##### 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 December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-25251
 CENTRAL BANCORP, INC.
  Massachusetts
    
    04-3447594(State or other jurisdiction of incorporation or
organization)
    
    (I.R.S. Employer Identification No.)
 399 Highland Avenue, Somerville, Massachusetts
    
    02144(Address of principal executive offices)
    
    (Zip Code)
 (617) 628-4000
 (Registrants telephone number, including area code)
 N/A
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
  o o þ
 o þ
 Common Stock, $1.00 par value
    
    1,590,181 sharesClass
    
    Outstanding at February 13, 2006




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##### 



CENTRAL BANCORP, INC.
 Form 10-Q
 Table of Contents
 Page No.Part I. Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Statements of Financial Condition at December 31, 2005 and
March 31, 2005
    
    
    1Consolidated Statements of Income for the Three and Nine Months Ended
December 31, 2005 and 2004
    
    
    2Consolidated Statements of Changes in Stockholders Equity for the Nine
Months Ended December 31, 2005
    
    
    3Consolidated Statements of Cash Flows for the Nine Months Ended
December 31, 2005 and 2004
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    9Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    18Part II. Other InformationItem 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3. Defaults Upon Senior Securities
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19Item 5. Other Information
    
    
    19Item 6. Exhibits
    
    
    19SignaturesEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO




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##### Table of Contents



Part I. Financial Information
 
   
   December 31,
    
    
    March 31,(Dollars in Thousands)
    
    2005
    
    
    2005ASSETSCash and due from banks
    
    $
    5,292
    
    
    $
    6,158Short-term investments
    
    
    2,373
    
    
    
    225Cash and cash equivalents
    
    
    7,665
    
    
    
    6,383Certificates of deposit
    
    
    620
    
    
    
    606Investment securities available for sale (amortized cost of $98,493
at December 31, 2005 and $108,690 at March 31, 2005)
    
    
    97,037
    
    
    
    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
    
    
    106,913
    
    
    
    118,492Loans held for sale
    
    
    1,056
    
    
    
    2,221Loans (Note 2)
    
    
    412,731
    
    
    
    386,382Less allowance for loan losses
    
    
    (3,783
    )
    
    
    (3,681
    )Net loans
    
    
    408,948
    
    
    
    382,701Accrued interest receivable
    
    
    2,437
    
    
    
    2,444Banking premises and equipment, net
    
    
    3,263
    
    
    
    2,807Deferred tax asset, net
    
    
    2,126
    
    
    
    1,639Goodwill, net
    
    
    2,232
    
    
    
    2,232Other assets
    
    
    1,607
    
    
    
    1,546Total assets
    
    $
    536,867
    
    
    $
    521,071LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 3)
    
    $
    359,540
    
    
    $
    333,215Short-term borrowings
    
    
    
    
    
    
    141Federal Home Loan Bank advances
    
    
    126,500
    
    
    
    138,135Subordinated debenture (Note 4)
    
    
    5,258
    
    
    
    5,258ESOP Loan
    
    
    2,629
    
    
    
    2,921Advance payments by borrowers for taxes and insurance
    
    
    1,364
    
    
    
    1,168Accrued expenses and other liabilities
    
    
    2,421
    
    
    
    1,994Total liabilities
    
    
    497,712
    
    
    
    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 December 31, 2005 and 2,031,026
shares issued at March 31, 2005
    
    
    2,033
    
    
    
    2,031Additional paid-in capital
    
    
    12,904
    
    
    
    12,883Retained income
    
    
    40,178
    
    
    
    38,728Treasury stock (442,428 shares at December 31, 2005 and
at March 31, 2005), at cost
    
    
    (9,957
    )
    
    
    (9,907
    )Accumulated other comprehensive loss (Note 5)
    
    
    (951
    )
    
    
    (56
    )Unearned compensation  ESOP
    
    
    (5,052
    )
    
    
    (5,440
    )Total stockholders equity
    
    
    39,155
    
    
    
    38,239Total liabilities and stockholders equity
    
    $
    536,867
    
    
    $
    521,071
  1




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Interest and dividend income:Mortgage loans
    
    $
    6,275
    
    
    $
    5,455
    
    
    $
    18,246
    
    
    $
    16,295Other loans
    
    
    110
    
    
    
    104
    
    
    
    317
    
    
    
    275Short-term investments
    
    
    22
    
    
    
    46
    
    
    
    88
    
    
    
    165Investments
    
    
    1,295
    
    
    
    1,367
    
    
    
    3,990
    
    
    
    3,778Total interest and dividend income
    
    
    7,702
    
    
    
    6,972
    
    
    
    22,641
    
    
    
    20,513Interest expense:Deposits
    
    
    1,806
    
    
    
    1,184
    
    
    
    4,666
    
    
    
    3,550Advances from Federal Home Loan Bank of Boston
    
    
    1,683
    
    
    
    1,709
    
    
    
    5,125
    
    
    
    5,140Other borrowings
    
    
    134
    
    
    
    105
    
    
    
    399
    
    
    
    196Total interest expense
    
    
    3,623
    
    
    
    2,998
    
    
    
    10,190
    
    
    
    8,886Net interest and dividend income
    
    
    4,079
    
    
    
    3,974
    
    
    
    12,451
    
    
    
    11,627Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    50Net interest and dividend income afterprovision for loan losses
    
    
    4,079
    
    
    
    3,974
    
    
    
    12,351
    
    
    
    11,577Non-interest income:Deposit service charges
    
    
    250
    
    
    
    147
    
    
    
    718
    
    
    
    438Net gains from sales of investment securities
    
    
    93
    
    
    
    84
    
    
    
    306
    
    
    
    432Net gains on sales of loans
    
    
    44
    
    
    
    85
    
    
    
    183
    
    
    
    204Other income
    
    
    60
    
    
    
    61
    
    
    
    340
    
    
    
    250Total non-interest income
    
    
    447
    
    
    
    377
    
    
    
    1,547
    
    
    
    1,324Non-interest expenses:Salaries and employee benefits
    
    
    1,952
    
    
    
    1,918
    
    
    
    6,392
    
    
    
    5,780Occupancy and equipment
    
    
    406
    
    
    
    323
    
    
    
    1,169
    
    
    
    948Data processing fees
    
    
    227
    
    
    
    239
    
    
    
    705
    
    
    
    794Professional fees
    
    
    161
    
    
    
    217
    
    
    
    566
    
    
    
    825Advertising and marketing
    
    
    167
    
    
    
    109
    
    
    
    512
    
    
    
    513Other expenses
    
    
    389
    
    
    
    443
    
    
    
    1,277
    
    
    
    1,394Total non-interest expenses
    
    
    3,302
    
    
    
    3,249
    
    
    
    10,621
    
    
    
    10,254Income before income taxes
    
    
    1,224
    
    
    
    1,102
    
    
    
    3,277
    
    
    
    2,647Provision for income taxes (Note 6)
    
    
    428
    
    
    
    416
    
    
    
    1,152
    
    
    
    1,001Net income
    
    $
    796
    
    
    $
    686
    
    
    $
    2,125
    
    
    $
    1,646Earnings per common share  basic (Note 8)
    
    $
    0.56
    
    
    $
    0.49
    
    
    $
    1.49
    
    
    $
    1.10Earnings per common share  diluted (Note 8)
    
    $
    0.55
    
    
    $
    0.48
    
    
    $
    1.48
    
    
    $
    1.09Weighted average common shares outstanding  basic
    
    
    1,431
    
    
    
    1,413
    
    
    
    1,427
    
    
    
    1,503Weighted average common and equivalent shares
outstanding  diluted
    
    
    1,440
    
    
    
    1,424
    
    
    
    1,435
    
    
    
    1,515
  2




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##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Unearned
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Retained
    
    
    Treasury
    
    
    Comprehensive
    
    
    Compensation
    
    
    Stockholders(In Thousands)
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Stock
    
    
    Income
    
    
    ESOP
    
    
    EquityNine Months Ended December 31, 2005Balance at March 31, 2005
    
    $
    2,031
    
    
    $
    12,883
    
    
    $
    38,728
    
    
    $
    (9,907
    )
    
    $
    (56
    )
    
    $
    (5,440
    )
    
    $
    38,239Net income
    
    
    
    
    
    
    
    
    
    
    2,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,125Other comprehensive income net of tax:Unrealized gain on securities, net
of reclassification adjustment (Note 5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (895
    )
    
    
    
    
    
    
    (895
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,230Proceeds from exercise
of stock options (1,583 shares)
    
    
    2
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Tax benefit of stock option exercises
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Director deferred compensation
transactions
    
    
    
    
    
    
    47
    
    
    
    
    
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )Dividends paid ($0.48 per share)
    
    
    
    
    
    
    
    
    
    
    (675
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (675
    )Amortization of unearned compensation -
ESOP -
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388
    
    
    
    334Balance at December 31, 2005
    
    $
    2,033
    
    
    $
    12,904
    
    
    $
    40,178
    
    
    $
    (9,957
    )
    
    $
    (951
    )
    
    $
    (5,052
    )
    
    $
    39,155
  3




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##### Table of Contents



Nine Months EndedDecember 31,(In thousands)
    
    2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    2,125
    
    
    $
    1,646Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    416
    
    
    
    293Amortization of premiums
    
    
    110
    
    
    
    137Provision for loan losses
    
    
    100
    
    
    
    50Stock-based compensation
    
    
    334
    
    
    
    345Net gains from sales and write-downs of
investment securities
    
    
    (306
    )
    
    
    (432
    )Gain on sales of loans held for sale
    
    
    (183
    )
    
    
    (204
    )Originations of loans held for sale
    
    
    (15,240
    )
    
    
    (17,493
    )Proceeds from sale of loans originated for sale
    
    
    16,588
    
    
    
    16,219Decrease (increase) in accrued interest receivable
    
    
    7
    
    
    
    (19
    )Decrease (increase) in other assets, net
    
    
    (61
    )
    
    
    322Increase in advance payments by borrowers for taxes and insurance
    
    
    196
    
    
    
    49Increase (decrease) in accrued expenses and other liabilities, net
    
    
    427
    
    
    
    (3,218
    )Net cash provided by (used in) operating activities
    
    
    4,513
    
    
    
    (2,305
    )Cash flows from investing activities:Increase in loans
    
    
    (26,347
    )
    
    
    (15,623
    )Principal payments on mortgage-backed securities
    
    
    9,261
    
    
    
    5,797(Increase) decrease in certificate of deposit
    
    
    (14
    )
    
    
    609Proceeds from sales of investment securities
    
    
    3,661
    
    
    
    6,188Purchases of investment securities
    
    
    (4,029
    )
    
    
    (47,404
    )Maturities and calls of investment securities
    
    
    1,500
    
    
    
    4,495Purchase of banking premises and equipment
    
    
    (872
    )
    
    
    (688
    )Net cash provided by (used in) investing activities
    
    
    (16,840
    )
    
    
    (46,626
    )Cash flows from financing activities:Increase in deposits
    
    
    26,325
    
    
    
    18,402Proceeds from advances from FHLB of Boston
    
    
    122,184
    
    
    
    13,000Repayment of advances from FHLB of Boston
    
    
    (133,819
    )
    
    
    (9,300
    )Increase (decrease) in short-term borrowings
    
    
    (141
    )
    
    
    (699
    )Issuance of subordinated debenture
    
    
    
    
    
    
    5,258Repayment of ESOP loan
    
    
    (292
    )
    
    
    (292
    )Purchase of shares by ESOP
    
    
    
    
    
    
    (2,565
    )Proceeds from exercise of stock options
    
    
    25
    
    
    
    19Tax benefit from exercise of stock option
    
    
    5
    
    
    
    Dividends paid, net
    
    
    (675
    )
    
    
    (542
    )Net directors deferred compensation
    
    
    (3
    )
    
    
    5Purchase of treasury stock
    
    
    
    
    
    
    (2,565
    )Net cash provided by financing activities
    
    
    13,609
    
    
    
    20,721Net increase (decrease) in cash and cash equivalents
    
    
    1,282
    
    
    
    (28,210
    )Cash and cash equivalents at beginning of year
    
    
    6,383
    
    
    
    34,337Cash and cash equivalents at end of period
    
    $
    7,665
    
    
    $
    6,127Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    9,838
    
    
    $
    8,874Income taxes
    
    $
    938
    
    
    $
    655
  4




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Notes to Unaudited Consolidated Financial Statements
 December 31, 2005
 (1) Basis of Presentation
    (2) Loans
  December 31,
    
    
    March 31,2005
    
    
    2005Real estate loans:Residential real estate (1-4 family)
    
    $
    160,485
    
    
    $
    159,838Commercial real estate
    
    
    208,831
    
    
    
    194,326Construction
    
    
    28,718
    
    
    
    17,187Home equity lines of credit
    
    
    8,513
    
    
    
    9,194Total real estate loans
    
    
    406,547
    
    
    
    380,545Commercial loans
    
    
    5,229
    
    
    
    4,786Consumer loans
    
    
    955
    
    
    
    1,051Total loans
    
    
    412,731
    
    
    
    386,382Less: allowance for loan losses
    
    
    (3,783
    )
    
    
    (3,681
    )Total loans, net
    
    $
    408,948
    
    
    $
    382,701
   5




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2005
  Three Months EndedDecember 31,2005
    
    
    2004Balance at beginning of period
    
    $
    3,783
    
    
    $
    3,606Provision charged to expense
    
    
    
    
    
    
    Less: charge-offs
    
    
    (12
    )
    
    
    Add: recoveries
    
    
    12
    
    
    
    15Balance at end of period
    
    $
    3,783
    
    
    $
    3,621
 Nine Months EndedDecember 31,2005
    
    
    2004Balance at beginning of period
    
    $
    3,681
    
    
    $
    3,537Provision charged to expense
    
    
    100
    
    
    
    50Less: charge-offs
    
    
    (33
    )
    
    
    (1
    )Add: recoveries
    
    
    35
    
    
    
    35Balance at end of period
    
    $
    3,783
    
    
    $
    3,621
 (3) Deposits
  December 31, 2005
    
    
    March 31, 2005Demand deposit accounts
    
    $
    36,822
    
    
    $
    33,982NOW accounts
    
    
    33,253
    
    
    
    39,205Passbook and other savings accounts
    
    
    66,295
    
    
    
    74,316Money market deposit accounts
    
    
    39,445
    
    
    
    50,051Total non-certificate accounts
    
    
    175,815
    
    
    
    197,554Term deposit certificatesCertificates of $100,000 and above
    
    
    66,943
    
    
    
    47,270Certificates of less than $100,000
    
    
    116,782
    
    
    
    88,391Total term deposit certificates
    
    
    183,725
    
    
    
    135,661Total deposits
    
    $
    359,540
    
    
    $
    333,215
 (4) Subordinated Debenture
  6




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2005
   (5) Other Comprehensive Income (Loss)
   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
    )
 For the Nine Months EndedDecember 31, 2004Before-Tax
    
    
    Tax
    
    
    After-TaxAmount
    
    
    Effect
    
    
    AmountUnrealized losses on securities:Unrealized net holding losses during period
    
    $
    (1,203
    )
    
    $
    (424
    )
    
    $
    (779
    )Less: reclassification adjustment for net
gains included in net income
    
    
    432
    
    
    
    161
    
    
    
    271Other comprehensive loss
    
    $
    (1,635
    )
    
    $
    (585
    )
    
    $
    (1,050
    )
 7




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2005
 (6) Contingencies
 Legal Proceedings
  (7) Subsequent Event
  (8) Earnings per Share (EPS)
   Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004(Amounts in thousands, except per share amounts)Net income available to common shareholders
    
    $
    796
    
    
    $
    686
    
    
    $
    2,125
    
    
    $
    1,646Weighted average number of common shares outstanding
    
    
    1,590
    
    
    
    1,589
    
    
    
    1,590
    
    
    
    1,636Weighted average number of unallocated ESOP shares
    
    
    (159
    )
    
    
    (176
    )
    
    
    (163
    )
    
    
    (133
    )Weighted average number of common shares outstanding
used in calculation of basic earnings per share
    
    
    1,431
    
    
    
    1,413
    
    
    
    1,427
    
    
    
    1,503Incremental shares from the assumed exercise of dilutive
stock options
    
    
    9
    
    
    
    11
    
    
    
    8
    
    
    
    12Weighted average number of common shares outstanding
used in calculating diluted earnings per share
    
    
    1,440
    
    
    
    1,424
    
    
    
    1.435
    
    
    
    1,515Earnings per shareBasic
    
    $
    .56
    
    
    $
    .49
    
    
    $
    1.49
    
    
    $
    1.10Diluted
    
    $
    .55
    
    
    $
    .48
    
    
    $
    1.48
    
    
    $
    1.09
 8




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
December 31, 2005
 (9) Recent Accounting Pronouncements
   
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
   9




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General
   Critical Accounting Policies
   10




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##### Table of Contents



Comparison of Financial Condition at December 31, 2005 and March 31, 2005
     Comparison of Operating Results for the Quarters Ended December 31, 2005 and 2004
  Net Interest Income.
  Interest Income.
 11




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##### Table of Contents



Interest Expense.
  Three Months Ended December 31,2005
    
    
    2004Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    406,727
    
    
    $
    6,275
    
    
    
    6.17
    %
    
    $
    357,470
    
    
    $
    5,455
    
    
    
    6.10
    %Other loans
    
    
    5,716
    
    
    
    110
    
    
    
    7.70
    
    
    
    6,328
    
    
    
    104
    
    
    
    6.57Investment securities
    
    
    110,140
    
    
    
    1,295
    
    
    
    4.70
    
    
    
    118,443
    
    
    
    1,367
    
    
    
    4.62Short-term investments
    
    
    3,314
    
    
    
    22
    
    
    
    2.66
    
    
    
    11,354
    
    
    
    46
    
    
    
    1.62Total interest-earning assets
    
    
    525,897
    
    
    
    7,702
    
    
    
    5.86
    
    
    
    493,595
    
    
    
    6,972
    
    
    
    5.65Allowance for loan losses
    
    
    (3,786
    )
    
    
    
    
    
    
    
    
    
    
    (3,613
    )Non-interest-earning assets
    
    
    16,662
    
    
    
    
    
    
    
    
    
    
    
    15,588Total assets
    
    $
    538,773
    
    
    
    
    
    
    
    
    
    
    $
    505,570Interest-bearing liabilities:Deposits
    
    $
    315,527
    
    
    $
    1,806
    
    
    
    2.29
    
    
    $
    283,304
    
    
    $
    1,184
    
    
    
    1.67Advances from FHLB of Boston
    
    
    133,833
    
    
    
    1,683
    
    
    
    5.03
    
    
    
    138,343
    
    
    
    1,709
    
    
    
    4.94Other borrowings
    
    
    8,174
    
    
    
    134
    
    
    
    6.56
    
    
    
    8,466
    
    
    
    105
    
    
    
    4.96Total interest-bearing liabilities
    
    
    457,534
    
    
    
    3,623
    
    
    
    3.17
    
    
    
    430,113
    
    
    
    2,998
    
    
    
    2.79Noninterest-bearing liabilities
    
    
    42,184
    
    
    
    
    
    
    
    
    
    
    
    36,971Total liabilities
    
    
    499,718
    
    
    
    
    
    
    
    
    
    
    
    467,084Stockholders equity
    
    
    39,055
    
    
    
    
    
    
    
    
    
    
    
    38,486Total liabilities and stockholders equity
    
    $
    538,773
    
    
    
    
    
    
    
    
    
    
    $
    505,570Net interest and dividend income
    
    
    
    
    
    $
    4,079
    
    
    
    
    
    
    
    
    
    
    $
    3,974Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.69
    %
    
    
    
    
    
    
    
    
    
    
    2.86
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.10
    %
    
    
    
    
    
    
    
    
    
    
    3.22
    %
 Provision for Loan Losses.
 12




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##### Table of Contents



Non-Interest Income.
 Non-Interest Expense.
       Income Taxes.
 13




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##### Table of Contents



Comparison of Operating Results for the Nine Months Ended December 31, 2005 and 2004
  Interest Income.
 Interest Expense.
  14




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##### Table of Contents



Nine Months Ended December 31,2005
    
    
    2004Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)Interest-earning assets:Mortgage loans
    
    $
    398,024
    
    
    $
    18,246
    
    
    
    6.11
    %
    
    $
    354,935
    
    
    $
    16,295
    
    
    
    6.12
    %Other loans
    
    
    5,905
    
    
    
    317
    
    
    
    7.16
    
    
    
    5,722
    
    
    
    275
    
    
    
    6.41Investment securities
    
    
    113,685
    
    
    
    3,990
    
    
    
    4.68
    
    
    
    108,100
    
    
    
    3,778
    
    
    
    4.66Short-term investments
    
    
    4,092
    
    
    
    88
    
    
    
    2.87
    
    
    
    18,988
    
    
    
    165
    
    
    
    1.16Total interest-earning assets
    
    
    521,706
    
    
    
    22,641
    
    
    
    5.79
    
    
    
    487,745
    
    
    
    20,513
    
    
    
    5.61Allowance for loan losses
    
    
    (3,744
    )
    
    
    
    
    
    
    
    
    
    
    (3,596
    )Non-interest-earning assets
    
    
    16,898
    
    
    
    
    
    
    
    
    
    
    
    17,511Total assets
    
    $
    534,860
    
    
    
    
    
    
    
    
    
    
    $
    501,660Interest-bearing liabilities:Deposits
    
    $
    306,342
    
    
    
    4,666
    
    
    
    2.03
    
    
    $
    279,742
    
    
    
    3,550
    
    
    
    1.69Advances from FHLB of Boston
    
    
    139,451
    
    
    
    5,125
    
    
    
    4.90
    
    
    
    139,163
    
    
    
    5,140
    
    
    
    4.92Other borrowings
    
    
    8,855
    
    
    
    399
    
    
    
    6.01
    
    
    
    5,709
    
    
    
    196
    
    
    
    4.58Total interest-bearing liabilities
    
    
    454,648
    
    
    
    10,190
    
    
    
    2.99
    
    
    
    424,614
    
    
    
    8,886
    
    
    
    2.79Noninterest-bearing liabilities
    
    
    41,075
    
    
    
    
    
    
    
    
    
    
    
    37,178Total liabilities
    
    
    495,723
    
    
    
    
    
    
    
    
    
    
    
    461,792Stockholders equity
    
    
    39,137
    
    
    
    
    
    
    
    
    
    
    
    39,868Total liabilities and stockholders equity
    
    $
    534,860
    
    
    
    
    
    
    
    
    
    
    $
    501,660Net interest and dividend income
    
    
    
    
    
    $
    12,451
    
    
    
    
    
    
    
    
    
    
    $
    11,627Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.80
    %
    
    
    
    
    
    
    
    
    
    
    2.82
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.18
    %
    
    
    
    
    
    
    
    
    
    
    3.18
    %
 Provision for Loan Losses.
  Non-Interest Income.
 15




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##### Table of Contents



Non-Interest Expense.
      Income Taxes.
 Liquidity and Capital Resources
   16




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##### Table of Contents



Company
    
    BankTier 1 Capital (to average assets)
    
    
    8.01
    %
    
    
    7.39
    %Tier 1 Capital (to risk-weighted assets)
    
    
    11.99
    %
    
    
    11.05
    %Total Capital (to risk-weighted assets)
    
    
    13.05
    %
    
    
    12.11
    %
  Off-Balance Sheet Arrangements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
     17




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##### Table of Contents



December 31,
    
    
    March 31,2005
    
    
    2005Amount
    
    
    % Change
    
    
    Amount
    
    
    % Change(Dollars in thousands)300 basis point increase in rates
    
    $
    (2,324
    )
    
    
    (14.42
    )%
    
    $
    (2,361
    )
    
    
    (13.8
    )%150 basis point decrease in rates
    
    
    
    
    
    
    
    
    
    
    (455
    )
    
    
    (2.7
    )%200 basis point decrease in rates
    
    
    (514
    )
    
    
    (3.19
    )%
    
    
    
    
    
    
    
  
 Item 4. Controls and Procedures
   18




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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
 19




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##### Table of Contents



SIGNATURES
  CENTRAL BANCORP, INC.
           RegistrantFebruary 14, 2006
    
    By:
    
    /s/ John D. DohertyJohn D. Doherty
Chairman, President and Chief Executive OfficerFebruary 14, 2006
    
    By:
    
    /s/ Paul S. FeeleyPaul S. Feeley
Senior Vice President, Treasurer and
Chief Financial Officer
 20