    
    93,515
    
    
    
    107,071Loans held for sale
    
    
    755
    
    
    
    45Loans (Note 2)
    
    
    456,058
    
    
    
    415,318Less allowance for loan losses
    
    
    3,847
    
    
    
    3,788Net loans
    
    
    452,211
    
    
    
    411,530Accrued interest receivable
    
    
    2,561
    
    
    
    2,678Banking premises and equipment, net
    
    
    4,923
    
    
    
    3,870Deferred tax asset, net
    
    
    1,792
    
    
    
    2,347Goodwill, net
    
    
    2,232
    
    
    
    2,232Other assets
    
    
    1,690
    
    
    
    1,612Total assets
    
    $
    565,482
    
    
    $
    547,275LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 3)
    
    
    387,174
    
    
    $
    393,413Short-term borrowings
    
    
    3,702
    
    
    
    Federal Home Loan Bank advances
    
    
    123,000
    
    
    
    103,500Subordinated debenture (Note 4)
    
    
    5,258
    
    
    
    5,258ESOP Loan
    
    
    2,240
    
    
    
    2,532Advanced payments by borrowers for taxes and insurance
    
    
    1,311
    
    
    
    1,277Accrued expenses and other liabilities
    
    
    2,034
    
    
    
    2,106Total liabilities
    
    
    524,719
    
    
    
    508,086Commitments and Contingencies (Note 6)Stockholders equity (Note 7):Preferred stock $1.00 par value; authorized 5,000,000 shares;
none issued or outstanding
    
    
    
    
    
    
    Common stock $1.00 par value; authorized 15,000,000 shares;
1,639,951 shares issued at December 31, 2006 and 1,590,181
shares issued at March 31, 2006
    
    
    2,033
    
    
    
    2,033Additional paid-in capital
    
    
    3,009
    
    
    
    2,938Retained income
    
    
    40,585
    
    
    
    40,421Accumulated other comprehensive loss (Note 5)
    
    
    (330
    )
    
    
    (1,281
    )Unearned compensation  ESOP
    
    
    (4,534
    )
    
    
    (4,922
    )Total stockholders equity
    
    
    40,763
    
    
    
    39,189Total liabilities and stockholders equity
    
    $
    565,482
    
    
    $
    547,275
 
 1




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest and dividend income:Mortgage loans
    
    $
    6,904
    
    
    $
    6,275
    
    
    $
    19,680
    
    
    $
    18,324Other loans
    
    
    154
    
    
    
    110
    
    
    
    427
    
    
    
    317Short-term investments
    
    
    26
    
    
    
    22
    
    
    
    242
    
    
    
    88Investments
    
    
    1,268
    
    
    
    1,295
    
    
    
    3,738
    
    
    
    3,990Total interest and dividend income
    
    
    8,352
    
    
    
    7,702
    
    
    
    24,087
    
    
    
    22,719Interest expense:Deposits
    
    
    2,881
    
    
    
    1,806
    
    
    
    8,289
    
    
    
    4,666Advances from Federal Home Loan Bank of Boston
    
    
    1,679
    
    
    
    1,683
    
    
    
    4,236
    
    
    
    5,125Other borrowings
    
    
    172
    
    
    
    134
    
    
    
    482
    
    
    
    399Total interest expense
    
    
    4,732
    
    
    
    3,623
    
    
    
    13,007
    
    
    
    10,190Net interest and dividend income
    
    
    3,620
    
    
    
    4,079
    
    
    
    11,080
    
    
    
    12,529Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    100Net interest and dividend income after
provision for loan losses
    
    
    3,620
    
    
    
    4,079
    
    
    
    11,030
    
    
    
    12,429Non-interest income:Deposit service charges
    
    
    281
    
    
    
    250
    
    
    
    786
    
    
    
    718Net gains from sales of investment securities
    
    
    131
    
    
    
    93
    
    
    
    359
    
    
    
    306Net gains on sales of loans
    
    
    
    
    
    
    44
    
    
    
    59
    
    
    
    183Other income
    
    
    63
    
    
    
    60
    
    
    
    203
    
    
    
    262Total non-interest income
    
    
    475
    
    
    
    447
    
    
    
    1,407
    
    
    
    1,469Non-interest expenses:Salaries and employee benefits
    
    
    1,917
    
    
    
    1,952
    
    
    
    6,273
    
    
    
    6,392Occupancy and equipment
    
    
    518
    
    
    
    406
    
    
    
    1,565
    
    
    
    1,169Data processing fees
    
    
    232
    
    
    
    227
    
    
    
    720
    
    
    
    705Professional fees
    
    
    203
    
    
    
    161
    
    
    
    660
    
    
    
    566Advertising and marketing
    
    
    58
    
    
    
    167
    
    
    
    380
    
    
    
    512Other expenses
    
    
    382
    
    
    
    389
    
    
    
    1,346
    
    
    
    1,277Total non-interest expenses
    
    
    3,310
    
    
    
    3,302
    
    
    
    10,944
    
    
    
    10,621Income before income taxes
    
    
    785
    
    
    
    1,224
    
    
    
    1,493
    
    
    
    3,277Provision for income taxes (Note 6)
    
    
    271
    
    
    
    428
    
    
    
    515
    
    
    
    1,152Net income
    
    $
    514
    
    
    $
    796
    
    
    $
    978
    
    
    $
    2,125Earnings per common share  basic (Note 8)
    
    $
    0.36
    
    
    $
    0.56
    
    
    $
    0.68
    
    
    $
    1.49Earnings per common share  diluted (Note 8)
    
    $
    0.35
    
    
    $
    0.55
    
    
    $
    0.67
    
    
    $
    1.48Weighted average common shares outstanding  basic
    
    
    1,448
    
    
    
    1,431
    
    
    
    1,445
    
    
    
    1,427Weighted average common and equivalent shares
outstanding  diluted
    
    
    1,463
    
    
    
    1,440
    
    
    
    1,459
    
    
    
    1,435
  2




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##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    Unearned
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Compensation
    
    
    Stockholders(In Thousands)
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Income
    
    
    ESOP
    
    
    EquityNine Months Ended December 31, 2006Balance at March 31, 2006
    
    $
    2,033
    
    
    $
    2,938
    
    
    $
    40,421
    
    
    $
    (1,281
    )
    
    $
    (4,922
    )
    
    $
    39,189Net income
    
    
    
    
    
    
    
    
    
    
    978
    
    
    
    
    
    
    
    
    
    
    
    978Other comprehensive income net of tax:Unrealized gain on securities, net
of reclassification adjustment (Note 5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    951
    
    
    
    
    
    
    
    951Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,929Proceeds from exercise of stock options
(770 shares)
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Tax benefit of stock option exercises
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Dividends paid ($.54 per share)
    
    
    
    
    
    
    
    
    
    
    (814
    )
    
    
    
    
    
    
    
    
    
    
    (814
    )Grant and option expense
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Amortization of unearned compensation  ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388
    
    
    
    388Balance at December 31, 2006
    
    $
    2,033
    
    
    $
    3,009
    
    
    $
    40,585
    
    
    $
    (330
    )
    
    $
    (4,534
    )
    
    $
    40,763
  3




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##### Table of Contents



Nine Months EndedDecember 31,(In thousands)
    
    2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    978
    
    
    $
    2,125Adjustments to reconcile net income to net cash provided by (used
in)
operating activities:Depreciation and amortization
    
    
    595
    
    
    
    416Amortization of premiums
    
    
    63
    
    
    
    110Provision for loan losses
    
    
    50
    
    
    
    100Stock-based compensation
    
    
    442
    
    
    
    334Net gains
from sale of investment securities
    
    
    (359
    )
    
    
    (306
    )Gain on sales of loans held for sale
    
    
    (59
    )
    
    
    (183
    )Originations of loans held for sale
    
    
    (6,021
    )
    
    
    (15,240
    )Proceeds from sale of loans originated for sale
    
    
    5,370
    
    
    
    16,588Decrease in accrued interest receivable
    
    
    117
    
    
    
    7Increase in other assets, net
    
    
    (77
    )
    
    
    (61
    )Increase in advance payments by borrowers for taxes and insurance
    
    
    34
    
    
    
    196Increase (decrease) in accrued expenses and other liabilities, net
    
    
    (72
    )
    
    
    427Net cash provided by operating activities
    
    
    1,061
    
    
    
    4,513Cash flows from investing activities:Increase in loans
    
    
    (40,731
    )
    
    
    (26,347
    )Principal payments on mortgage-backed securities
    
    
    6,349
    
    
    
    9,261(Increase) decrease in certificate of deposit
    
    
    627
    
    
    
    (14
    )Proceeds from the redemption of FHLB stock (net)
    
    
    1,391
    
    
    
    Proceeds from sales of investment securities
    
    
    5,266
    
    
    
    3,661Purchases of investment securities
    
    
    (11,549
    )
    
    
    (4,029
    )Maturities and calls of investment securities
    
    
    13,900
    
    
    
    1,500Purchase of banking premises and equipment
    
    
    (1,648
    )
    
    
    (872
    )Net cash used in investing activities
    
    
    (26,395
    )
    
    
    (16,840
    )Cash flows from financing activities:Increase (decrease) in deposits
    
    
    (6,239
    )
    
    
    26,325Proceeds from advances from FHLB of Boston
    
    
    85,000
    
    
    
    122,184Repayment of advances from FHLB of Boston
    
    
    (65,500
    )
    
    
    (133,819
    )Increase (decrease) in short-term borrowings
    
    
    3,702
    
    
    
    (141
    )Repayment of ESOP loan
    
    
    (292
    )
    
    
    (292
    )Proceeds from exercise of stock options
    
    
    13
    
    
    
    25Tax benefit from exercise of stock options
    
    
    4
    
    
    
    5Dividends paid, net
    
    
    (814
    )
    
    
    (675
    )Net directors deferred compensation
    
    
    
    
    
    
    (3
    )Net cash provided by financing activities
    
    
    15,874
    
    
    
    13,609Net increase (decrease) in cash and cash equivalents
    
    
    (9,460
    )
    
    
    1,282Cash and cash equivalents at beginning of year
    
    
    15,263
    
    
    
    6,383Cash and cash equivalents at end of period
    
    $
    5,803
    
    
    $
    7,665Supplementary disclosure of cash flows information:Cash paid during the period for:Interest
    
    $
    13,077
    
    
    $
    9,838Income taxes
    
    $
    645
    
    
    $
    938
  4




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2006
 (1) Basis of Presentation
    (2) Loans
  December 31,
    
    
    March 31,2006
    
    
    2006Real estate loans:Residential real estate (1-4 family)
    
    $
    180,609
    
    
    $
    160,381Commercial real estate
    
    
    223,455
    
    
    
    213,935Construction
    
    
    37,081
    
    
    
    27,680Home equity lines of credit
    
    
    6,896
    
    
    
    7,505Total real estate loans
    
    
    448,041
    
    
    
    409,501Commercial loans
    
    
    6,719
    
    
    
    4,457Consumer loans
    
    
    1,298
    
    
    
    1,360Total loans
    
    
    456,058
    
    
    
    415,318Less: allowance for loan losses
    
    
    (3,847
    )
    
    
    (3,788
    )Total loans, net
    
    $
    452,211
    
    
    $
    411,530
   5




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2006
  Three Months EndedDecember 31,2006
    
    
    2005Balance at beginning of period
    
    $
    3,850
    
    
    $
    3,783Provision charged to expense
    
    
    
    
    
    
    Less: charge-offs
    
    
    (19
    )
    
    
    (12
    )Add: recoveries
    
    
    16
    
    
    
    12Balance at end of period
    
    $
    3,847
    
    
    $
    3,783
 Nine Months EndedDecember 31,2006
    
    
    2005Balance at beginning of period
    
    $
    3,788
    
    
    $
    3,681Provision charged to expense
    
    
    50
    
    
    
    100Less: charge-offs
    
    
    (39
    )
    
    
    (33
    )Add: recoveries
    
    
    48
    
    
    
    35Balance at end of period
    
    $
    3,847
    
    
    $
    3,783
 (3) Deposits
  December 31,
    
    
    March 31,2006
    
    
    2006Demand deposit accounts
    
    $
    39,514
    
    
    $
    40,871NOW accounts
    
    
    36,912
    
    
    
    29,902Passbook and other savings accounts
    
    
    55,846
    
    
    
    65,546Money market deposit accounts
    
    
    34,797
    
    
    
    36,051Total non-certificate accounts
    
    
    167,069
    
    
    
    172,370Term deposit certificates:Certificates of $100,000 and above
    
    
    82,533
    
    
    
    84,028Certificates of less than $100,000
    
    
    137,572
    
    
    
    137,015Total term deposit certificates
    
    
    220,105
    
    
    
    221,043Total deposits
    
    $
    387,174
    
    
    $
    393,413
 (4) Subordinated
Debentures
  6




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2006
  (5) Other Comprehensive Income (Loss)
   For the Nine Months EndedDecember 31, 2006Before-Tax
    
    
    Tax
    
    
    After-TaxAmount
    
    
    Effect
    
    
    AmountUnrealized gains on securities:Unrealized
net holding gains during period
    
    $
    1,864
    
    
    $
    679
    
    
    $
    1,185Less: reclassification adjustment for net
gains included in net income
    
    
    359
    
    
    
    125
    
    
    
    234Other comprehensive gain
    
    $
    1,505
    
    
    $
    554
    
    
    $
    951
 For the Nine Months EndedDecember 31, 2005Before-Tax
    
    
    Tax
    
    
    After-TaxAmount
    
    
    Effect
    
    
    AmountUnrealized losses on securities:Unrealized net holding losses during period
    
    $
    (1,076
    )
    
    $
    (379
    )
    
    $
    (697
    )Less: reclassification adjustment for net
gains included in net income
    
    
    306
    
    
    
    108
    
    
    
    198Other comprehensive loss
    
    $
    (1,382
    )
    
    $
    (487
    )
    
    $
    (895
    )
 7




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2006
 (6) Contingencies
 Legal Proceedings
  (7) Subsequent Events
     8




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2006
 (8) Earnings per Share (EPS)
   Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005(Amounts in thousands, except per share amounts)Net income available to common shareholders
    
    $
    514
    
    
    $
    796
    
    
    $
    978
    
    
    $
    2,125Weighted average number of common shares outstanding
    
    
    1,590
    
    
    
    1,590
    
    
    
    1,590
    
    
    
    1,590Weighted average number of unallocated ESOP shares
    
    
    (142
    )
    
    
    (159
    )
    
    
    (145
    )
    
    
    (163
    )Weighted average number of common shares outstanding
used in calculation of basic earnings per share
    
    
    1,448
    
    
    
    1,431
    
    
    
    1,445
    
    
    
    1,427Incremental shares from the assumed exercise of dilutive
common stock options
    
    
    15
    
    
    
    9
    
    
    
    14
    
    
    
    8Weighted average number of common shares outstanding
used in calculating diluted earnings per share
    
    
    1,463
    
    
    
    1,440
    
    
    
    1,459
    
    
    
    1,435Earnings per shareBasic
    
    $
    0.36
    
    
    $
    0.56
    
    
    $
    0.68
    
    
    $
    1.49Diluted
    
    $
    0.35
    
    
    $
    0.55
    
    
    $
    0.67
    
    
    $
    1.48
  9




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2006
 (9) Stock Based Compensation
      10




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2006
  Number of
    
    Weighted AverageShares
    
    Exercise PriceBalance March 31, 2006
    
    
    59,891
    
    
    $
    24.356Granted
    
    
    10,000
    
    
    
    31.200Exercised
    
    
    (770
    )
    
    
    18.490Canceled
    
    
    
    
    
    
    Balance December 31, 2006
    
    
    69,121
    
    
    
    25.411
   Fiscal
year ending
    
    

2007
    
    

2008
    
    

2009
    
    

2010
    
    

2011
    
    

TOTAL
Compensation
Expense
    



    80,500
    
    
    
    322,000

    
    
    322,000
    
    

    322,000
    
    

    322,000
    
    
    1,368,500
    WeightedAverageRemaining
    
    
    WeightedNumber
    
    
    Contractual
    
    
    Average
    
    
    AggregateExercise
    
    
    of Shares
    
    
    Life
    
    
    Exercise
    
    
    IntrinsicPrice
    
    
    Outstanding
    
    
    (Years)
    
    
    Price
    
    
    Value(1)$
    16.625
    
    
    
    12,077
    (2)
    
    
    3.9
    
    
    $
    16.625
    
    
    $
    190,05620.250
    
    
    
    13,745
    (2)
    
    
    2.8
    
    
    
    20.250
    
    
    
    166,47928.990
    
    
    
    33,299
    (2)
    
    
    8.1
    
    
    
    28.990
    
    
    
    112,28431.200
    
    
    
    10,000
    (3)
    
    
    9.7
    
    
    
    31.200
    
    
    
    11,620Average/Total
    
    $
    25.411
    
    
    
    69,121
    
    
    
    6.6
    
    
    $
    25.411
    
    
    $
    480,439
 
 (1)
    
    Represents the total intrinsic value, based on the Company's closing
stock price of $32.362 as of December 31, 2006, which would have
been received by the option holders had all option holders exercised
their options as of that date. The total intrinsic value of options
exercised during the three and nine months ended December 31,
2006 was approximately $11,105 and $11,105, respectively.(2)
    
    Fully vested and exercisable at the time of grant(3)
    
    Subject to vesting over five years, 0% vested at December 31,
2006  11




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2006
 (10) Recent Accounting Pronouncements
       12




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Forward-Looking Statements
 www.sec.gov
 General
      13




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##### Table of Contents



Critical Accounting Policies
   Comparison of Financial Condition at December 31, 2006 and March 31, 2006
   14




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##### Table of Contents



Comparison of Operating Results for the Quarters Ended December 31, 2006 and 2005
  Net Interest Income.
 15




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##### Table of Contents



Interest
Income.
 Interest Expense.
 16




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##### Table of Contents



Three Months Ended December 31,2006
    
    
    2005Average
    
    
    
    
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Average Rate
    
    
    Balance
    
    
    Interest
    
    
    Average Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    433,571
    
    
    $
    6,904
    
    
    
    6.37
    %
    
    $
    406,727
    
    
    $
    6,275
    
    
    
    6.17
    %Other loans
    
    
    7,515
    
    
    
    154
    
    
    
    8.20
    
    
    
    5,716
    
    
    
    110
    
    
    
    7.70Investment securities
    
    
    101,047
    
    
    
    1,268
    
    
    
    5.02
    
    
    
    110,140
    
    
    
    1,295
    
    
    
    4.70Short-term investments
    
    
    2,306
    
    
    
    26
    
    
    
    4.51
    
    
    
    3,314
    
    
    
    22
    
    
    
    2.66Total interest-earning assets
    
    
    544,439
    
    
    
    8,352
    
    
    
    6.14
    
    
    
    523,824
    
    
    
    7,702
    
    
    
    5.86Allowance for loan losses
    
    
    (3,851
    )
    
    
    
    
    
    
    
    
    
    
    (3,786
    )Non-interest-earning assets
    
    
    17,414
    
    
    
    
    
    
    
    
    
    
    
    16,662Total assets
    
    $
    558,002
    
    
    
    
    
    
    
    
    
    
    $
    538,773Interest-bearing liabilities:Deposits
    
    $
    344,443
    
    
    $
    2,881
    
    
    
    3.35
    
    
    $
    315,527
    
    
    $
    1,806
    
    
    
    2.29Advances from FHLB of Boston
    
    
    121,386
    
    
    
    1,679
    
    
    
    5.53
    
    
    
    133,833
    
    
    
    1,683
    
    
    
    5.03Other borrowings
    
    
    10,155
    
    
    
    172
    
    
    
    6.77
    
    
    
    8,174
    
    
    
    134
    
    
    
    6.56Total interest-bearing liabilities
    
    
    475,984
    
    
    
    4,732
    
    
    
    3.98
    
    
    
    457,534
    
    
    
    3,623
    
    
    
    3.17Non-interest-bearing liabilities
    
    
    41,586
    
    
    
    
    
    
    
    
    
    
    
    42,184Total liabilities
    
    
    517,570
    
    
    
    
    
    
    
    
    
    
    
    499,718Stockholders equity
    
    
    40,432
    
    
    
    
    
    
    
    
    
    
    
    39,055Total liabilities and stockholders
Equity
    
    $
    558,002
    
    
    
    
    
    
    
    
    
    
    $
    538,773Net interest and dividend income
    
    
    
    
    
    $
    3,620
    
    
    
    
    
    
    
    
    
    
    $
    4,079Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.16
    %
    
    
    
    
    
    
    
    
    
    
    2.69
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.66
    %
    
    
    
    
    
    
    
    
    
    
    3.10
    %
 Provision for Loan Losses.
  17




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##### Table of Contents



Non-Interest Income
 Non-Interest Expense
      Income Taxes
 18




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##### Table of Contents



Comparison
of Operating Results for the Nine Months Ended December 31, 2006
and 2005
  Interest Income
 Interest Expense
  19




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##### Table of Contents



Nine Months Ended December 31,2006
    
    
    2005Average
    
    
    
    
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Average Rate
    
    
    Balance
    
    
    Interest
    
    
    Average Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    418,465
    
    
    $
    19,680
    
    
    
    6.27
    %
    
    $
    398,024
    
    
    $
    18,324
    
    
    
    6.14
    %Other loans
    
    
    7,057
    
    
    
    427
    
    
    
    8.07
    
    
    
    5,905
    
    
    
    317
    
    
    
    7.16Investment securities
    
    
    102,357
    
    
    
    3,738
    
    
    
    4.87
    
    
    
    113,685
    
    
    
    3,990
    
    
    
    4.68Short-term investments
    
    
    6,817
    
    
    
    242
    
    
    
    4.73
    
    
    
    4,092
    
    
    
    88
    
    
    
    2.87Total interest-earning assets
    
    
    534,696
    
    
    
    24,087
    
    
    
    6.01
    
    
    
    521,706
    
    
    
    22,719
    
    
    
    5.81Allowance for loan losses
    
    
    (3,834
    )
    
    
    
    
    
    
    
    
    
    
    (3,744
    )Noninterest-earning assets
    
    
    17,235
    
    
    
    
    
    
    
    
    
    
    
    16,898Total assets
    
    $
    548,097
    
    
    
    
    
    
    
    
    
    
    $
    534,860Interest-bearing liabilities:Deposits
    
    $
    353,790
    
    
    $
    8,289
    
    
    
    3.12
    
    
    $
    306,342
    
    
    $
    4,666
    
    
    
    2.03Advances from FHLB of Boston
    
    
    103,924
    
    
    
    4,236
    
    
    
    5.44
    
    
    
    139,451
    
    
    
    5,125
    
    
    
    4.90Other borrowings
    
    
    8,854
    
    
    
    482
    
    
    
    7.26
    
    
    
    8,855
    
    
    
    399
    
    
    
    6.01Total interest-bearing liabilities
    
    
    466,568
    
    
    
    13,007
    
    
    
    3.72
    
    
    
    454,648
    
    
    
    10,190
    
    
    
    2.99Non-interest-bearing liabilities
    
    
    41,585
    
    
    
    
    
    
    
    
    
    
    
    41,075Total liabilities
    
    
    508153
    
    
    
    
    
    
    
    
    
    
    
    495,723Stockholders equity
    
    
    39,944
    
    
    
    
    
    
    
    
    
    
    
    39,134Total liabilities and stockholders
equity
    
    $
    548,097
    
    
    
    
    
    
    
    
    
    
    $
    534,860Net interest and dividend income
    
    
    
    
    
    $
    11,080
    
    
    
    
    
    
    
    
    
    
    $
    12,529Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.29
    %
    
    
    
    
    
    
    
    
    
    
    2.82
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.74
    %
    
    
    
    
    
    
    
    
    
    
    3.20
    %
 Non-interest Income.
 Provision for Loan Losses.
  20




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##### Table of Contents



Non-interest
Expense.
       Income Taxes.
 Liquidity and Capital Resources
   21




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##### Table of Contents



Company
    
    BankTier 1 Capital (to average assets)
    
    
    7.91
    %
    
    
    7.36
    %Tier 1 Capital (to risk-weighted assets)
    
    
    11.71
    %
    
    
    10.90
    %Total Capital (to risk-weighted assets)
    
    
    12.77
    %
    
    
    11.96
    %
  Off-Balance Sheet Arrangements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
     22




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##### Table of Contents



December 31,
    
    March 31,2006
    
    2006Amount
    
    % Change
    
    Amount
    
    % Change(Dollars in thousands)200 basis point increase in rates
    
    $
    (2,192
    )
    
    
    (15.39
    )%
    
    $
    (1,530
    )
    
    
    (10.0
    )%200 basis point decrease in rates
    
    
    1,613
    
    
    
    11.33
    
    
    
    611
    
    
    
    4.0
  
 Item 4. Controls and Procedures
   23




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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
 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
 24




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##### Table of Contents



SIGNATURES
  CENTRAL BANCORP, INC.
               RegistrantFebruary 14, 2007
    By:

/s/
John D. DohertyJohn D. DohertyChairman, President and Chief Executive OfficerFebruary 14, 2007
    By:

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