##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 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 organization)
    
    (I.R.S. Employer
Identification No.)399 Highland Avenue, Somerville, Massachusetts
    
    02144(Address of principal executive offices)
    
    (Zip Code)
 (617) 628-4000
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value $1.00 per share, 
and Related Stock Purchase Rights
    
    The NASDAQ Stock Market LLC
 None
 o þ
 o þ
 þ o
 o o
 o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-accelerated Filer o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



CENTRAL BANCORP, INC.
 ANNUAL REPORT ON FORM 10-K
 TABLE OF CONTENTS
 PART
IPageItem 1.
    
    Business
    
    1Item 1A.
    
    Risk Factors
    
    23Item 1B.
    
    Unresolved Staff
Comments
    
    30Item 2.
    
    Properties
    
    31Item 3.
    
    Legal Proceedings
    
    32Item 4.
    
    [Removed and
Reserved]
    
    32PART
IIItem 5.
    
    Market for the
Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    32Item 6.
    
    Selected Financial
Data
    
    33Item 7.
    
    Managements
Discussion and Analysis of Financial Condition and Results of
Operation
    
    35Item 7A.
    
    Quantitative and
Qualitative Disclosures About Market Risk
    
    46Item 8.
    
    Financial Statements
and Supplementary Data
    
    47Item 9.
    
    Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure
    
    84Item 9A(T).
    
    Controls and
Procedures
    
    84Item 9B.
    
    Other Information
    
    84PART
IIIItem 10.
    
    Directors, Executive
Officers and Corporate Governance
    
    85Item 11.
    
    Executive
Compensation
    
    85Item 12.
    
    Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    85Item 13.
    
    Certain
Relationships and Related Transactions, and Director Independence
    
    86Item 14.
    
    Principal Accounting
Fees and Services
    
    86PART
IVItem 15.
    
    Exhibits and
Financial Statement Schedules
    
    86SIGNATURESEX-21EX-23.1EX-31.1EX-31.2EX-32EX-99.1EX-99.2




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##### Table of Contents



PART I
 Note Regarding Forward-Looking Statements
 This document, as well as other written communications made from time to time by Central
Bancorp, Inc. (the Company) and subsidiaries and oral communications made from time to time by
authorized officers of the Company, may contain statements relating to the future results of the
Company (including certain projections, such as earnings projections, necessary tax provisions, and
business trends) that are considered forward looking statements as defined in the Private
Securities Litigation Reform Act of 1995 (the PSLRA). Such forward-looking statements may be
identified by the use of such words as intend, believe, expect, should, planned,
estimated, and potential. For these statements, the Company claims the protection of the safe
harbor for forward-looking statements contained in the PSLRA. The Companys ability to predict
future results is inherently uncertain and the Company cautions you that a number of important
factors could cause actual results to differ materially from those currently anticipated in any
forward-looking statement. These factors include but are not limited to: recent and future
bail-out actions by the government; the impact of the Companys participation in the U.S.
Department of Treasurys Troubled Asset Relief Program; a further slowdown in the national and
Massachusetts economies; a further deterioration in asset values locally and nationwide; the
volatility of rate-sensitive deposits; changes in the regulatory environment; increasing
competitive pressure in the banking industry; operational risks including data processing system
failures or fraud; asset/liability matching risks and liquidity risks; continued access to
liquidity sources; changes in our borrowers performance on loans; changes in critical accounting
policies and judgments; changes in accounting policies or procedures as may be required by the
Financial Accounting Standards Board or other regulatory agencies; changes in the equity and debt
securities markets; governmental action as a result of our inability to comply with regulatory
orders and agreements; the effect of additional provision for loan losses; the effect of an
impairment charge on our deferred tax asset; fluctuations of our stock price; the success and
timing of our business strategies; the impact of reputation risk created by these developments on
such matters as business generation and retention, funding and liquidity; the impact of regulatory
restrictions on our ability to receive dividends from our subsidiaries; and political developments,
wars or other hostilities may disrupt or increase volatility in securities or otherwise affect
economic conditions.
 The Company does not undertake and specifically disclaims any obligation to update any
forward-looking statements to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
 
 Item 1.

    Business
 General
 The Company.
 The Bank.
 1




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##### Table of Contents



Regulation and Supervision of the Bank 
Insurance of Deposit Accounts
  www.centralbk.com
  Market Area
  Competition
   2




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##### Table of Contents



Lending Activities
   3




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##### Table of Contents



Loan Portfolio Composition.
 At March 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in Thousands)Mortgage loans:Residential
    
    $
    217,053
    
    
    
    47.03
    %
    
    $
    183,327
    
    
    
    39.80
    %
    
    $
    178,727
    
    
    
    37.6
    %
    
    $
    175,259
    
    
    
    38.1
    %
    
    $
    160,381
    
    
    
    38.6
    %Commercial
    
    
    227,938
    
    
    
    49.39
    
    
    
    249,941
    
    
    
    54.25
    
    
    
    244,496
    
    
    
    51.5
    
    
    
    235,535
    
    
    
    51.1
    
    
    
    213,935
    
    
    
    51.5Construction
    
    
    2,722
    
    
    
    0.59
    
    
    
    14,089
    
    
    
    3.06
    
    
    
    30,950
    
    
    
    6.5
    
    
    
    35,011
    
    
    
    7.6
    
    
    
    27,680
    
    
    
    6.7Home equity
    
    
    8,817
    
    
    
    1.91
    
    
    
    7,347
    
    
    
    1.59
    
    
    
    6,559
    
    
    
    1.4
    
    
    
    6,901
    
    
    
    1.5
    
    
    
    7,505
    
    
    
    1.8Total mortgage loans
    
    
    456,530
    
    
    
    98.92
    
    
    
    454,704
    
    
    
    98.70
    
    
    
    460,732
    
    
    
    97.0
    
    
    
    452,706
    
    
    
    98.3
    
    
    
    409,501
    
    
    
    98.6Other loans:Commercial and industrial
    
    
    4,037
    
    
    
    0.88
    
    
    
    4,834
    
    
    
    1.05
    
    
    
    13,173
    
    
    
    2.8
    
    
    
    6,605
    
    
    
    1.4
    
    
    
    4,457
    
    
    
    1.1Consumer
    
    
    943
    
    
    
    0.20
    
    
    
    1,132
    
    
    
    0.25
    
    
    
    1,037
    
    
    
    0.2
    
    
    
    1,231
    
    
    
    0.3
    
    
    
    1,360
    
    
    
    0.3Total other loans
    
    
    4,980
    
    
    
    1.08
    
    
    
    5,966
    
    
    
    1.30
    
    
    
    14,210
    
    
    
    3.0
    
    
    
    7,836
    
    
    
    1.7
    
    
    
    5,817
    
    
    
    1.4Total loans
    
    
    461,510
    
    
    
    100.0
    %
    
    
    460,670
    
    
    
    100.0
    %
    
    
    474,942
    
    
    
    100.0
    %
    
    
    460,542
    
    
    
    100.0
    %
    
    
    415,318
    
    
    
    100.0
    %Less:Allowance for loan losses
    
    
    3,038
    
    
    
    
    
    
    
    3,191
    
    
    
    
    
    
    
    3,613
    
    
    
    
    
    
    
    3,881
    
    
    
    
    
    
    
    3,788Loans, net
    
    $
    458,472
    
    
    
    
    
    
    $
    457,479
    
    
    
    
    
    
    $
    471,329
    
    
    
    
    
    
    $
    456,661
    
    
    
    
    
    
    $
    411,530
 Loan Portfolio Sensitivity.
 Due AfterDue Within
    
    
    One Through
    
    
    Due AfterOne Year
    
    
    Five Years
    
    
    Five Years
    
    
    Total(In Thousands)Commercial and industrial loans
    
    $
    2,910
    
    
    $
    743
    
    
    $
    384
    
    
    $
    4,037Construction loans
    
    
    2,573
    
    
    
    34
    
    
    
    115
    
    
    
    2,722Total
    
    $
    5,483
    
    
    $
    777
    
    
    $
    499
    
    
    $
    6,759
 Residential Lending.
 e.g.,
 4




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##### Table of Contents



Commercial Real Estate and Construction Lending .
   Home Equity Lines of Credit . Wall Street Journal
 Commercial and Industrial, Consumer and Other Loans .
 5




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##### Table of Contents



Risks of Residential and Commercial Real Estate, Construction, and Commercial and Industrial
Lending . Nonperforming Assets
 Origination Fees and Other Fees .
  Loan Solicitation and Processing .
  Nonperforming Assets .
  6




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At March 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(Dollars in Thousands)Loans accounted for on a nonaccrual
basis:Nonperforming loans
    
    $
    5,575
    
    
    $
    4,617
    
    
    $
    9,606
    
    
    $
    330
    
    
    $
    1,220Restructured loans
    
    
    671
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    Real estate acquired by foreclosure or
deed in lieu of foreclosure
    
    
    60
    
    
    
    2,986
    
    
    
    
    
    
    
    
    
    
    
    Total nonperforming assets
    
    $
    6,306
    
    
    $
    7,753
    
    
    $
    9,606
    
    
    $
    330
    
    
    $
    1,220Impaired loans, accruing
    
    $
    10,597
    
    
    $
    
    
    
    $
    136
    
    
    $
    
    
    
    $
    Nonperforming loans to total loans
    
    
    1.35
    %
    
    
    1.03
    %
    
    
    2.02
    %
    
    
    0.07
    %
    
    
    0.29
    %Nonperforming assets to total assets
    
    
    1.16
    %
    
    
    1.35
    %
    
    
    1.68
    %
    
    
    0.06
    %
    
    
    0.22
    %
  7




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##### Table of Contents



Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations,
Provision for Loan Losses.
 Allowance for Loan Losses . Receivables Contingencies
 8




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##### Table of Contents



At or for the Years Ended March 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(Dollars in Thousands)Balance at beginning of year
    
    $
    3,191
    
    
    $
    3,613
    
    
    $
    3,881
    
    
    $
    3,788
    
    
    $
    3,681Provision (reduction of provision)
    
    
    600
    
    
    
    2,125
    
    
    
    (70
    )
    
    
    80
    
    
    
    100Charge-offs:Construction
    
    
    
    
    
    
    (2,201
    )
    
    
    
    
    
    
    
    
    
    
    Residential mortgage
    
    
    (250
    )
    
    
    (144
    )
    
    
    
    
    
    
    
    
    
    
    Commercial mortgage
    
    
    (469
    )
    
    
    (178
    )
    
    
    (173
    )
    
    
    
    
    
    
    Other loans
    
    
    (54
    )
    
    
    (36
    )
    
    
    (76
    )
    
    
    (48
    )
    
    
    (39
    )Total charge-offs
    
    
    (773
    )
    
    
    (2,559
    )
    
    
    (249
    )
    
    
    (48
    )
    
    
    (39
    )Recoveries:Residential mortgage
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Commercial mortgage
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    43
    
    
    
    37Other loans
    
    
    20
    
    
    
    9
    
    
    
    14
    
    
    
    18
    
    
    
    9Total recoveries
    
    
    20
    
    
    
    12
    
    
    
    51
    
    
    
    61
    
    
    
    46Net (charge-offs) recoveries
    
    
    (753
    )
    
    
    (2,547
    )
    
    
    (198
    )
    
    
    13
    
    
    
    7Balance at end of year
    
    $
    3,038
    
    
    $
    3,191
    
    
    $
    3,613
    
    
    $
    3,881
    
    
    $
    3,788Average loans outstanding during the
year*
    
    $
    461,592
    
    
    $
    464,288
    
    
    $
    462,164
    
    
    $
    433,935
    
    
    $
    406,474Ratio of net charge-offs to average loans
    
    
    0.16
    %
    
    
    0.55
    %
    
    
    0.04
    %
    
    
    n/a
    
    
    
    n/aTotal loans outstanding at end of year
    
    $
    461,510
    
    
    $
    460,670
    
    
    $
    474,942
    
    
    $
    460,542
    
    
    $
    415,318Ratio of allowance for loan losses to
loans at end of year
    
    
    0.66
    %
    
    
    0.69
    %
    
    
    0.76
    %
    
    
    0.84
    %
    
    
    0.91
    %
 
 n/a
    
    means either not applicable or not meaningful*
    
    Does not include loans held for sale 9




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At March 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofLoans to
    
    
    
    
    
    
    Loans to
    
    
    
    
    
    
    Loans to
    
    
    
    
    
    
    Loans to
    
    
    
    
    
    
    Loans toAmount
    
    
    Total Loans
    
    
    Amount
    
    
    Total Loans
    
    
    Amount
    
    
    Total Loans
    
    
    Amount
    
    
    Total Loans
    
    
    Amount
    
    
    Total Loans(Dollars in Thousands)Mortgage loans:Residential
    
    $
    721
    
    
    
    47.03
    %
    
    $
    655
    
    
    
    39.80
    %
    
    $
    520
    
    
    
    37.60
    %
    
    $
    456
    
    
    
    38.10
    %
    
    $
    443
    
    
    
    38.60
    %Commercial
    
    
    2,023
    
    
    
    49.39
    
    
    
    1,941
    
    
    
    54.25
    
    
    
    1,616
    
    
    
    51.50
    
    
    
    2,642
    
    
    
    51.10
    
    
    
    2,653
    
    
    
    51.50Construction
    
    
    14
    
    
    
    0.59
    
    
    
    406
    
    
    
    3.06
    
    
    
    1,246
    
    
    
    6.50
    
    
    
    587
    
    
    
    7.60
    
    
    
    523
    
    
    
    6.70Home equity
    
    
    133
    
    
    
    1.91
    
    
    
    114
    
    
    
    1.59
    
    
    
    86
    
    
    
    1.40
    
    
    
    84
    
    
    
    1.50
    
    
    
    88
    
    
    
    1.80Total mortgage loans
    
    
    2,891
    
    
    
    98.92
    
    
    
    3,116
    
    
    
    98.70
    
    
    
    3,468
    
    
    
    97.00
    
    
    
    3,769
    
    
    
    98.30
    
    
    
    3,707
    
    
    
    98.60Other loans
    
    
    147
    
    
    
    1.08
    
    
    
    75
    
    
    
    1.30
    
    
    
    145
    
    
    
    3.00
    
    
    
    112
    
    
    
    1.70
    
    
    
    81
    
    
    
    1.40Total
    
    $
    3,038
    
    
    
    100.00
    %
    
    $
    3,191
    
    
    
    100.00
    %
    
    $
    3,613
    
    
    
    100.00
    %
    
    $
    3,881
    
    
    
    100.00
    %
    
    $
    3,788
    
    
    
    100.00
    %
 10




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Investment Activities
    11




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##### Table of Contents



At March 31,2010
    
    
    2009
    
    
    2008(Dollars in Thousands)U.S. Government and agency obligations
    
    $
    
    
    
    $
    1,503
    
    
    $
    3,547Corporate bonds
    
    
    1,752
    
    
    
    701
    
    
    
    8,312Mortgage-backed securities
    
    
    24,993
    
    
    
    28,353
    
    
    
    22,450Trust preferred securities
    
    
    1,045
    
    
    
    750
    
    
    
    1,012Total debt securities
    
    
    27,790
    
    
    
    31,307
    
    
    
    35,321Preferred stock
    
    
    3,255
    
    
    
    1,650
    
    
    
    11,422Common stock
    
    
    3,323
    
    
    
    2,258
    
    
    
    6,217Total investment securities
    
    $
    34,468
    
    
    $
    35,215
    
    
    $
    52,960Percentage of total assets
    
    
    6.35
    %
    
    
    6.12
    %
    
    
    9.27
    %
   One Year or Less
    
    
    One to Five Years
    
    
    Five to Ten Years
    
    
    More than Ten Years
    
    
    Total Investment PortfolioAmortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Fair
    
    
    AverageCost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Cost
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Value
    
    
    Yield(Dollars in Thousands)Corporate bonds
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    1,752
    
    
    
    7.02
    %
    
    $
    
    
    
    
    
    %
    
    $
    1,752
    
    
    $
    1,752
    
    
    
    7.02
    %Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    5,118
    
    
    
    4.19
    
    
    
    6
    
    
    
    1.50
    
    
    
    19,129
    
    
    
    5.30
    
    
    
    24,253
    
    
    
    24,993
    
    
    
    5.06Trust preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,002
    
    
    
    7.78
    
    
    
    1,002
    
    
    
    1,045
    
    
    
    7.78Total
    
    $
    
    
    
    
    
    
    
    $
    5,118
    
    
    
    
    
    
    $
    1,758
    
    
    
    
    
    
    $
    20,131
    
    
    
    
    
    
    $
    27,007
    
    
    $
    27,790
 Deposits, Borrowed Funds, and Other Sources of Funds
 General .
 Deposits .
 12




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##### Table of Contents



Deposit Accounts.
 Years Ended March 31,2010
    
    
    2009
    
    
    2008Average

    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    

    
    
    AverageAverage
    
    
    % of
    
    
    Rate
    
    
    Average
    
    
    % of
    
    
    Rate
    
    
    Average
    
    
    % of
    
    
    RateBalance
    
    
    Deposits
    
    
    Paid
    
    
    Balance
    
    
    Deposits
    
    
    Paid
    
    
    Balance
    
    
    Deposits
    
    
    Paid(Dollars in Thousands)Demand deposit accounts
    
    $
    42,247
    
    
    
    12.04
    %
    
    
    
    %
    
    $
    38,807
    
    
    
    10.92
    %
    
    
    
    %
    
    $
    37,863
    
    
    
    10.38
    %
    
    
    
    %NOW accounts
    
    
    27,856
    
    
    
    7.93
    
    
    
    0.29
    
    
    
    26,029
    
    
    
    7.32
    
    
    
    0.37
    
    
    
    28,384
    
    
    
    7.78
    
    
    
    0.63Passbook and other savings
accounts
    
    
    51,577
    
    
    
    14.69
    
    
    
    0.45
    
    
    
    50,240
    
    
    
    14.13
    
    
    
    0.51
    
    
    
    52,071
    
    
    
    14.28
    
    
    
    0.60Money market deposit
accounts
    
    
    79,583
    
    
    
    22.67
    
    
    
    1.32
    
    
    
    67,111
    
    
    
    18.88
    
    
    
    2.30
    
    
    
    58,211
    
    
    
    15.97
    
    
    
    3.64Term deposit certificates
    
    
    149,814
    
    
    
    42.67
    
    
    
    2.08
    
    
    
    173,303
    
    
    
    48.75
    
    
    
    2.95
    
    
    
    188,101
    
    
    
    51.59
    
    
    
    4.34Total deposits
    
    $
    351,077
    
    
    
    100.00
    %
    
    
    1.45
    %
    
    $
    355,490
    
    
    
    100.00
    %
    
    
    1.97
    %
    
    $
    364,630
    
    
    
    100.00
    %
    
    
    2.96
    %
 Time Deposits in Excess of $100,000.
 Maturity Period:Three months or less
    
    $
    16,733Three through six months
    
    
    7,881Six through twelve months
    
    
    20,531Over twelve months
    
    
    6,550Total
    
    $
    51,695
 Borrowings .
  At or for theYears Ended March 31,2010
    
    
    2009
    
    
    2008(Dollars in Thousands)Amounts outstanding at end of period
    
    $
    143,469
    
    
    $
    144,583
    
    
    $
    156,691Weighted average rate at end of period
    
    
    3.98
    %
    
    
    4.52
    %
    
    
    4.57
    %Maximum amount of borrowings outstanding at any month end
    
    $
    161,509
    
    
    $
    156,682
    
    
    $
    161,700Approximate average amounts outstanding at any month end
    
    $
    146,210
    
    
    $
    147,117
    
    
    $
    140,925Approximate weighted average rate during the year
    
    
    4.43
    %
    
    
    4.59
    %
    
    
    4.97
    %
 Troubled Asset Relief Program Capital Purchase Program
 13




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##### Table of Contents



Subsidiaries
       14




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##### Table of Contents



REGULATION AND SUPERVISION
 Regulation and Supervision of the Company
 General .
 Activities.
  Acquisitions.
  15




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##### Table of Contents



Capital Requirements. Regulation and
Supervision of the BankCapital Requirements.
 Dividends . Regulation and Supervision of the BankPrompt Corrective
Regulatory Action.
  Stock Repurchases.
 The Sarbanes-Oxley Act of 2002
  16




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##### Table of Contents



Regulation and Supervision of the Bank
 General .
 Massachusetts State Law .
 Capital Requirements .
  17




---



##### Table of Contents



Dividend Limitations .
  Regulation and Supervision of the BankPrompt Corrective
Regulatory Action.
  Investment Activities.
 Insurance of Deposit Accounts.
 18




---



##### Table of Contents



Prompt Corrective Regulatory Action .
 19




---



##### Table of Contents



Adequately
    
    
    
    SignificantlyWell Capitalized
    
    Capitalized
    
    Undercapitalized
    
    UndercapitalizedTotal risk-based
capital ratio
    
    10.0% or more
    
    8.0% or more
    
    Less than 8.0%
    
    Less than 6.0%Tier 1 risk-based
capital ratio
    
    6.0% or more
    
    4.0% or more
    
    Less than 4.0%
    
    Less than 3.0%Leverage ratio
    
    5.0% or more
    
    4.0% or more *
    
    Less than 4.0% *
    
    Less than 3.0%
 
 *
    
    3.0% if the institution has a composite 1 CAMELS rating.  Loans to Executive Officers, Directors and Principal Stockholders .
 20




---



##### Table of Contents



Transactions with Affiliates .
 Enforcement.
 Prompt Corrective Regulatory Action.
 Federal Reserve System.
 Community Reinvestment Act.
 21




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##### Table of Contents



Federal Home Loan Bank System.
   Regulatory Restructuring Legislation.
  Employees
  22




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##### Table of Contents



Item 1A. Risk Factors
 An investment in shares of our common stock involves various risks. Before deciding to invest
in our common stock, you should carefully consider the risks described below in conjunction with
the other information in this Annual Report on Form 10-K and information incorporated by reference
into this Annual Report on Form 10-K , including our consolidated financial statements and related
notes. Our business, financial condition and results of operations could be harmed by any of the
following risks or by other risks that have not been identified or that we may believe are
immaterial or unlikely. The value or market price of our common stock could decline due to any of
these risks, and you may lose all or part of your investment. The risks discussed below also
include forward-looking statements and our actual results may differ substantially from those
discussed in these forward-looking statements.
 Our nonresidential real estate and construction lending may expose us to a greater risk of loss and
hurt our earnings and profitability.
    Severe, adverse and precipitous economic and market conditions have adversely affected us and our
industry.
  23




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##### Table of Contents




    
    We potentially face increased regulation of our industry including heightened legal
standards and regulatory requirements or expectations imposed in connection with recent
and anticipated legislation. Compliance with such regulation may increase our costs and
limit our ability to pursue business opportunities.
    
    The process we use to estimate losses inherent in our credit exposure requires
difficult, subjective and complex judgments, including forecasts of economic conditions
and how these economic conditions might impair the ability of our borrowers to repay
their loans. The level of uncertainty concerning economic conditions may adversely
affect the accuracy of our estimates which may, in turn, impact the reliability of the
process.
    
    We will be required to pay significantly higher FDIC premiums because market
developments have significantly depleted the insurance fund of the FDIC and reduced the
ratio of reserves to insured deposits, also our current risk profile will cause us to
pay higher premiums.
    
    The number of our borrowers that may be unable to make timely repayments of their
loans, or the decrease in value of real estate collateral securing the payment of such
loans could continue to escalate and result in significant credit losses, increased
delinquencies, foreclosures and customer bankruptcies, any of which could have a
material adverse effect on our operating results.
    
    Further disruptions in the capital markets or other events, including actions by
rating agencies and deteriorating investor expectations, may result in an inability to
borrow on favorable terms or on any terms from other financial institutions.
    
    Increased competition among financial services companies due to the recent
consolidation of certain competing financial institutions, the conversion of certain
investment banks to bank holding companies and the favorable governmental treatment
afforded to the largest of the financial institutions may adversely affect our ability
to market our products and services and continue to obtain market share.
 Recent legislative and regulatory initiatives to address difficult market and economic conditions
may not stabilize the U.S. banking system. If current levels of market disruption and volatility
continue or worsen, there can be no assurance that we will not experience an adverse effect, which
may be material, on our ability to access capital and on our business, financial condition, results
of operations, and cash flows.
   24




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##### Table of Contents



U.S. and international financial markets and economic conditions, particularly in our market area,
could adversely affect our liquidity, results of operations and financial condition.
  Proposed regulatory reform may have a material impact on our operations.
  Liquidity is essential to our businesses and we rely on external sources to finance a
significant portion of our operations.
  25




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##### Table of Contents



The limitations on executive compensation imposed through our participation in the TARP Capital
Purchase Program may restrict our ability to attract, retain and motivate key employees, which
could adversely affect our operations.
  Future dividend payments and common stock repurchases are restricted by the terms of the U.S.
Treasurys equity investment in us.
  The terms governing the issuance of the preferred stock to the U.S. Treasury may be changed, the
effect of which may have an adverse effect on our operations.
  Our business is subject to the success of the local economy in which we operate.
  26




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##### Table of Contents



If the value of real estate in northwestern suburbs of Boston were to decline materially, a
significant portion of our loan portfolio could become under-collateralized, which could have a
material adverse effect on us.
  Our continued pace of growth may require us to raise additional capital in the future, but that
capital may not be available when it is needed.
   Competition from financial institutions and other financial service providers may adversely affect
our growth and profitability.
  27




---



##### Table of Contents



Future FDIC assessments will reduce our earnings.
 ,
 Fluctuations in interest rates could reduce our profitability and affect the value of our assets.
 e.g.
 .
   Item 7A,
Quantitative and Qualitative Disclosures About Market Risk.
 28




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##### Table of Contents



Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.
    We are dependent upon the services of our management team.
  Our failure to continue to recruit and retain qualified loan originators could adversely affect our
ability to compete successfully and affect our profitability.
  We operate in a highly regulated environment and we may be adversely affected by changes in laws
and regulations.
  29




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##### Table of Contents



We are subject to security and operational risks relating to our use of technology that could
damage our reputation and our business.
  We may have fewer resources than many of our competitors to invest in technological improvements.
  Our ability to service our debt, pay dividends and otherwise pay our obligations as they come due
is substantially dependent on capital distributions from Central Co-operative Bank, and these
distributions are subject to regulatory limits and other restrictions.
  
 Item 1B. Unresolved Staff Comments
  30




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##### Table of Contents



Item 2. Properties
  Net BookValue atYear
    
    
    March 31, 2010Office Location
    
    Opened
    
    
    (In Thousands)Main Office
399 Highland Avenue
Somerville, MA (owned)
    
    
    1974
    
    
    $
    264Branch Offices:
175 Broadway
Arlington, MA (owned)
    
    
    1982
    
    
    
    10685 Wilmington Road
Burlington, MA (leased)
    
    
    1978
    (a)
    
    
    271192 Boylston Street
Chestnut Hill (Brookline), MA (owned)
    
    
    1954
    
    
    
    159137 Pleasant Street
Malden, MA (leased)
    
    
    1975
    (b)
    
    
    27846 Main Street
Melrose, MA (owned)
    
    
    1994
    
    
    
    189275 Main Street
Woburn, MA (owned)
    
    
    1980
    
    
    
    444198 Lexington Street
Woburn, MA (owned)
    
    
    1974
    
    
    
    175Woburn High School
Woburn, MA (leased)
    
    
    2002
    (c)
    
    
    16Stand-Alone ATM
94 Highland Avenue
Somerville, MA (leased)
    
    
    2004
    (d)
    
    
    Loan Center
401 Highland Avenue
Somerville, MA (leased)
    
    
    2002
    (e)
    
    
    200Operations Center/Branch Office
270 Mystic Avenue
Medford, MA (leased)
    
    
    2006
    (f)
    
    
    455
 
 (a)
    
    The lease for the Burlington branch expires October 31, 2012 with a five-year renewal option.(b)
    
    The lease for the Malden branch expires August 31, 2015.(c)
    
    The lease for the Woburn High School branch is for one year, renewable annually on an automatic basis.(d)
    
    The lease for the stand-alone ATM expires November 30, 2010 with an option to extend for three three-year terms.(e)
    
    The lease for the Commercial Loan Center expires May 1, 2015 with two five-year renewal options.(f)
    
    In March 2005, the Bank signed a lease for a combined retail branch and operations center to
be located at 270 Mystic Avenue, Medford. The lease was subsequently renegotiated and the
Bank took occupancy in May 2006. The initial rent under the lease is for $150,000 per year
and the initial term is 10 years. There are options to extend the lease by two five-year
terms.  31




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##### Table of Contents



Item 3. Legal Proceedings
  
 Item 4. (Removed and Reserved)
 
 PART II
 
 Item 5. Market for the Registrants Common Equity and Related Stockholder Matters and Issuer Purchases of Securities
 SM
  Common Stock PricesFiscal 2010
    
    High
    
    
    LowJune 30, 2009
    
    $
    8.00
    
    
    $
    4.05September 30, 2009
    
    
    9.40
    
    
    
    5.60December 31, 2009
    
    
    10.80
    
    
    
    7.96March 31, 2010
    
    
    10.09
    
    
    
    8.11Fiscal 2009
    
    High
    
    
    LowJune 30, 2008
    
    $
    21.15
    
    
    $
    11.00September 30, 2008
    
    
    14.27
    
    
    
    8.32December 31, 2008
    
    
    31.50
    
    
    
    3.04March 31, 2009
    
    
    6.80
    
    
    
    4.27Cash Dividends(payable dates)Fiscal 2010
    
    
    
    
    
    AmountMay 15, 2009
    
    
    
    
    
    $
        0.05August 21, 2009
    
    
    
    
    
    
    0.05November 20, 2009
    
    
    
    
    
    
    0.05February 19, 2010
    
    
    
    
    
    
    0.05Fiscal 2009
    
    
    
    
    
    AmountMay 16, 2008
    
    
    
    
    
    $
    0.18August 15, 2008
    
    
    
    
    
    
    0.18November 21, 2008
    
    
    
    
    
    
    0.18February 20, 2009
    
    
    
    
    
    
    0.18
  32




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##### Table of Contents



Item 6. Selected Financial Data
  At or for the Year Ended March 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(Dollars in Thousands, Except Per Share Data)Balance SheetTotal assets
    
    $
    542,444
    
    
    $
    575,827
    
    
    $
    571,245
    
    
    $
    566,140
    
    
    $
    547,275Total loans
    
    
    461,510
    
    
    
    460,670
    
    
    
    474,942
    
    
    
    460,542
    
    
    
    415,318Investments available for sale
    
    
    34,368
    
    
    
    35,215
    
    
    
    52,960
    
    
    
    65,763
    
    
    
    97,195Deposits
    
    
    339,169
    
    
    
    375,074
    
    
    
    361,089
    
    
    
    388,573
    
    
    
    393,413Total borrowings
    
    
    154,810
    
    
    
    156,938
    
    
    
    168,173
    
    
    
    137,053
    
    
    
    111,290Total stockholders equity
    
    
    45,113
    
    
    
    40,239
    
    
    
    38,816
    
    
    
    37,702
    
    
    
    39,189Shares outstanding
    
    
    1,667,151
    
    
    
    1,639,951
    
    
    
    1,639,951
    
    
    
    1,639,951
    
    
    
    1,590,951Statements of OperationsNet interest and dividend income
    
    $
    17,013
    
    
    $
    15,862
    
    
    $
    13,596
    
    
    $
    14,449
    
    
    $
    16,317Provision for loan losses (reduction of provision)
    
    
    600
    
    
    
    2,125
    
    
    
    (70
    )
    
    
    80
    
    
    
    100Net (loss) gain from sales and write-downs of
investment securities
    
    
    (465
    )
    
    
    (9,796
    )
    
    
    645
    
    
    
    581
    
    
    
    419Gain on sales of loans
    
    
    329
    
    
    
    111
    
    
    
    158
    
    
    
    99
    
    
    
    208Other noninterest income
    
    
    1,547
    
    
    
    1,640
    
    
    
    1,429
    
    
    
    1,314
    
    
    
    1,370Total noninterest expenses
    
    
    15,146
    
    
    
    15,159
    
    
    
    13,859
    
    
    
    14,856
    
    
    
    14,183Net income (loss)
    
    
    1,993
    
    
    
    (6,205
    )
    
    
    1,447
    
    
    
    1,020
    
    
    
    2,643Earnings (loss) per common share  diluted
    
    
    0.92
    
    
    
    (4.58
    )
    
    
    1.07
    
    
    
    0.70
    
    
    
    1.83Selected RatiosInterest rate spread
    
    
    2.92
    %
    
    
    2.63
    %
    
    
    2.06
    %
    
    
    2.21
    %
    
    
    2.72
    %Net yield on interest-earning assets
    
    
    3.21
    
    
    
    2.96
    
    
    
    2.51
    
    
    
    2.68
    
    
    
    3.11Noninterest expenses to average assets
    
    
    2.73
    
    
    
    2.73
    
    
    
    2.49
    
    
    
    2.69
    
    
    
    2.64Book equity-to-assets
    
    
    8.32
    
    
    
    6.99
    
    
    
    6.79
    
    
    
    6.66
    
    
    
    7.16Return on average assets
    
    
    0.36
    
    
    
    (1.12
    )
    
    
    0.26
    
    
    
    0.18
    
    
    
    0.49Return on average stockholders equity
    
    
    4.66
    
    
    
    (16.68
    )
    
    
    3.76
    
    
    
    2.59
    
    
    
    6.78Dividend payout ratio for common shares
    
    
    21.74
    
    
    
    n/a
    
    
    
    67.29
    
    
    
    100.00
    
    
    
    35.68Book value per common share
    
    $
    21.31
    
    
    $
    18.76
    
    
    $
    23.67
    
    
    $
    22.99
    
    
    $
    24.64Tangible book value per common share
    
    $
    19.97
    
    
    $
    17.40
    
    
    $
    22.31
    
    
    $
    21.63
    
    
    $
    23.24
 33




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##### Table of Contents



Quarterly Results of Operations (In Thousands, Except Per Share Data)
  2010First
    
    
    Second
    
    
    Third
    
    
    FourthInterest and dividend income
    
    $
    7,188
    
    
    $
    7,225
    
    
    $
    7,088
    
    
    $
    7,037Interest expense
    
    
    3,340
    
    
    
    3,039
    
    
    
    2,711
    
    
    
    2,435Net interest and dividend income
    
    
    3,848
    
    
    
    4,186
    
    
    
    4,377
    
    
    
    4,602Provision for loan losses
    
    
    50
    
    
    
    200
    
    
    
    100
    
    
    
    250Noninterest income
    
    
    534
    
    
    
    410
    
    
    
    379
    
    
    
    87Noninterest expenses
    
    
    3,922
    
    
    
    3,485
    
    
    
    3,983
    
    
    
    3,756Income before income taxes
    
    
    410
    
    
    
    911
    
    
    
    673
    
    
    
    683Income tax provision (benefit)
    
    
    112
    
    
    
    307
    
    
    
    307
    
    
    
    (42
    )Net income
    
    $
    298
    
    
    $
    604
    
    
    $
    366
    
    
    $
    725Earnings per common share  basic
    
    $
    0.10
    
    
    $
    0.31
    
    
    $
    0.15
    
    
    $
    0.39Earnings per common share  diluted
    
    $
    0.10
    
    
    $
    0.31
    
    
    $
    0.14
    
    
    $
    0.37
 2009First
    
    
    Second
    
    
    Third
    
    
    FourthInterest and dividend income
    
    $
    7,865
    
    
    $
    7,800
    
    
    $
    7,418
    
    
    $
    7,208Interest expense
    
    
    3,940
    
    
    
    3,602
    
    
    
    3,503
    
    
    
    3,384Net interest and dividend income
    
    
    3,925
    
    
    
    4,198
    
    
    
    3,915
    
    
    
    3,824Provision for loan losses
    
    
    200
    
    
    
    900
    
    
    
    
    
    
    
    1,025Noninterest income
    
    
    428
    
    
    
    (9,094
    )
    
    
    432
    
    
    
    189Noninterest expenses
    
    
    3,608
    
    
    
    3,606
    
    
    
    3,791
    
    
    
    4,153Income (loss) before income taxes (benefit)
    
    
    545
    
    
    
    (9,402
    )
    
    
    556
    
    
    
    (1,165
    )Income tax provision (benefit)
    
    
    144
    
    
    
    64
    
    
    
    (3,361
    )
    
    
    (108
    )Net income (loss)
    
    $
    401
    
    
    $
    (9,466
    )
    
    $
    3,917
    
    
    $
    (1,057
    )Earnings (loss) per common share  basic
    
    $
    0.29
    
    
    $
    (6.80
    )
    
    $
    2.76
    
    
    $
    (0.86
    )Earnings (loss) per common share  diluted
    
    $
    0.29
    
    
    $
    (6.80
    )
    
    $
    2.76
    
    
    $
    (0.86
    )
 34




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
    Application of Critical Accounting Policies
 Compensation  Stock Compensation
 Allowance for Loan Losses
 35




---



##### Table of Contents



Other Real Estate Owned
 Fair Value of Investments
    Income Taxes.
 Accounting for Goodwill and Impairment. Intangibles  Goodwill and Other e.g
 Stock-Based Compensation. Compensation-Stock Compensation
 36




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##### Table of Contents



Troubled Asset Relief Program Capital Purchase Program
  Results of Operations
 Overview.
   37




---



##### Table of Contents



Net Interest Rate Spread and Net Interest Margin.
 38




---



##### Table of Contents



Years Ended March 31,2010
    
    
    2009Average/
    
    
    
    
    
    
    
    
    
    
    Average/Average
    
    
    
    
    
    
    Yield
    
    
    Average
    
    
    
    
    
    
    YieldBalance
    
    
    Interest
    
    
    Cost
    
    
    Balance
    
    
    Interest
    
    
    Cost(Dollars in Thousands)Assets:Interest-earning assets:Mortgage loans
    
    $
    458,214
    
    
    $
    26,694
    
    
    
    5.83
    %
    
    $
    455,782
    
    
    $
    27,141
    
    
    
    5.95
    %Other loans
    
    
    5,560
    
    
    
    320
    
    
    
    5.76
    
    
    
    8,507
    
    
    
    533
    
    
    
    6.28Total loans
    
    
    463,774
    
    
    
    27,014
    
    
    
    5.82
    
    
    
    464,289
    
    
    
    27,674
    
    
    
    5.96Short-term investments
    
    
    20,504
    
    
    
    50
    
    
    
    0.24
    
    
    
    25,812
    
    
    
    150
    
    
    
    0.58Investment securities
    
    
    45,185
    
    
    
    1,473
    
    
    
    3.26
    
    
    
    45,374
    
    
    
    2,467
    
    
    
    5.44Total investments
    
    
    65,689
    
    
    
    1,523
    
    
    
    2.32
    
    
    
    71,186
    
    
    
    2,617
    
    
    
    3.68Total interest-earnings assets
    
    
    529,463
    
    
    
    28,537
    
    
    
    5.39
    
    
    
    535,475
    
    
    
    30,291
    
    
    
    5.66Allowance for loan losses
    
    
    (2,962
    )
    
    
    
    
    
    
    
    
    
    
    (4,066
    )Noninterest-earning assets
    
    
    28,537
    
    
    
    
    
    
    
    
    
    
    
    23,331Total assets
    
    $
    555,038
    
    
    
    
    
    
    
    
    
    
    $
    554,740Liabilities and Stockholders Equity:Interest-bearing liabilities:Deposits
    
    $
    308,830
    
    
    
    4,468
    
    
    
    1.45
    
    
    $
    316,683
    
    
    
    6,984
    
    
    
    2.21Other borrowings
    
    
    11,892
    
    
    
    578
    
    
    
    4.86
    
    
    
    12,126
    
    
    
    689
    
    
    
    5.68Advances from FHLB of Boston
    
    
    146,210
    
    
    
    6,478
    
    
    
    4.43
    
    
    
    147,108
    
    
    
    6,756
    
    
    
    4.59Total interest-bearing liabilities
    
    
    466,932
    
    
    
    11,524
    
    
    
    2.47
    
    
    
    475,917
    
    
    
    14,429
    
    
    
    3.03Noninterest-bearing deposits
    
    
    42,247
    
    
    
    
    
    
    
    
    
    
    
    38,807Other liabilities
    
    
    3,056
    
    
    
    
    
    
    
    
    
    
    
    2,818Total liabilities
    
    
    512,235
    
    
    
    
    
    
    
    
    
    
    
    517,542Stockholders equity
    
    
    42,803
    
    
    
    
    
    
    
    
    
    
    
    37,198Total liabilities and
stockholders
equity
    
    $
    555,038
    
    
    
    
    
    
    
    
    
    
    $
    554,740Net interest and dividend income
    
    
    
    
    
    $
    17,013
    
    
    
    
    
    
    
    
    
    
    $
    15,862Interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.92
    %
    
    
    
    
    
    
    
    
    
    
    2.63
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.21
    %
    
    
    
    
    
    
    
    
    
    
    2.96
    %
 39




---



##### Table of Contents



Rate/Volume Analysis.
 2010 vs. 2009
    
    
    2009 vs. 2008Changes due to
    
    
    
    
    
    
    
    
    
    
    Changes due toIncrease (decrease) in:
    
    
    Increase (decrease) in:Volume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    
    Total(In Thousands)Interest income:Mortgage loans
    
    $
    136
    
    
    $
    (583
    )
    
    $
    (447
    )
    
    $
    361
    
    
    $
    (432
    )
    
    $
    (71
    )Other loans
    
    
    (173
    )
    
    
    (40
    )
    
    
    (213
    )
    
    
    (238
    )
    
    
    (108
    )
    
    
    (346
    )Total income from loans
    
    
    (37
    )
    
    
    (623
    )
    
    
    (660
    )
    
    
    123
    
    
    
    (540
    )
    
    
    (417
    )Short-term investments
    
    
    (26
    )
    
    
    (74
    )
    
    
    (100
    )
    
    
    312
    
    
    
    (585
    )
    
    
    (273
    )Investment securities
    
    
    (10
    )
    
    
    (984
    )
    
    
    (994
    )
    
    
    (1,313
    )
    
    
    211
    
    
    
    (1,102
    )Total income from investments
    
    
    (36
    )
    
    
    (1,058
    )
    
    
    (1,094
    )
    
    
    (1,001
    )
    
    
    (374
    )
    
    
    (1,375
    )Total interest and dividend income
    
    
    (73
    )
    
    
    (1,681
    )
    
    
    (1,754
    )
    
    
    (878
    )
    
    
    (914
    )
    
    
    (1,792
    )Interest expense:Deposits
    
    
    (170
    )
    
    
    (2,346
    )
    
    
    (2,516
    )
    
    
    (324
    )
    
    
    (3,425
    )
    
    
    (3,749
    )Other borrowings  including
short-term
advances from FHLB
    
    
    (13
    )
    
    
    (98
    )
    
    
    (111
    )
    
    
    19
    
    
    
    (168
    )
    
    
    (149
    )Long-term advance  FHLB of Boston
    
    
    (41
    )
    
    
    (237
    )
    
    
    (278
    )
    
    
    386
    
    
    
    (546
    )
    
    
    (160
    )Total interest expense
    
    
    (224
    )
    
    
    (2,681
    )
    
    
    (2,905
    )
    
    
    81
    
    
    
    (4,139
    )
    
    
    (4,058
    )Net interest and dividend income
    
    $
    151
    
    
    $
    1,000
    
    
    $
    1,151
    
    
    $
    (959
    )
    
    $
    3,225
    
    
    $
    2,266
 Interest and Dividend Income.
 Interest Expense.
 40




---



##### Table of Contents



Provision for Loan Losses.
  Noninterest Income (Loss).
 Noninterest Expenses.
   41




---



##### Table of Contents



Income Taxes .
 Comparison of Financial Condition at March 31, 2010 and March 31, 2009
  Provision for Loan Losses.
  42




---



##### Table of Contents



Bank-Owned Life Insurance
    Liquidity and Capital Resources
  43




---



##### Table of Contents



Troubled Asset Relief Program Capital
Purchase Program
  
    Commitments, Contingencies and Off-Balance Sheet Risk
   44




---



##### Table of Contents



Impact of Inflation and Changing Prices
  Capital Resources
   45




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
      At March 31,2010
    
    
    2009Amount
    
    
    % Change
    
    
    Amount
    
    
    % Change(Dollars in Thousands)300 basis point increase in rates
    
    $
    (1,631
    )
    
    
    (9.00
    )%
    
    $
    (1,006
    )
    
    
    (6.16
    )%50 basis point decrease in rates
    
    
    (131
    )
    
    
    (0.72
    )%
    
    
    (155
    )
    
    
    (0.95
    )
  46




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 PageConsolidated Balance Sheets at March 31, 2010 and 2009
    
    
    48Consolidated Statements of Operations for the Years Ended March 31, 2010 and 2009
    
    
    49Consolidated Statement of Changes in Stockholders Equity and Comprehensive Income for the Years
Ended March 31, 2010 and 2009
    
    
    50Consolidated Statements of Cash Flows for the Years Ended March 31, 2010 and 2009
    
    
    52Notes to Consolidated Financial Statements
    
    
    53Report of Independent Registered Public Accounting Firm
    
    
    83
 47




---



##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Balance Sheets
 (Dollars in Thousands, Except Share and Per Share Data)
 March 31,2010
    
    
    2009ASSETSCash and due from banks
    
    $
    4,328
    
    
    $
    5,099Short-term investments
    
    
    12,208
    
    
    
    37,323Cash and cash equivalents
    
    
    16,536
    
    
    
    42,422Investment securities available for sale (Note 2)
    
    
    34,368
    
    
    
    35,215Stock in Federal Home Loan Bank of Boston, at cost (Notes 2 and 8)
    
    
    8,518
    
    
    
    8,518The Co-operative Central Bank Reserve Fund, at cost (Note 2)
    
    
    1,576
    
    
    
    1,576Total investments
    
    
    44,462
    
    
    
    45,309Loans held for sale (Note 1)
    
    
    392
    
    
    
    3,208Loans (Note 3)
    
    
    461,510
    
    
    
    460,670Less allowance for loan losses (Note 4)
    
    
    (3,038
    )
    
    
    (3,191
    )Loans, net
    
    
    458,472
    
    
    
    457,479Accrued interest receivable
    
    
    1,896
    
    
    
    1,859Banking premises and equipment, net (Note 5)
    
    
    2,759
    
    
    
    3,323Deferred tax asset, net (Note 9)
    
    
    4,681
    
    
    
    7,585Other real estate owned (Note 6)
    
    
    60
    
    
    
    2,986Goodwill, net (Note 1)
    
    
    2,232
    
    
    
    2,232Bank owned life insurance (Note 1)
    
    
    6,686
    
    
    
    6,391Other assets
    
    
    4,268
    
    
    
    3,033Total assets
    
    $
    542,444
    
    
    $
    575,827LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 7)
    
    $
    339,169
    
    
    $
    375,074Short-term borrowings
    
    
    
    
    
    
    1,014Federal Home Loan Bank advances (Notes 2 and 8)
    
    
    143,469
    
    
    
    144,583Subordinated debentures (Note 1)
    
    
    11,341
    
    
    
    11,341Advance payments by borrowers for taxes and insurance
    
    
    1,649
    
    
    
    1,532Accrued expenses and other liabilities
    
    
    1,703
    
    
    
    2,044Total liabilities
    
    
    497,331
    
    
    
    535,588Commitments and Contingencies (Notes 9, 10 and 13)Stockholders equity (Note 11):Preferred stock  Series A Fixed Rate Cumulative Perpetual, $1.00 par value;
5,000,000 shares authorized; 10,000 shares issued and outstanding at March
31,
2010 and 2009, with a liquidation preference and redemption value of
$10,063,889 at March 31, 2010 and 2009
    
    
    9,589
    
    
    
    9,476Common stock $1.00 par value; 15,000,000 shares authorized; 1,667,151 and
1,639,951 shares issued and outstanding at March 31, 2010 and 2009,
respectively
    
    
    1,667
    
    
    
    1,640Additional paid-in capital
    
    
    4,291
    
    
    
    4,371Retained income
    
    
    34,482
    
    
    
    33,393Accumulated other comprehensive income (loss) (Notes 1, 2 and 12)
    
    
    810
    
    
    
    (2,226
    )Unearned compensation  Employee Stock Ownership Plan (Note 12)
    
    
    (5,726
    )
    
    
    (6,415
    )Total stockholders equity
    
    
    45,113
    
    
    
    40,239Total liabilities and stockholders equity
    
    $
    542,444
    
    
    $
    575,827
 See accompanying notes to consolidated financial statements.
 48




---



##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Operations
 (In Thousands, Except Share And Per Share Data)
 Years Ended March 31,2010
    
    
    2009Interest and dividend income:Mortgage loans
    
    $
    26,694
    
    
    $
    27,141Other loans
    
    
    320
    
    
    
    533Short-term investments
    
    
    50
    
    
    
    150Investments
    
    
    1,473
    
    
    
    2,467Total interest and dividend income
    
    
    28,537
    
    
    
    30,291Interest expense:Deposits
    
    
    4,468
    
    
    
    6,984Advances from Federal Home Loan Bank of Boston
    
    
    6,478
    
    
    
    6,756Other borrowings
    
    
    578
    
    
    
    689Total interest expense
    
    
    11,524
    
    
    
    14,429Net interest and dividend income
    
    
    17,013
    
    
    
    15,862Provision for loan losses (Note 4)
    
    
    600
    
    
    
    2,125Net interest and dividend income after
provision for loan losses
    
    
    16,413
    
    
    
    13,737Noninterest income:Deposit service charges
    
    
    985
    
    
    
    981Net loss from sales and write-downs of Fannie Mae and
Freddie Mac securities (Note 2)
    
    
    (196
    )
    
    
    (9,394
    )Net loss from sales and write-downs of investment securities other than
Fannie Mae and Freddie Mac (Note 2)
    
    
    (269
    )
    
    
    (402
    )Net gains on sales of loans
    
    
    329
    
    
    
    111Bank-owned life insurance income
    
    
    300
    
    
    
    309Brokerage income
    
    
    137
    
    
    
    151Other income
    
    
    125
    
    
    
    199Total noninterest income (loss)
    
    
    1,411
    
    
    
    (8,045
    )Noninterest expenses:Salaries and employee benefits (Note 12)
    
    
    7,991
    
    
    
    8,288Occupancy and equipment (Note 5)
    
    
    2,184
    
    
    
    2,325Data processing fees
    
    
    854
    
    
    
    802Professional fees (Note 13)
    
    
    895
    
    
    
    925FDIC deposit premiums
    
    
    1,151
    
    
    
    130Advertising and marketing
    
    
    163
    
    
    
    416Other expenses (Note 1)
    
    
    1,908
    
    
    
    2,273Total noninterest expenses
    
    
    15,146
    
    
    
    15,159Income (loss) before income taxes (benefit)
    
    
    2,678
    
    
    
    (9,467
    )Provision (benefit) for income taxes (Note 1)
    
    
    685
    
    
    
    (3,262
    )Net income (loss)
    
    $
    1,993
    
    
    $
    (6,205
    )Net income (loss) available to common stockholders
    
    $
    1,380
    
    
    $
    (6,403
    )Earnings (loss) per common share (Note 1)Basic
    
    $
    0.95
    
    
    $
    (4.58
    )Diluted
    
    $
    0.92
    
    
    $
    (4.58
    )Weighted average common shares outstanding  basic
    
    
    1,457,232
    
    
    
    1,398,175Weighted average common and equivalent shares outstanding  diluted
    
    
    1,499,912
    
    
    
    1,398,175
 See accompanying notes to consolidated financial statements.
 49




---



##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income
 (In Thousands, except per share data)
 Number ofShares of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedSeries A
    
    
    Series A
    
    
    Number of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    Unearned
    
    
    TotalPreferred
    
    
    Preferred
    
    
    Shares of
    
    
    Common
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Compensation
    
    
    StockholdersStock
    
    
    Stock
    
    
    Common Stock
    
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Income (Loss)
    
    
    ESOP
    
    
    EquityBalance at March 31, 2008
    
    
    
    
    
    $
    
    
    
    
    1,639,951
    
    
    $
    1,640
    
    
    $
    3,690
    
    
    $
    40,825
    
    
    $
    (236
    )
    
    $
    (7,103
    )
    
    $
    38,816Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,205
    )Other comprehensive loss, net of
$1.3 million tax benefit:Unrealized loss on securities, net
of reclassification
adjustment (Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,990
    )
    
    
    
    
    
    
    (1,990
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,195
    )Dividends paid to common shareholders
($0.72 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,030
    )
    
    
    
    
    
    
    
    
    
    
    (1,030
    )Issuance of preferred stock and
warrants, net of $30 issuance costs
    
    
    10,000
    
    
    
    9,376
    
    
    
    
    
    
    
    
    
    
    
    594
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,970Preferred stock accretion of
discount and issuance costs
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    Dividends accrued/paid on preferred
stock
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (161
    )
    
    
    
    
    
    
    
    
    
    
    (97
    )Stock-based compensation (Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    322
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    322Amortization of unearned
compensation  ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (235
    )
    
    
    
    
    
    
    
    
    
    
    688
    
    
    
    453Balance at March 31, 2009
    
    
    10,000
    
    
    
    9,476
    
    
    
    1,639,951
    
    
    
    1,640
    
    
    
    4,371
    
    
    
    33,393
    
    
    
    (2,226
    )
    
    
    (6,415
    )
    
    
    40,239Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,993
    
    
    
    
    
    
    
    
    
    
    
    1,993Other comprehensive income, net of
taxes of
$2.0 million:Unrealized gain on post retirement
benefits, net of
taxes of $17 thousand
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    24Unrealized gain on securities, net
of reclassification
adjustment (Note 2) and taxes of
$2.0 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,012
    
    
    
    
    
    
    
    3,012Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,029Dividends paid to common stockholder
($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (291
    )
    
    
    
    
    
    
    
    
    
    
    (291
    )Preferred stock accretion of
discount and issuance costs
    
    
    
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (113
    )
    
    
    
    
    
    
    
    
    
    
    Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    (500
    )Grant of restricted common stock
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    30
    
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeiture of restricted common stock
    
    
    
    
    
    
    
    
    
    
    (2,800
    )
    
    
    (3
    )
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation (Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    321
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    321Amortization of unearned
compensation  ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (374
    )
    
    
    
    
    
    
    
    
    
    
    689
    
    
    
    315Balance at March 31, 2010
    
    
    10,000
    
    
    $
    9,589
    
    
    
    1,667,151
    
    
    $
    1,667
    
    
    $
    4,291
    
    
    $
    34,482
    
    
    $
    810
    
    
    $
    (5,726
    )
    
    $
    45,113
 See accompanying notes to consolidated financial statements
 50




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income (continued)
(In Thousands)
  Before Tax
    
    
    Tax Expense
    
    
    After-TaxAmount
    
    
    (Benefit)
    
    
    AmountYear ending March 31, 2010Unrealized gain on post-retirement benefits
    
    $
    41
    
    
    $
    17
    
    
    $
    24Unrealized gains on securities:Unrealized net holding gains during period
    
    
    4,553
    
    
    
    1,816
    
    
    
    2,737Less: reclassification adjustment for net losses
included in net income
    
    
    (465
    )
    
    
    (190
    )
    
    
    (275
    )Other comprehensive income
    
    $
    5,059
    
    
    $
    2,023
    
    
    $
    3,036
 Before-Tax
    
    
    Tax Expense
    
    
    After-TaxAmount
    
    
    (Benefit)
    
    
    AmountYear ending March 31, 2009Unrealized gain on post-retirement benefits
    
    $
    115
    
    
    $
    115
    
    
    $
    Unrealized losses on securities:Unrealized net holding losses during period
    
    
    (13,163
    )
    
    
    (4,752
    )
    
    
    (8,411
    )Less: reclassification adjustment for net losses
included in net income
    
    
    (9,796
    )
    
    
    (3,375
    )
    
    
    (6,421
    )Other comprehensive loss
    
    $
    (3,252
    )
    
    $
    (1,262
    )
    
    $
    (1,990
    )
 See accompanying notes to consolidated financial statements.
 51




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows
 (Dollars in Thousands)
 Years Ended March 31,2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    1,993
    
    
    $
    (6,205
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation and amortization
    
    
    773
    
    
    
    905Amortization of premiums
    
    
    369
    
    
    
    58Provision for loan losses
    
    
    600
    
    
    
    2,125Stock-based compensation and amortization of unearned
compensation  ESOP
    
    
    636
    
    
    
    775Decrease (increase) in deferred tax asset
    
    
    896
    
    
    
    (3,650
    )Net losses from sales and write-downs of investment securities
    
    
    465
    
    
    
    9,796Bank-owned life insurance income
    
    
    (300
    )
    
    
    (309
    )Gains on sales of loans held for sale
    
    
    (329
    )
    
    
    (111
    )Originations of loans held for sale
    
    
    (36,052
    )
    
    
    (13,909
    )Proceeds from the sale of loans originated for sale
    
    
    39,197
    
    
    
    11,007Loss (gain) on sale of other real estate
    
    
    60
    
    
    
    (27
    )Gain on sale of equipment
    
    
    (5
    )
    
    
    (Increase) decrease in accrued interest receivable
    
    
    (37
    )
    
    
    122Increase in other assets, net
    
    
    (1,230
    )
    
    
    (912
    )Increase in advance payments by borrowers for taxes and insurance
    
    
    117
    
    
    
    224(Increase) decrease in accrued expenses and other liabilities, net
    
    
    (317
    )
    
    
    185Net cash provided by operating activities
    
    
    6,836
    
    
    
    74Cash flows from investing activities:Loan (originations) principal collections, net
    
    
    (1,670
    )
    
    
    8,488Principal payments on mortgage-backed securities
    
    
    14,225
    
    
    
    5,510Purchases of investment securities
    
    
    (11,026
    )
    
    
    (13,108
    )Proceeds from sales of investment securities
    
    
    335
    
    
    
    3,621Maturities and calls of investment securities
    
    
    1,500
    
    
    
    8,500Purchases of banking premises and equipment
    
    
    (214
    )
    
    
    (259
    )Net expenditures on foreclosed real estate
    
    
    16
    
    
    
    60Proceeds from sale of equipment
    
    
    10
    
    
    
    Proceeds from sales of OREO
    
    
    2,926
    
    
    
    218Net cash provided by investing activities
    
    
    6,102
    
    
    
    13,030Cash flows from financing activities:Net (decrease) increase in deposits
    
    
    (35,905
    )
    
    
    13,985Proceeds from advances from FHLB of Boston
    
    
    26,000
    
    
    
    Repayment of advances from FHLB of Boston
    
    
    (27,114
    )
    
    
    (12,108
    )(Repayments) net proceeds (of) from short-term borrowings
    
    
    (1,014
    )
    
    
    873Cash dividends, paid
    
    
    (791
    )
    
    
    (1,127
    )Issuance of Series A preferred stock and warrants
    
    
    
    
    
    
    9,970Net cash (used in) provided by financing activities
    
    
    (38,824
    )
    
    
    11,593Net (decrease) increase in cash and cash equivalents
    
    
    (25,886
    )
    
    
    24,697Cash and cash equivalents at beginning of year
    
    
    42,422
    
    
    
    17,725Cash and cash equivalents at end of year
    
    $
    16,536
    
    
    $
    42,422Cash paid (received) during the period for:Interest
    
    $
    11,610
    
    
    $
    14,468Income taxes
    
    
    (813
    )
    
    
    935Supplemental disclosure of non-cash investing and financing activities:Loans transferred to other real estate owned
    
    $
    77
    
    
    $
    3,237Accretion of Series A preferred stock discount and issuance costs
    
    
    113
    
    
    
    36
 See accompanying notes to consolidated financial statements
 52




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CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Notes to Consolidated Financial Statements
 For the Year Ended March 31, 2010
 Note 1. Summary of Significant Accounting Policies
     Transfers and Servicing
 53




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##### Table of Contents



Cash and Cash Equivalents
   Fair Value of Investments
     Loans
     54




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##### Table of Contents



Receivables
 Allowance for Loan Losses
  Contingencies
 55




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##### Table of Contents



Subordinated Debentures
    Income Taxes
  56




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##### Table of Contents



Banking Premises and Equipment
  Other Real Estate Owned
  Accounting for Goodwill and Impairment
 Intangibles  Goodwill and Other e.g.,
 Pension Benefits
  Compensation  Retirement Benefits
 Stock-Based Compensation
 Compensation-Stock
Compensation
  57




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##### Table of Contents



Number of
    
    
    Weighted AverageShares
    
    
    Exercise PriceBalance at March 31, 2008
    
    
    68,218
    
    
    $
    25.36Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    Balance at March 31, 2009
    
    
    68,218
    
    
    $
    25.36Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (865
    )
    
    
    28.99Expired
    
    
    (13,745
    )
    
    
    20.25Balance at March 31, 2010
    
    
    53,608
    
    
    $
    26.62Exercisable at March 31, 2010
    
    
    49,608
    
    
    $
    26.25
  58




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AverageRemaining
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RemainingNumber
    
    
    Contractual
    
    
    Weighted Average
    
    
    Aggregate
    
    
    
    
    
    
    Contractual
    
    
    Weighted AverageExercise
    
    of Shares
    
    
    Life
    
    
    Exercise
    
    
    Intrinsic
    
    
    Number of Shares
    
    
    Life
    
    
    ExercisePrice
    
    Outstanding
    
    
    (Years)
    
    
    Price
    
    
    Value (1)
    
    
    Outstanding
    
    
    (Years)
    
    
    Price$16.625
    
    
    12,077
    (2)
    
    
    0.7
    
    
    $
    16.63
    
    
    $
    
    
    
    
    12,077
    (2)
    
    
    0.7
    
    
    $
    16.6328.990
    
    
    31,531
    (2)
    
    
    4.9
    
    
    
    28.99
    
    
    
    
    
    
    
    31,531
    (2)
    
    
    4.9
    
    
    
    28.9931.200
    
    
    10,000
    (3)
    
    
    6.5
    
    
    
    31.20
    
    
    
    
    
    
    
    6,000
    (3)
    
    
    6.5
    
    
    
    31.2053,608
    
    
    
    4.3
    
    
    
    26.62
    
    
    
    
    
    
    
    49,608
    
    
    
    4.3
    
    
    
    26.25
 
 (1)
    
    Represents the total intrinsic value, based on the Companys closing stock price of $9.11 as
of March 31, 2010, which would have been received by the option holders had all option holders
exercised their options as of that date.(2)
    
    Fully vested and exercisable at the time of grant.(3)
    
    Subject to vesting over five years, 60% vested at March 31, 2010.  Weighted AverageNumber of
    
    
    Grant DateNon-Vested Shares
    
    Shares
    
    
    Fair ValueBalance at March 31, 2008
    
    
    39,200
    
    
    $
    31.20Granted
    
    
    
    
    
    
    Vested
    
    
    (9,800
    )
    
    
    31.20Forfeited
    
    
    
    
    
    
    Balance at March 31, 2009
    
    
    29,400
    
    
    
    31.20Granted
    
    
    30,000
    
    
    
    8.28Vested
    
    
    (9,800
    )
    
    
    31.20Forfeited
    
    
    (2,800
    )
    
    
    31.20Non-vested at March 31, 2010
    
    
    46,800
    
    
    
    16.51
 Earnings Per Share
 , Earnings Per Share
 59




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##### Table of Contents



2010
    
    
    2009(Amounts in thousands, exceptper share amounts)Net income (loss) as reported
    
    $
    1,993
    
    
    $
    (6,205
    )Less preferred dividends and accretion
    
    
    (613
    )
    
    
    (198
    )Net income (loss) available to common stockholders
    
    $
    1,380
    
    
    $
    (6,403
    )Weighted average number of common shares outstanding
    
    
    1,643
    
    
    
    1,640Weighted average number of unallocated ESOP and
unvested restricted shares
    
    
    (186
    )
    
    
    (242
    )Weighted average number of common shares
outstanding used in calculation of basic earnings per
share
    
    
    1,457
    
    
    
    1,398Incremental shares from the assumed exercise of
dilutive common stock equivalents
    
    
    43
    
    
    
    Weighted average number of common shares
outstanding used in calculating diluted earnings per
share
    
    
    1,500
    
    
    
    1,398Earnings (loss) per share:Basic
    
    $
    0.95
    
    
    $
    (4.58
    )Diluted
    
    $
    0.92
    
    
    $
    (4.58
    )
  Bank-Owned Life Insurance
 Investments  Other
 Other Comprehensive Income (Loss)
  60




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##### Table of Contents



Recent Accounting Pronouncements
 Effective Date of FASB Statement No. 157 Financial Instruments Fair Value Measurements
 Disclosures about Derivative Instruments and Hedging Activities Derivatives and Hedgin Accounting for Derivative Instruments and Hedging
Activities
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Earnings Per Share Participating Securities and the
Two-Class Method under FASB Statement No. 128, Earnings per Share
 Interim Disclosures about Fair Value
of Financial Instruments Financial Instruments . Disclosures about
Fair Value of Financial Instruments Interim Financial Reporting
 Recognition and
Presentation of Other- Than-Temporary Impairments Investments-Debt and Equity Securities
 61




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##### Table of Contents



Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions
that are not Orderly Fair
Value Measurements and Disclosures
 Subsequent Events Subsequent Events
 Accounting for
Transfers of Financial Assets  an amendment of FASB Statement No. 140, Transfers and Servicing,
 Amendments to FASB
Interpretation No. 46(R), Consolidation of Variable Interest Entities,
 62




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##### Table of Contents



The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles  A replacement of FASB Statement No. 162 Generally Accepted Accounting Principles Financial Accounting
Standards Board Accounting Standards Codification
 Improving Disclosures
About Fair Value Measurements
 Note 2. Investments
  March 31, 2010Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In Thousands)Corporate bonds
    
    $
    1,752
    
    
    $
    
    
    
    $
    
    
    
    $
    1,752Mortgage-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
 63




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##### Table of Contents



March 31, 2009Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In Thousands)U.S. Government and agency obligations
    
    $
    1,500
    
    
    $
    3
    
    
    $
    
    
    
    $
    1,503Corporate bonds
    
    
    1,984
    
    
    
    
    
    
    
    (1,283
    )
    
    
    701Mortgage-backed securities
    
    
    27,813
    
    
    
    572
    
    
    
    (32
    )
    
    
    28,353Trust preferred securities
    
    
    1,003
    
    
    
    
    
    
    
    (253
    )
    
    
    750Total debt securities
    
    
    32,300
    
    
    
    575
    
    
    
    (1,568
    )
    
    
    31,307Preferred Stock
    
    
    3,775
    
    
    
    
    
    
    
    (2,125
    )
    
    
    1,650Common stock
    
    
    3,158
    
    
    
    3
    
    
    
    (903
    )
    
    
    2,258Total
    
    $
    39,233
    
    
    $
    578
    
    
    $
    (4,596
    )
    
    $
    35,215
  Less Than or Equal to
    
    
    Greater Than12 Months
    
    
    12 MonthsFair
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In Thousands)Mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    570
    
    
    $
    (12
    )Preferred stock
    
    
    240
    
    
    
    (62
    )
    
    
    1,914
    
    
    
    (133
    )Common stock
    
    
    129
    
    
    
    (10
    )
    
    
    992
    
    
    
    (142
    )Total temporarily impaired securities
    
    $
    369
    
    
    $
    (72
    )
    
    $
    3,476
    
    
    $
    (287
    )
   64




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##### Table of Contents



Amortized
    
    
    Fair
    
    
    AnnualCost
    
    
    Value
    
    
    Yield(Dollars in Thousands)Due within one year
    
    $
    
    
    
    $
    
    
    
    
    
    %Due after one year but within five years
    
    
    5,118
    
    
    
    5,260
    
    
    
    4.19Due after five years but within ten years
    
    
    1,758
    
    
    
    1,758
    
    
    
    7.00Due after ten years
    
    
    20,131
    
    
    
    20,772
    
    
    
    5.42Total
    
    $
    27,007
    
    
    $
    27,790
   2010
    
    
    2009(Dollars in Thousands)Proceeds from sales, maturities,
redemptions
    
    $
    1,835
    
    
    $
    12,121Gross gains
    
    
    46
    
    
    
    415Gross losses
    
    
    (170
    )
    
    
    (77
    )Other than temporary impairments
    
    
    (341
    )
    
    
    (10,134
    )Net realized loss
    
    $
    (465
    )
    
    $
    (9,796
    )
  65




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##### Table of Contents



Note 3. Loans
  2010
    
    
    2009Real estate loans:Residential real estate (1-4 family)
    
    $
    217,053
    
    
    $
    183,327Commercial real estate
    
    
    227,938
    
    
    
    249,941Construction
    
    
    2,722
    
    
    
    14,089Home equity lines of credit
    
    
    8,817
    
    
    
    7,347Total real estate loans
    
    
    456,530
    
    
    
    454,704Commercial loans
    
    
    4,037
    
    
    
    4,834Consumer loans
    
    
    943
    
    
    
    1,132Total loans
    
    
    461,510
    
    
    
    460,670Less: allowance for losses
    
    
    (3,038
    )
    
    
    (3,191
    )Total loans, net
    
    $
    458,472
    
    
    $
    457,479
     At March 31,2010
    
    
    2009Impaired loans with a valuation allowance
    
    $
    3,009
    
    
    $
    690Impaired loans without a valuation allowance
    
    
    13,506
    
    
    
    3,335Total impaired loans
    
    $
    16,515
    
    
    $
    4,025Specific valuation allowance related to impaired loans
    
    $
    354
    
    
    $
    300
 66




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##### Table of Contents



Year Ended March 31,2010
    
    
    2009Average recorded investment in impaired loans
    
    $
    8,175
    
    
    $
    8,597Cash receipts applied to reduce principal balance
    
    
    1,777
    
    
    
    1,228Interest income recognized for cash payments
    
    
    386
    
    
    
    33
      2010
    
    
    2009Balance at beginning of year
    
    $
    390
    
    
    $
    381New loans
    
    
    
    
    
    
    42Repayment of principal
    
    
    (22
    )
    
    
    (33
    )Reduction of directors and officers
    
    
    (63
    )
    
    
    Balance at end of year
    
    $
    305
    
    
    $
    390
  67




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##### Table of Contents



Note 4. Allowance for Loan Losses
  Year Ended March 31,2010
    
    
    2009Balance at beginning of year
    
    $
    3,191
    
    
    $
    3,613Provision charged to expense
    
    
    600
    
    
    
    2,125Less: Amounts charged-off
    
    
    (773
    )
    
    
    (2,559
    )Add: Recoveries on accounts previously
charged-off
    
    
    20
    
    
    
    12Balance at end of year
    
    $
    3,038
    
    
    $
    3,191
 Note 5. Banking Premises and Equipment
  Estimated2010
    
    
    2009
    
    
    Useful LivesLand
    
    $
    589
    
    
    $
    589Buildings and improvements
    
    
    2,362
    
    
    
    2,307
    
    
    50 yearsFurniture and fixtures
    
    
    3,484
    
    
    
    3,353
    
    
    3-5 yearsLeasehold improvements
    
    
    1,561
    
    
    
    1,561
    
    
    5-10 years7,996
    
    
    
    7,810Less accumulated depreciation and
amortization
    
    
    (5,237
    )
    
    
    (4,487
    )Total
    
    $
    2,759
    
    
    $
    3,323
  Note 6. Other Real Estate Owned
  2010
    
    
    2009Balance at beginning of year
    
    $
    2,986
    
    
    $
    Additions
    
    
    77
    
    
    
    3,237Valuation adjustments
    
    
    (17
    )
    
    
    (60
    )Sales
    
    
    (2,986
    )
    
    
    (191
    )Balance at end of year
    
    $
    60
    
    
    $
    2,986
  68




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##### Table of Contents



Note 7. Deposits
  2010
    
    
    2009Demand deposit accounts
    
    $
    41,959
    
    
    $
    46,259NOW accounts
    
    
    29,358
    
    
    
    30,976Passbook and other savings accounts
    
    
    53,544
    
    
    
    50,737Money market deposit accounts
    
    
    79,745
    
    
    
    67,398Total non-certificate accounts
    
    
    204,606
    
    
    
    195,370Term deposit certificatesCertificates of $100,000 and above
    
    
    51,695
    
    
    
    85,497Certificates less than $100,000
    
    
    82,868
    
    
    
    94,207Total term deposit certificates
    
    
    134,563
    
    
    
    179,704Total deposits
    
    $
    339,169
    
    
    $
    375,074
  Weighted AverageAmount
    
    
    Interest RateWithin 1 year
    
    $
    112,223
    
    
    
    1.41
    %Over 1 to 3 years
    
    
    21,388
    
    
    
    1.65Over 3 years
    
    
    952
    
    
    
    1.96$
    134,563
 Note 8. Federal Home Loan Bank Advances
  2010
    
    
    2009Weighted Average
    
    
    
    
    
    
    Weighted AverageAmount
    
    
    Interest Rate
    
    
    Amount
    
    
    Interest RateWithin 1 year
    
    $
    26,000
    
    
    
    5.37
    %
    
    $
    27,000
    
    
    
    5.55
    %1-2 years
    
    
    
    
    
    
    
    
    
    
    26,000
    
    
    
    5.372-3 years
    
    
    29,469
    
    
    
    3.92
    
    
    
    
    
    
    
    3-4 years
    
    
    11,000
    
    
    
    2.98
    
    
    
    29,583
    
    
    
    3.924-5 years
    
    
    22,000
    
    
    
    2.93
    
    
    
    2,000
    
    
    
    5.49Over 5 to 10 years
    
    
    55,000
    
    
    
    3.99
    
    
    
    60,000
    
    
    
    3.94$
    143,469
    
    
    
    3.98
    %
    
    $
    144,583
    
    
    
    4.52
    %
   69




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##### Table of Contents



Note 9. Income Taxes
  Year Ended March 31,2010
    
    
    2009CurrentFederal
    
    $
    (176
    )
    
    $
    203State
    
    
    55
    
    
    
    86Total current (benefit) provision
    
    
    (121
    )
    
    
    289Deferred provision (benefit)
    
    
    806
    
    
    
    (3,551
    )Provision (benefit) for income taxes
    
    $
    685
    
    
    $
    (3,262
    )
  Year Ended March 31,2010
    
    
    2009Statutory Federal Tax Rate
    
    
    34.0
    %
    
    
    (34.0
    )%Items affecting Federal Income tax rateDividends received deduction
    
    
    (2.7
    )
    
    
    (1.6
    )Net state impact of deferred rate change
    
    
    (10.3
    )
    
    
    State income taxes  net of federal
    
    
    6.3
    
    
    
    (2.1
    )Bank-owned life insurance deduction
    
    
    (5.4
    )
    
    
    (1.1
    )Stock compensation
    
    
    3.1
    
    
    
    0.8Valuation allowance
    
    
    1.0
    
    
    
    3.4Other
    
    
    (0.4
    )
    
    
    0.1Effective tax rate
    
    
    25.6
    %
    
    
    (34.5
    )%
 70




---



##### Table of Contents



2010
    
    
    2009Deferred tax assets:Allowance for loan losses
    
    $
    1,243
    
    
    $
    1,306Depreciation
    
    
    966
    
    
    
    860Post-employee retirement benefit accrual
    
    
    299
    
    
    
    221Write-down of investments securities
    
    
    2,778
    
    
    
    3,888Unrealized gain on securities, net
    
    
    
    
    
    
    1,628Other
    
    
    333
    
    
    
    350Gross deferred tax asset
    
    
    5,619
    
    
    
    8,253Less: Valuation allowance
    
    
    (421
    )
    
    
    (387
    )Net deferred tax assets
    
    
    5,198
    
    
    
    7,866Deferred tax liabilities:Unrealized loss on securities, net
    
    
    380
    
    
    
    Deferred loan origination costs
    
    
    137
    
    
    
    281Gross deferred tax liability
    
    
    517
    
    
    
    281Net deferred tax assets
    
    $
    4,681
    
    
    $
    7,585
    AmountUnrecognized tax benefits at April 1, 2009
    
    $
    176Additions for tax positions related to the current year
    
    
    35Additions for tax positions of prior years
    
    
    Reductions for tax positions of prior years
    
    
    (13
    )Unrecognized tax benefits at March 31, 2010
    
    $
    198
  71




---



##### Table of Contents



Note 10. Financial Instruments with Off-Balance Sheet Risk
    At March 31,2010
    
    
    2009Unused lines of credit
    
    $
    16,495
    
    
    $
    15,129Unadvanced portions of construction loans
    
    
    126
    
    
    
    1,439Unadvanced portions of commercial loans
    
    
    1,135
    
    
    
    1,739Commitments to originate commercial mortgage loans
    
    
    
    
    
    
    1,884Commitments to originate residential mortgage loans
    
    
    6,077
    
    
    
    23,187Commitments to sell residential mortgage loans
    
    
    4,024
    
    
    
    11,351Total off-balance sheet commitments
    
    $
    27,857
    
    
    $
    54,729
   Years EndingMarch 31,2011
    

    $
    3592012
    

    
    3552013
    

    
    3422014
    

    
    3222015
    

    
    326Thereafter
    

    
    333Total
    

    $
    2,037
  72




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##### Table of Contents



Note 11. Stockholders Equity
   To Be WellFor Capital
    
    
    Capitalized UnderAdequacy
    
    
    Prompt CorrectiveActual
    
    
    Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioAs of March 31, 2010:Company (consolidated)Total risk-based capital
    
    $
    53,569
    
    
    
    15.12
    %
    
    $
    29,769
    
    
    
    38.00
    %
    
    
    N/A
    
    
    
    N/ATier 1 capital
    
    
    50,432
    
    
    
    14.24
    
    
    
    14,166
    
    
    
    34.00
    
    
    
    N/A
    
    
    
    N/ATier 1 leverage capital
    
    
    50,432
    
    
    
    9.22
    
    
    
    21,879
    
    
    
    34.00
    
    
    
    N/A
    
    
    
    N/ABankTotal risk-based capital
    
    $
    47,374
    
    
    
    13.37
    %
    
    $
    35,433
    
    
    
    38.00
    %
    
    $
    28,346
    
    
    
    310.00
    %Tier 1 capital
    
    
    44,237
    
    
    
    12.49
    
    
    
    21,250
    
    
    
    34.00
    
    
    
    14,167
    
    
    
    36.00Tier 1 leverage capital
    
    
    44,237
    
    
    
    8.09
    
    
    
    27,340
    
    
    
    34.00
    
    
    
    21,872
    
    
    
    35.00As of March 31, 2009:Company (consolidated)Total risk-based capital
    
    $
    46,180
    
    
    
    12.41
    %
    
    $
    29,769
    
    
    
    38.00
    %
    
    
    N/A
    
    
    
    N/ATier 1 capital
    
    
    42,989
    
    
    
    11.56
    
    
    
    14,875
    
    
    
    34.00
    
    
    
    N/A
    
    
    
    N/ATier 1 leverage capital
    
    
    42,989
    
    
    
    7.77
    
    
    
    22,130
    
    
    
    34.00
    
    
    
    N/A
    
    
    
    N/ABankTotal risk-based capital
    
    $
    39,815
    
    
    
    10.69
    %
    
    $
    29,796
    
    
    
    38.00
    %
    
    $
    37,245
    
    
    
    310.00
    %Tier 1 capital
    
    
    36,624
    
    
    
    9.84
    
    
    
    14,887
    
    
    
    34.00
    
    
    
    22,418
    
    
    
    36.00Tier 1 leverage capital
    
    
    36,624
    
    
    
    6.61
    
    
    
    22,162
    
    
    
    34.00
    
    
    
    27,810
    
    
    
    35.00
 73




---



##### Table of Contents



Note 12. Employee Benefits
 Pension and Savings Plans
    Employee Stock Ownership Plan
     74




---



##### Table of Contents



Other Post-Retirement Benefits
  Year Ended March 31,2010
    
    
    2009Life
    
    
    Medical
    
    
    Life
    
    
    MedicalActuarial present value of benefits obligation:Retirees
    
    $
    (126
    )
    
    $
    (145
    )
    
    $
    (165
    )
    
    $
    (168
    )Fully eligible participants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    (126
    )
    
    $
    (145
    )
    
    $
    (165
    )
    
    $
    (168
    )Change in projected benefit obligation:Accumulated benefit obligations at prior year-end
    
    $
    (165
    )
    
    $
    (168
    )
    
    $
    (235
    )
    
    $
    (216
    )Service cost less expense component
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest cost
    
    
    (7
    )
    
    
    (9
    )
    
    
    (12
    )
    
    
    (11
    )Actuarial gain
    
    
    60
    
    
    
    27
    
    
    
    66
    
    
    
    26Amendment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Assumptions
    
    
    (15
    )
    
    
    (12
    )
    
    
    15
    
    
    
    11Benefits paid
    
    
    1
    
    
    
    17
    
    
    
    1
    
    
    
    22Accumulated benefit obligations at year-end
    
    $
    (126
    )
    
    $
    (145
    )
    
    $
    (165
    )
    
    $
    (168
    )Change in plan assets:Fair value of plan assets at prior year-end
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contribution
    
    
    1
    
    
    
    17
    
    
    
    1
    
    
    
    22Benefits paid and expenses
    
    
    (1
    )
    
    
    (17
    )
    
    
    (1
    )
    
    
    (22
    )Fair value of plan assets at current year-end
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Change in Other Comprehensive Income:Other Comprehensive Income at prior fiscal
year-end
    
    $
    (141
    )
    
    $
    (140
    )
    
    $
    (62
    )
    
    $
    (104
    )Loss on actuarial experience
    
    
    (60
    )
    
    
    (27
    )
    
    
    (66
    )
    
    
    (26
    )Gain (loss) actuarial assumptions
    
    
    15
    
    
    
    12
    
    
    
    (15
    )
    
    
    (11
    )Amortization included in Pension Expense
    
    
    13
    
    
    
    6
    
    
    
    2
    
    
    
    1Other Comprehensive Income at current year-end
    
    $
    (173
    )
    
    $
    (149
    )
    
    $
    (141
    )
    
    $
    (140
    )Amounts with Deferred RecognitionReconciliation of accrued pension cost:Accrued pension cost at beginning of year
    
    $
    (305
    )
    
    $
    (309
    )
    
    $
    (296
    )
    
    $
    (321
    )Minus net periodic cost
    
    
    6
    
    
    
    (2
    )
    
    
    (10
    )
    
    
    (9
    )Plus employer contributions, net
    
    
    1
    
    
    
    17
    
    
    
    1
    
    
    
    22Accrued cost at end of year
    
    $
    (298
    )
    
    $
    (294
    )
    
    $
    (305
    )
    
    $
    (308
    )Benefit obligation weighted average assumption as
change in projected benefit obligation:Discount rate
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    6.75
    %
    
    
    6.75
    %Expected return on plan assets
    
    
    5.00
    
    
    
    5.00
    
    
    
    6.75
    
    
    
    6.75Rate of compensation increase
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
 75




---



##### Table of Contents



Years Ended March 31,2010
    
    
    2009Life
    
    
    Medical
    
    
    Life
    
    
    MedicalComponents of net periodic benefit cost:Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    7
    
    
    
    9
    
    
    
    12
    
    
    
    11Expected return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    9
    
    
    
    13
    
    
    
    9
    
    
    
    14Recognized actuarial gain
    
    
    (22
    )
    
    
    (20
    )
    
    
    (11
    )
    
    
    (15
    )Net periodic benefit cost
    
    $
    (6
    )
    
    $
    2
    
    
    $
    10
    
    
    $
    10Periodic benefit cost weighted average
assumptions:Discount rate
    
    
    6.75
    %
    
    
    6.75
    %
    
    
    5.75
    %
    
    
    5.75
    %Expected return on plan assets
    
    
    6.75
    %
    
    
    6.75
    %
    
    
    5.75
    %
    
    
    5.75
    %Rate of compensation increase
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aAmounts recognized in the statement of
financial position consist of:Noncurrent Assets
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Current Liabilities
    
    
    (11
    )
    
    
    (15
    )
    
    
    (22
    )
    
    
    (20
    )Noncurrent Liabilities
    
    
    (114
    )
    
    
    (129
    )
    
    
    (143
    )
    
    
    (148
    )$
    (125
    )
    
    $
    (144
    )
    
    $
    (165
    )
    
    $
    (168
    )Amounts recognized in accumulated other
comprehensive income consist of:Net gain
    
    $
    (198
    )
    
    $
    (160
    )
    
    $
    (175
    )
    
    $
    (165
    )Prior credit
    
    
    
    
    
    
    (63
    )
    
    
    
    
    
    
    (74
    )Transition liability
    
    
    25
    
    
    
    74
    
    
    
    34
    
    
    
    99$
    (173
    )
    
    $
    (149
    )
    
    $
    (141
    )
    
    $
    (140
    )Amounts anticipated to be recognized in expense
for fiscal year ending in 2010:
    
    $
    (21
    )
    
    $
    (18
    )
    
    $
    (19
    )
    
    $
    (18
    )Net gain
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    (11
    )Prior service cost
    
    
    9
    
    
    
    25
    
    
    
    9
    
    
    
    25Transition asset
    
    $
    (12
    )
    
    $
    (4
    )
    
    $
    (10
    )
    
    $
    (4
    )
  Note 13. Legal Proceedings
  76




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##### Table of Contents



Note 14. Troubled Asset Relief Program Capital Purchase Program
    Derivatives and Hedging, Debt Equity
 Expected life in years
    
    
    10.00Expected volatility
    
    
    54.76
    %Dividend yield
    
    
    3.00
    %Risk-free interest rate
    
    
    2.67
    %
  77




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##### Table of Contents



Note 15. Fair Values of Financial Instruments
 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
   Carrying Value (in thousands)At March 31, 2010
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets recorded at fair value on a
recurring basis:Securities available for sale
    
    $
    3,323
    
    
    $
    31,045
    
    
    $
    
    
    
    $
    34,368Assets recorded at fair value on a
nonrecurring basis:Impaired loans carried at fair value
    
    
    
    
    
    
    
    
    
    
    8,617
    
    
    
    8,617OREO
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    60
 Carrying Value (in thousands)At March 31, 2009
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets recorded at fair value on a
recurring basis:Securities available for sale
    
    $
    2,258
    
    
    $
    31,945
    
    
    $
    1,012
    
    
    $
    35,215Assets recorded at fair value on a
nonrecurring basis:Impaired loans carried at fair value
    
    
    
    
    
    
    
    
    
    
    690
    
    
    
    690OREO
    
    
    
    
    
    
    
    
    
    
    2,986
    
    
    
    2,986
   78




---



##### Table of Contents



InvestmentSecuritiesAvailable for SaleBalance at March 31, 2009
    
    $
    1,012Total realized and unrealized gains (losses) included in income
    
    
    Total unrealized losses included in other comprehensive income
    
    
    Net accretion of discount and repayment of principal
    
    
    Net transfers in/out of Level 3
    
    
    (1,012
    )Balance at March 31, 2010
    
    $
    
   Cash and Due from Banks 
 Short-Term Investments 
 Investments and Mortgage-Backed Securities 
 Loans and Loans Held for Sale 
 79




---



##### Table of Contents



Other Real Estate Owned 
 Accrued Interest Receivable 
 Stock in FHLB of Boston 
 The Co-operative Central Bank Reserve Fund 
 Deposits 
 Advances from FHLB of Boston 
 Subordinated Debentures 
 Short-Term Borrowings, Advance Payments by Borrowers for Taxes and Insurance and Accrued
Interest Payable 
 Off-Balance Sheet Instruments 
 80




---



##### Table of Contents



March 31, 2010
    
    
    March 31, 2009Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueAssetsCash and due from banks
    
    $
    4,328
    
    
    $
    4,328
    
    
    $
    5,099
    
    
    $
    5,099Short-term investments
    
    
    12,208
    
    
    
    12,208
    
    
    
    37,323
    
    
    
    37,323Investment securities
    
    
    34,368
    
    
    
    34,368
    
    
    
    35,215
    
    
    
    35,215Loans held for sale
    
    
    392
    
    
    
    392
    
    
    
    3,208
    
    
    
    3,208Net loans
    
    
    458,472
    
    
    
    454,557
    
    
    
    457,479
    
    
    
    453,974Stock in Federal Home Loan Bank of Boston
    
    
    8,518
    
    
    
    8,518
    
    
    
    8,518
    
    
    
    8,518The Co-operative Central Bank Reserve Fund
    
    
    1,576
    
    
    
    1,576
    
    
    
    1,576
    
    
    
    1,576Accrued interest receivable
    
    
    1,896
    
    
    
    1,896
    
    
    
    1,859
    
    
    
    1,859LiabilitiesDeposits
    
    $
    339,169
    
    
    $
    329,749
    
    
    $
    375,074
    
    
    $
    366,052Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    1,014
    
    
    
    1,014Advances from FHLB of Boston
    
    
    143,469
    
    
    
    150,949
    
    
    
    144,583
    
    
    
    153,318Subordinated debentures
    
    
    11,341
    
    
    
    8,226
    
    
    
    11,341
    
    
    
    9,013Advance payments by borrowers for taxes and insurance
    
    
    1,649
    
    
    
    1,649
    
    
    
    1,532
    
    
    
    1,532Accrued interest payable
    
    
    517
    
    
    
    517
    
    
    
    619
    
    
    
    619Off-Balance Sheet Instruments
    
    
    27,257
    
    
    
    27,257
    
    
    
    54,729
    
    
    
    54,729
 Note 16. Parent Company Only Condensed Financial Statements
  At March 31,Balance Sheets
    
    2010
    
    
    2009AssetsCash deposit in subsidiary bank
    
    $
    342
    
    
    $
    337Investment in subsidiary
    
    
    49,467
    
    
    
    44,005ESOP loan (Note 11)
    
    
    6,254
    
    
    
    6,819Investment in unconsolidated subsidiary
    
    
    341
    
    
    
    341Other assets
    
    
    97
    
    
    
    197Total assets
    
    $
    56,501
    
    
    $
    51,699Liabilities and Stockholders EquitySubordinated debentures (Note 1)
    
    $
    11,341
    
    
    $
    11,341Accrued taxes and other liabilities
    
    
    47
    
    
    
    119Total stockholders equity
    
    
    45,113
    
    
    
    40,239Total liabilities and stockholders equity
    
    $
    56,501
    
    
    $
    51,699
 81




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##### Table of Contents



Year Ended March 31,Statements of Operations
    
    2010
    
    
    2009Dividends from subsidiary
    
    $
    500
    
    
    $
    1,132Interest income
    
    
    515
    
    
    
    564Interest expense on subordinated debentures
    
    
    (586
    )
    
    
    (692
    )Noninterest expenses
    
    
    (432
    )
    
    
    (522
    )(Loss) income before income tax benefit
    
    
    (3
    )
    
    
    482Income tax benefit
    
    
    206
    
    
    
    221Income before equity in undistributed net income of subsidiary
    
    
    203
    
    
    
    703Equity in undistributed net income (loss) of subsidiary
    
    
    1,790
    
    
    
    (6,908
    )Net income (loss)
    
    $
    1,993
    
    
    $
    (6,205
    )
 Year Ended March 31Statements of Cash Flows
    
    2010
    
    
    2009Cash flows from operating activitiesNet income (loss)
    
    $
    1,993
    
    
    $
    (6,205
    )Adjustments to reconcile net income (loss) to net cash provided byoperating activitiesEquity in undistributed net income of subsidiary
    
    
    (1,790
    )
    
    
    6,908Decrease (increase) in other assets
    
    
    99
    
    
    
    (84
    )(Decrease) increase in accrued taxes and other liabilities
    
    
    (72
    )
    
    
    82Net cash provided by operating activities
    
    
    230
    
    
    
    701Cash flows from investing activities:ESOP loans, net of repayment
    
    
    566
    
    
    
    554Investment in subsidiary
    
    
    
    
    
    
    (10,000
    )Net cash provided by (used in) by investing activities
    
    
    796
    
    
    
    (9,446
    )Cash flows from financing activities:Issuance of Series A preferred stock and warrants
    
    
    
    
    
    
    9,970Cash dividends paid, net
    
    
    (791
    )
    
    
    (1,126
    )Net cash provided by financing activities
    
    
    5
    
    
    
    8,844Net increase in cash in subsidiary bank
    
    
    5
    
    
    
    99Cash in subsidiary bank at beginning of year
    
    
    337
    
    
    
    238Cash in subsidiary bank at end of year
    
    $
    342
    
    
    $
    337
 82




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      /s/  CATURANO AND COMPANY, P.C.Boston, MassachusettsJune 18, 2010 83




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
 Not applicable.
 
 Item 9A(T). Controls and Procedures
 (a)
    
    Disclosure Controls and ProceduresThe Companys management, including the Companys principal executive officer and
principal financial officer, have evaluated the effectiveness of the Companys
disclosure controls and procedures, as such term is defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended, (the Exchange
Act). Based upon their evaluation, the principal executive officer and principal
financial officer concluded that, as of the end of the period covered by this
report, the Companys disclosure controls and procedures were effective for the
purpose of ensuring that the information required to be disclosed in the reports
that the Company files or submits under the Exchange Act with the Securities and
Exchange Commission (the SEC) (1) is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms, and (2) is
accumulated and communicated to the Companys management, including its principal
executive and principal financial officers, as appropriate to allow timely decisions
regarding required disclosure.(b)
    
    Internal Controls Over Financial ReportingThe Companys management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934, and management has assessed the
effectiveness of the Companys internal control over financial reporting as of March
31, 2010 based upon the criteria set forth in a report entitled Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission. Based on its assessment, the Companys management has
concluded that the Company maintained effective internal control over financial
reporting as of March 31, 2010.This Annual Report does not include an attestation report of the Companys
registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to attestation by the Companys
independent registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
managements report in this Annual Report.(c)
    
    Changes to Internal Control Over Financial ReportingExcept as indicated herein, there were no changes in the Companys internal control
over financial reporting during the twelve months ended March 31, 2010 that have
materially affected, or are reasonable likely to materially affect, the Companys
internal control over financial reporting.
 
 Item 9B. Other Information
 Not applicable.
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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
 Directors
 Proposal I  Election of Directors
 Executive Officers
 Proposal I  Election of Directors 
Executive Officers Who Are Not Directors
 Compliance with Section 16(a) of the Exchange Act
 Section 16(a) Beneficial Ownership
Reporting Compliance
 Code of Ethics
  Corporate Governance
 Meetings and Committees of the Board of Directors  Audit
Committee
 
 Item 11. Executive Compensation
 Executive Compensation
 Executive Compensation Director Compensation
 Corporate Governance
 Meetings and Committees of the Board of Directors  Compensation Committee
 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
 (a)
    
    Security Ownership of Certain Beneficial OwnersThe information required by this item is incorporated herein by reference to the
section captioned Principal Holders of Voting Securitiesin the Proxy Statement.(b)
    
    Security Ownership of ManagementThe information required by this item is incorporated herein by reference to the
section captioned Security Ownership of Managementin the Proxy Statement.
 85




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##### Table of Contents



(c)
    
    Changes in ControlManagement of the Company knows of no arrangements, including any pledge by any
person of securities of the Company, the operation of which may at a subsequent date
result in a change in control of the Company.(d)
    
    Equity Compensation PlansThe Company has adopted the 1999 Stock Option and Incentive Plan and the 2006
Long-Term Incentive Plan, pursuant to which equity may be awarded to participants.
Both plans have been approved by stockholders.
  (c)Number of securities(a)
    
    
    (b)
    
    
    remainingNumber of securities to be
    
    
    Weighted-average
exercise
    
    
    available for future
issuanceissued
    
    
    price of outstanding
    
    
    under equity
compensationupon exercise of outstanding
    
    
    options, warrants and
    
    
    plan (excluding
securitiesPlan Category
    
    options, warrants and rights
    
    

rights
    
    

reflected in column (a))Equity compensation plans
approved by security holders
    
    
    53,608
    
    
    
    $26.617
    
    
    
    63,800Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total (1)
    
    
    53,608
    
    
    
    $26.617
    
    
    
    63,800
 
 (1)
    
    The 1999 Stock Option Plan and the 2006 Long-Term Incentive Plan provides for a proportionate
adjustment to the number of shares reserved thereunder in the event of a stock split, stock
dividend, reclassification or similar event. 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
 Certain Relationships and Related Transactions
 Transactions with Related Persons
 Director Independence
 Proposal 1  Election of Directors
 
 Item 14. Principal Accounting Fees and Services
 Independent Auditors
 
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
 86




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##### Table of Contents



(1)
    
    Financial StatementsFor the Financial Statements filed as part of this Annual Report on Form 10-K,
reference is made to Item 8  Financial Statements and Supplementary Data.(2)
    
    Financial Statement SchedulesAll financial statement schedules have been omitted as not applicable or not
required or because they are included in the financial statements appearing at Item
8.(3)
    
    ExhibitsThe exhibits required by Item 601 of Regulation S-K are either filed as part of this
Annual Report on Form 10-K or incorporated by reference herein.
  Exhibit No.
    
    Description3.11
    
    Articles of Organization of Central Bancorp, Inc.3.210
    
    Amended Bylaws of Central Bancorp, Inc.4.12
    
    Articles of Amendment to the Articles of Incorporation of Central Bancorp, Inc.
Establishing Fixed Rate Cumulative Perpetual Preferred Stock, Series A4.22
    
    Form of Stock Certificate for Fixed Rate Cumulative Perpetual Preferred Stock,
Series A, of Central Bancorp, Inc.4.32
    
    Warrant to Purchase 234,742 Shares of Common Stock of Central Bancorp, Inc.4.43
    
    Shareholder Rights Agreement, dated as of October 11, 2001, by and between Central Bancorp, Inc. and Registrar
and Transfer
Company, as Rights
Agent, as amended
and restated as of
January 29, 2003,
and as amended on
February 11, 2003,
May 22, 2003, July
24, 2003 and August
4, 200310.14
    
    Employment Agreement by and between Central Co-operative Bank and John D. Doherty10.24
    
    Employment Agreement by and between Central Co-operative Bank and William P. Morrissey 10.34
    
    Executive Salary Continuation Agreement by and between Central Co-operative Bank
and John D. Doherty, as amended 10.44
    
    Executive Salary Continuation Agreement by and between Central Co-operative Bank
and William P. Morrissey, as amended 10.54
    
    Executive Health Insurance Plan Agreement by and between Central Co-operative Bank
and John D. Doherty 10.64
    
    Executive Health Insurance Plan Agreement by and between Central Co-operative Bank
and John D. Doherty 10.74
    
    Executive Health Insurance Plan Agreement by and between Central Co-operative Bank
and William P. Morrissey 10.81
    
    Severance Agreement between the Bank and William P. Morrissey, dated December 14,
1994 10.91
    
    Severance Agreement between the Bank and Paul S. Feeley, dated May 14, 1998 10.101
    
    Amendments to Severance Agreements between the Bank and Messrs. Feeley and
Morrissey, dated January 8, 1999 10.115
    
    1999 Stock Option and Incentive Plan 10.126
    
    Amended and Restated Deferred Compensation Plan for Non-Employee Directors 10.133
    
    Senior Management Incentive Plan, as amended 10.147
    
    Severance Agreement between the Bank and Bryan E. Greenbaum dated March 17, 200510.158
    
    Central Bancorp, Inc. 2006 Long-Term Incentive Plan 149
    
    Code of Ethics21
    
    Subsidiaries of Registrant23.1
    
    Consent of Caturano and Company, P.C.31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer32
    
    Section 1350 Certifications99.1
    
    31 C.F.R. §30.15 Certification of Chief Executive Officer99.2
    
    31 C.F.R. §30.15 Certification of Chief Financial Officer
 87




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##### Table of Contents




    
    Management contract or compensatory plan.(1)
    
    Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended March 31,
1999 (File No. 0- 25251) filed with the SEC on June 28, 1999.(2)
    
    Incorporated by reference to the exhibits filed with the Companys Current Report on Form 8-K
(File No. 0-25251) filed with the SEC on December 9, 2010.(3)
    
    Incorporated by reference to the Form 10-K for the fiscal year ended March 31, 2004 (File No.
0-25251) filed with the SEC on June 28, 2004.(4)
    
    Incorporated by reference to the exhibits filed with the Companys Current Report on Form 8-K
(File No. 0-25251) filed with the SEC on December 21, 2007.(5)
    
    Incorporated by reference to the Registration Statement on Form S-8 (File No. 333-87005)
filed on September 13, 1999.(6)
    
    Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended December
31, 2009 (File No. 0- 25251) filed with the SEC on February 17, 2010).(7)
    
    Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended March 31,
2004 filed with the SEC on June 29, 2005 and to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2009 filed with the SEC on November 14, 2009 (File No. 0-25251).(8)
    
    Incorporated by reference to the Registration Statement on Form S-8 (File No. 333-136234) filed
with the SEC on August 2, 2006.(9)
    
    Incorporated by reference to the Current Report on Form 8-K (File No. 0-25251) filed with the
SEC on April 13, 2004.(10)
    
    Incorporated by reference to the exhibits filed with the Companys Current Report on Form 8-K
(File No. 0-25251)
filed with the SEC on October 22, 2007. 88




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##### Table of Contents



SIGNATURES
  CENTRAL BANCORP, INC.Date:  June 18, 2010
    By:
    /s/ John D. DohertyJohn D. DohertyChairman and Chief Executive Officer
(Principal Executive Officer)
(Duly Authorized Representative)  /s/ John D. Doherty

John D. Doherty
Chairman and Chief Executive Officer
(Principal Executive Officer)
    
    June 18, 2010/s/ Paul S. Feeley

Paul S. Feeley
Senior Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
    
    June 18, 2010/s/ William P. Morrissey

William P. Morrissey
President and Director
    
    June 18, 2010/s/ Robert J. Hardiman

Robert J. Hardiman
Director
    
    June 18, 2010/s/ Raymond Mannos

Raymond Mannos
Director
    
    June 18, 2010/s/ James P. McDonough

James P. McDonough
Director
    
    June 18, 2010/s/ Albert J. Mercuri, Jr.

Albert J. Mercuri, Jr.
Director
    
    June 18, 2010/s/ John J. Morrissey

John J. Morrissey
    
    June 18, 2010Director




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##### Table of Contents



/s/ Kenneth K. Quigley, Jr.

Kenneth K. Quigley, Jr.
Director
    
    June 18, 2010/s/ Edward F. Sweeney, Jr.

Edward F. Sweeney, Jr.
Director
    
    June 18, 2010