##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2009
 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
    
    (I.R.S. Employerincorporation or organization)
    
    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,
    
    The NASDAQ Stock Market LLCand Related Stock Purchase Rights
 None
 o þ
 o þ
 þ o
 o o
 þ
  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
 PagePART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    23Item 1B. Unresolved Staff Comments
    
    
    30Item 2. Properties
    
    
    31Item 3. Legal Proceedings
    
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    
    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 Operations
    
    
    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
    
    
    85Item 9A(T). Controls and Procedures
    
    
    85Item 9B. Other Information
    
    
    85PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    86Item 11. Executive Compensation
    
    
    86Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    86Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    87Item 14. Principal Accounting Fees and Services
    
    
    87PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    88SIGNATURESEX-21EX-23.1EX-31.1EX-31.2EX-32




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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



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 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in Thousands)Mortgage loans:Residential
    
    $
    183,327
    
    
    
    39.80
    %
    
    $
    178,727
    
    
    
    37.6
    %
    
    $
    175,259
    
    
    
    38.1
    %
    
    $
    160,381
    
    
    
    38.6
    %
    
    $
    159,838
    
    
    
    41.4
    %Commercial
    
    
    249,941
    
    
    
    54.25
    
    
    
    244,496
    
    
    
    51.5
    
    
    
    235,535
    
    
    
    51.1
    
    
    
    213,935
    
    
    
    51.5
    
    
    
    194,326
    
    
    
    50.3Construction
    
    
    14,089
    
    
    
    3.06
    
    
    
    30,950
    
    
    
    6.5
    
    
    
    35,011
    
    
    
    7.6
    
    
    
    27,680
    
    
    
    6.7
    
    
    
    17,187
    
    
    
    4.4Home equity
    
    
    7,347
    
    
    
    1.59
    
    
    
    6,559
    
    
    
    1.4
    
    
    
    6,901
    
    
    
    1.5
    
    
    
    7,505
    
    
    
    1.8
    
    
    
    9,194
    
    
    
    2.4Total mortgage loan
    
    
    454,704
    
    
    
    98.70
    
    
    
    460,732
    
    
    
    97.0
    
    
    
    452,706
    
    
    
    98.3
    
    
    
    409,501
    
    
    
    98.6
    
    
    
    380,545
    
    
    
    98.5Other loans:Commercial and industrial
    
    
    4,834
    
    
    
    1.05
    
    
    
    13,173
    
    
    
    2.8
    
    
    
    6,605
    
    
    
    1.4
    
    
    
    4,457
    
    
    
    1.1
    
    
    
    4,786
    
    
    
    1.2Consumer
    
    
    1,132
    
    
    
    0.25
    
    
    
    1,037
    
    
    
    0.2
    
    
    
    1,231
    
    
    
    0.3
    
    
    
    1,360
    
    
    
    0.3
    
    
    
    1,051
    
    
    
    0.3Total other loan
    
    
    5,966
    
    
    
    1.30
    
    
    
    14,210
    
    
    
    3.0
    
    
    
    7,836
    
    
    
    1.7
    
    
    
    5,817
    
    
    
    1.4
    
    
    
    5,837
    
    
    
    1.5Total loans
    
    
    460,670
    
    
    
    100.0
    %
    
    
    474,942
    
    
    
    100.0
    %
    
    
    460,542
    
    
    
    100.0
    %
    
    
    415,318
    
    
    
    100.0
    %
    
    
    386,382
    
    
    
    100
    %Less:Allowance for loan losses
    
    
    3,191
    
    
    
    
    
    
    
    3,613
    
    
    
    
    
    
    
    3,881
    
    
    
    
    
    
    
    3,788
    
    
    
    
    
    
    
    3,681Loans, net
    
    $
    457,479
    
    
    
    
    
    
    $
    471,329
    
    
    
    
    
    
    $
    456,661
    
    
    
    
    
    
    $
    411,530
    
    
    
    
    
    
    $
    382,701
 Loan Portfolio Sensitivity.
 Due AfterDue Within
    
    
    One Through
    
    
    Due AfterOne Year
    
    
    Five Years
    
    
    Five Years
    
    
    Total(In Thousands)Commercial and industrial loans
    
    $
    3,150
    
    
    $
    1,289
    
    
    $
    395
    
    
    $
    4,834Construction loans
    
    
    12,312
    
    
    
    936
    
    
    
    841
    
    
    
    14,089Total
    
    $
    15,462
    
    
    $
    2,225
    
    
    $
    1,236
    
    
    $
    18,923
 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
 5




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##### Table of Contents



Commercial and Industrial, Consumer and Other Loans .
 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 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in Thousands)Loans accounted for on a nonaccrual basis,
nonperforming loans
    
    $
    4,617
    
    
    $
    9,606
    
    
    $
    330
    
    
    $
    1,220
    
    
    $
    190Restructured loans
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate acquired by foreclosure or deed
    
    
    2,986
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total nonperforming assets
    
    $
    7,753
    
    
    $
    9,606
    
    
    $
    330
    
    
    $
    1,220
    
    
    $
    190Impaired loans, accruing
    
    $
    
    
    
    $
    136
    
    
    $
    
    
    
    $
    
    
    
    $
    Nonperforming loans to total loans
    
    
    1.03
    %
    
    
    2.02
    %
    
    
    0.07
    %
    
    
    0.29
    %
    
    
    0.05
    %Nonperforming assets to total assets
    
    
    1.35
    %
    
    
    1.68
    %
    
    
    0.06
    %
    
    
    0.22
    %
    
    
    0.04
    %
  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 . Accounting by Creditors for
Impairment of a Loan  an amendment of FASB Statements No. 5 and 15 Accounting for Contingencies
 Allowance for Loan Losses Item 1. Business
 8




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##### Table of Contents



At or for the Years Ended March 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in Thousands)Balance at beginning of year
    
    $
    3,613
    
    
    $
    3,881
    
    
    $
    3,788
    
    
    $
    3,681
    
    
    $
    3,537Provision (reduction of provision)
    
    
    2,125
    
    
    
    (70
    )
    
    
    80
    
    
    
    100
    
    
    
    100Charge-offs:Construction
    
    
    (2,201
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential mortgage
    
    
    (144
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial mortgage
    
    
    (178
    )
    
    
    (173
    )
    
    
    
    
    
    
    
    
    
    
    Other loans
    
    
    (36
    )
    
    
    (76
    )
    
    
    (48
    )
    
    
    (39
    )
    
    
    (3
    )Total charge-offs
    
    
    (2,559
    )
    
    
    (249
    )
    
    
    (48
    )
    
    
    (39
    )
    
    
    (3
    )Recoveries:Residential mortgage
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial mortgage
    
    
    
    
    
    
    37
    
    
    
    43
    
    
    
    37
    
    
    
    39Other loans
    
    
    9
    
    
    
    14
    
    
    
    18
    
    
    
    9
    
    
    
    8Total recoveries
    
    
    12
    
    
    
    51
    
    
    
    61
    
    
    
    46
    
    
    
    47Net (charge-offs) recoveries
    
    
    (2,547
    )
    
    
    (198
    )
    
    
    13
    
    
    
    7
    
    
    
    44Balance at end of year
    
    $
    3,191
    
    
    $
    3,613
    
    
    $
    3,881
    
    
    $
    3,788
    
    
    $
    3,681Average loans outstanding during the
year
    
    $
    464,288
    
    
    $
    462,164
    
    
    $
    433,935
    
    
    $
    406,474
    
    
    $
    365,130Ratio of net charge-offs to average
loans
    
    
    0.55
    %
    
    
    0.04
    %
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aTotal loans outstanding at end of
year
    
    $
    460,670
    
    
    $
    474,942
    
    
    $
    460,542
    
    
    $
    415,318
    
    
    $
    386,382Ratio of allowance for loan losses to
loans at end of year
    
    
    0.69
    %
    
    
    0.76
    %
    
    
    0.84
    %
    
    
    0.91
    %
    
    
    0.95
    %
 
 n/a means either not applicable or not meaningful 9




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##### Table of Contents



At March 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005% 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
    
    $
    655
    
    
    
    39.80
    %
    
    $
    520
    
    
    
    37.60
    %
    
    $
    456
    
    
    
    38.10
    %
    
    $
    443
    
    
    
    38.60
    %
    
    $
    422
    
    
    
    41.40
    %Commercial
    
    
    1,941
    
    
    
    54.25
    
    
    
    1,616
    
    
    
    51.50
    
    
    
    2,642
    
    
    
    51.10
    
    
    
    2,653
    
    
    
    51.50
    
    
    
    2,740
    
    
    
    50.30Construction
    
    
    406
    
    
    
    3.06
    
    
    
    1,246
    
    
    
    6.50
    
    
    
    587
    
    
    
    7.60
    
    
    
    523
    
    
    
    6.70
    
    
    
    334
    
    
    
    4.40Home equity
    
    
    114
    
    
    
    1.59
    
    
    
    86
    
    
    
    1.40
    
    
    
    84
    
    
    
    1.50
    
    
    
    88
    
    
    
    1.80
    
    
    
    100
    
    
    
    2.40Total mortgage loans
    
    
    3,116
    
    
    
    98.70
    
    
    
    3,468
    
    
    
    97.00
    
    
    
    3,769
    
    
    
    98.30
    
    
    
    3,707
    
    
    
    98.60
    
    
    
    3,596
    
    
    
    98.50Other loans
    
    
    75
    
    
    
    1.30
    
    
    
    145
    
    
    
    3.00
    
    
    
    112
    
    
    
    1.70
    
    
    
    81
    
    
    
    1.40
    
    
    
    85
    
    
    
    1.50Total
    
    $
    3,191
    
    
    
    100.00
    %
    
    $
    3,613
    
    
    
    100.00
    %
    
    $
    3,881
    
    
    
    100.00
    %
    
    $
    3,788
    
    
    
    100.00
    %
    
    $
    3,681
    
    
    
    100.00
    %
 10




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Investment Activities
    11




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##### Table of Contents



At March 31,2009
    
    
    2008
    
    
    2007(Dollars in Thousands)U.S. Government and agency obligations
    
    $
    1,503
    
    
    $
    3,547
    
    
    $
    19,768Corporate bonds
    
    
    701
    
    
    
    8,312
    
    
    
    13,697Mortgage-backed securities
    
    
    28,353
    
    
    
    22,450
    
    
    
    27,387Trust preferred securities
    
    
    750
    
    
    
    1,012
    
    
    
    Total debt securities
    
    
    31,307
    
    
    
    35,321
    
    
    
    60,852Preferred stock
    
    
    1,650
    
    
    
    11,422
    
    
    
    Common stock
    
    
    2,258
    
    
    
    6,217
    
    
    
    4,911Total investment securities
    
    $
    35,215
    
    
    $
    52,960
    
    
    $
    65,763Percentage of total assets
    
    
    6.12
    %
    
    
    9.27
    %
    
    
    11.6
    %
   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)U.S. government and agency
obligations
    
    $
    1,500
    
    
    
    4.03
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    1,500
    
    
    $
    1,503
    
    
    
    4.03
    %Corporate bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,984
    
    
    
    7.02
    
    
    

    
    
    
    
    
    
    
    
    1,984
    
    
    
    701
    
    
    
    7.02Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    4,468
    
    
    
    4.10
    
    
    
    3,117
    
    
    
    4.36
    
    
    
    20,228
    
    
    
    5.55
    
    
    
    27,813
    
    
    
    28,353
    
    
    
    4.55Trust Preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,003
    
    
    
    7.78
    
    
    
    1,003
    
    
    
    750
    
    
    
    7.78Total
    
    $
    1,500
    
    
    
    
    
    
    $
    4,468
    
    
    
    
    
    
    $
    5,101
    
    
    
    
    
    
    $
    21,231
    
    
    
    
    
    
    $
    32,300
    
    
    $
    31,307
 Deposits, Borrowed Funds, and Other Sources of Funds
 General .
 Deposits .
 12




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##### Table of Contents



Deposit Accounts.
 Years Ended March 31,2009
    
    
    2008
    
    
    2007Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    % of
    
    
    Rate
    
    
    Average
    
    
    % of
    
    
    Rate
    
    
    Average
    
    
    % of
    
    
    RateBalance
    
    
    Deposits
    
    
    Paid
    
    
    Balance
    
    
    Deposits
    
    
    Paid
    
    
    Balance
    
    
    Deposits
    
    
    Paid(Dollars in Thousands)Demand deposit accounts
    
    $
    38,807
    
    
    
    10.92
    %
    
    
    
    %
    
    $
    37,863
    
    
    
    10.38
    %
    
    
    
    %
    
    $
    38,832
    
    
    
    9.95
    %
    
    
    
    %NOW accounts
    
    
    26,029
    
    
    
    7.32
    
    
    
    0.37
    
    
    
    28,384
    
    
    
    7.78
    
    
    
    0.63
    
    
    
    30,005
    
    
    
    7.69
    
    
    
    0.61Passbook and other savings
accounts
    
    
    50,240
    
    
    
    14.13
    
    
    
    0.51
    
    
    
    52,071
    
    
    
    14.28
    
    
    
    0.60
    
    
    
    59,354
    
    
    
    15.22
    
    
    
    0.64Money market deposit accounts
    
    
    67,111
    
    
    
    18.88
    
    
    
    2.30
    
    
    
    58,211
    
    
    
    15.97
    
    
    
    3.64
    
    
    
    35,287
    
    
    
    9.05
    
    
    
    2.28Term deposit certificates
    
    
    173,303
    
    
    
    48.75
    
    
    
    2.95
    
    
    
    188,101
    
    
    
    51.59
    
    
    
    4.34
    
    
    
    226,630
    
    
    
    58.09
    
    
    
    4.33Total deposits
    
    $
    355,490
    
    
    
    100.00
    %
    
    
    1.97
    %
    
    $
    364,630
    
    
    
    100.00
    %
    
    
    2.96
    %
    
    $
    390,108
    
    
    
    100.00
    %
    
    
    2.86
    %
 Time Deposits in Excess of $100,000.
 Maturity Period:Three months or less
    
    
    28,599Three through six months
    
    $
    39,225Six through twelve months
    
    
    16,898Over twelve months
    
    
    775Total
    
    $
    85,497
 Borrowings .
  At or for theYears Ended March 31,2009
    
    2008
    
    2007(Dollars in Thousands)Amounts outstanding at end of period
    
    $
    144,583
    
    
    $
    156,691
    
    
    $
    125,000Weighted average rate at end of period
    
    
    4.52
    %
    
    
    4.57
    %
    
    
    5.11
    %Maximum amount of borrowings outstanding at any month end
    
    $
    156,682
    
    
    $
    161,700
    
    
    $
    140,371Approximate average amounts outstanding at any month end
    
    $
    147,117
    
    
    $
    140,925
    
    
    $
    112,070Approximate weighted average rate during the year
    
    
    4.59
    %
    
    
    4.97
    %
    
    
    5.40
    %
 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.
 18




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##### Table of Contents



Insurance of Deposit Accounts. 1/2
       19




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##### Table of Contents



Prompt Corrective Regulatory Action .
  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.  20




---



##### Table of Contents



Loans to Executive Officers, Directors and Principal Stockholders .
 Transactions with Affiliates .
 Enforcement.
 Prompt Corrective Regulatory Action.
 21




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##### Table of Contents



Federal Reserve System.
 Community Reinvestment Act.
  Federal Home Loan Bank System.
   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 the 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.
  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.
  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.
 26




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##### Table of Contents



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.
  Future FDIC assessments will hurt our earnings.
  27




---



##### Table of Contents



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.
 Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.
   28




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##### Table of Contents



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




---



##### 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 BookYear
    
    Value atOffice Location
    
    Opened
    
    March 31, 2009(In Thousands)Main Office
399 Highland Avenue
Somerville, MA (owned)
    
    
    1974
    
    
    $
    227Branch Offices:
175 Broadway
Arlington, MA (owned)
    
    
    1982
    
    
    
    11785 Wilmington Road
Burlington, MA (leased)
    
    
    1978
    (a)
    
    
    511192 Boylston Street
Chestnut Hill (Brookline), MA (owned)
    
    
    1954
    
    
    
    104137 Pleasant Street
Malden, MA (leased)
    
    
    1975
    (b)
    
    
    38846 Main Street
Melrose, MA (owned)
    
    
    1994
    
    
    
    216275 Main Street
Woburn, MA (owned)
    
    
    1980
    
    
    
    463198 Lexington Street
Woburn, MA (owned)
    
    
    1974
    
    
    
    193Woburn High School
Woburn, MA (leased)
    
    
    2002
    (c)
    
    
    20Stand-Alone ATM
94 Highland Avenue
Somerville, MA (leased)
    
    
    2004
    (d)
    
    
    27Loan Center
401 Highland Avenue
Somerville, MA (leased)
    
    
    2002
    (e)
    
    
    229Operations Center/Branch Office
270 Mystic Avenue
Medford, MA (leased)
    
    
    2006
    (f)
    
    
    526
 
 (a)
    
    The lease for the Burlington branch expires 10/31/2012 with a five-year
renewal option.(b)
    
    The lease for the Malden branch expires 8/31/2015.(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 11/30/10 with an option to extend for three
three-year terms.(e)
    
    The lease for the Commercial Loan Center expires 5/1/2015 with two five-year renewal
options. 31




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##### Table of Contents



(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.  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for the Registrants Common Equity and Related Stockholder Matters and Issuer
Purchases of Securities
 SM
  Common Stock Prices
    
    
    
    Cash Dividends (payable dates)Fiscal 2009
    
    High
    
    Low
    
    
    
    Fiscal 2009
    
    Amount6/30/08
    
    $
    21.15
    
    
    $
    11.00
    
    
    
    
    
    5/16/08
    
    
    $
    0.189/30/08
    
    
    14.27
    
    
    
    8.32
    
    
    
    
    
    8/15/08
    
    
    
    0.1812/31/08
    
    
    31.50
    
    
    
    3.04
    
    
    
    
    
    11/21/08
    
    
    
    0.183/31/09
    
    
    6.80
    
    
    
    4.27
    
    
    
    
    
    2/20/09
    
    
    
    0.18Fiscal 2008
    
    High
    
    Low
    
    
    
    Fiscal 2008
    
    Amount6/30/07
    
    $
    30.01
    
    
    $
    25.05
    
    
    
    
    
    5/18/07
    
    
    $
    0.189/30/07
    
    
    26.73
    
    
    
    20.12
    
    
    
    
    
    8/17/07
    
    
    
    0.1812/31/07
    
    
    24.20
    
    
    
    20.00
    
    
    
    
    
    11/16/07
    
    
    
    0.183/31/08
    
    
    22.24
    
    
    
    17.52
    
    
    
    
    
    2/15/08
    
    
    
    0.18
  32




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##### Table of Contents



Item 6. Selected Financial Data
  At or for the Year Ended March 31,2009
    
    2008
    
    2007
    
    2006
    
    2005(Dollars in Thousands, Except Per Share Data)Balance SheetTotal assets
    
    $
    575,827
    
    
    $
    571,245
    
    
    $
    566,140
    
    
    $
    547,275
    
    
    $
    521,071Total loans
    
    
    460,670
    
    
    
    474,942
    
    
    
    460,542
    
    
    
    415,318
    
    
    
    386,382Investments available for sale
    
    
    35,215
    
    
    
    52,960
    
    
    
    65,763
    
    
    
    97,195
    
    
    
    108,616Deposits
    
    
    375,074
    
    
    
    361,089
    
    
    
    388,573
    
    
    
    393,413
    
    
    
    333,215Total borrowings
    
    
    156,938
    
    
    
    168,173
    
    
    
    137,053
    
    
    
    111,290
    
    
    
    146,455Total stockholders equity
    
    
    40,239
    
    
    
    38,816
    
    
    
    37,702
    
    
    
    39,189
    
    
    
    38,239Shares outstanding
    
    
    1,639,951
    
    
    
    1,639,951
    
    
    
    1,639,951
    
    
    
    1,590,951
    
    
    
    1,588,598Statements of OperationsNet interest and dividend income
    
    $
    15,862
    
    
    $
    13,596
    
    
    $
    14,449
    
    
    $
    16,317
    
    
    $
    15,731Provision for loans losses (reduction of provision)
    
    
    2,125
    
    
    
    (70
    )
    
    
    80
    
    
    
    100
    
    
    
    100Net (loss) gain from sale and write-downs of
investment securities
    
    
    (9,796
    )
    
    
    645
    
    
    
    581
    
    
    
    419
    
    
    
    453Gain on sale of loans
    
    
    111
    
    
    
    158
    
    
    
    99
    
    
    
    208
    
    
    
    252Other noninterest income
    
    
    1,640
    
    
    
    1,429
    
    
    
    1,314
    
    
    
    1,370
    
    
    
    950Total noninterest expenses
    
    
    15,159
    
    
    
    13,859
    
    
    
    14,856
    
    
    
    14,183
    
    
    
    13,518Net (loss) income
    
    
    (6,205
    )
    
    
    1,447
    
    
    
    1,020
    
    
    
    2,643
    
    
    
    2,463(Loss) earnings per common share  diluted
    
    
    (4.58
    )
    
    
    1.07
    
    
    
    0.70
    
    
    
    1.83
    
    
    
    1.65Selected RatiosInterest rate spread
    
    
    2.63
    %
    
    
    2.06
    %
    
    
    2.21
    %
    
    
    2.72
    %
    
    
    2.85
    %Net yield on interest-earning assets
    
    
    2.96
    
    
    
    2.51
    
    
    
    2.68
    
    
    
    3.11
    
    
    
    3.20Noninterest expenses to average assets
    
    
    2.73
    
    
    
    2.49
    
    
    
    2.69
    
    
    
    2.64
    
    
    
    2.68Book equity-to-assets
    
    
    6.99
    
    
    
    6.79
    
    
    
    6.66
    
    
    
    7.16
    
    
    
    7.34Return on average assets
    
    
    (1.12
    )
    
    
    0.26
    
    
    
    0.18
    
    
    
    0.49
    
    
    
    0.49Return on average stockholders equity
    
    
    (16.68
    )
    
    
    3.76
    
    
    
    2.59
    
    
    
    6.78
    
    
    
    6.12Dividend payout ratio for common shares
    
    
    n/a
    
    
    
    67.29
    
    
    
    100.00
    
    
    
    35.68
    
    
    
    28.91Book value per common share
    
    $
    18.76
    
    
    $
    23.67
    
    
    $
    22.99
    
    
    $
    24.64
    
    
    $
    24.07Tangible book value per common share
    
    $
    17.40
    
    
    $
    22.31
    
    
    $
    21.63
    
    
    $
    23.24
    
    
    $
    22.67
 33




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##### Table of Contents



Quarterly Results of Operations (In Thousands, Except Per Share Data)
  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 taxes (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
    )
 2008First
    
    
    Second
    
    
    Third
    
    
    FourthInterest and dividend income
    
    $
    8,038
    
    
    $
    7,933
    
    
    $
    8,062
    
    
    $
    8,050Interest expense
    
    
    4,698
    
    
    
    4,680
    
    
    
    4,605
    
    
    
    4,504Net interest and dividend income
    
    
    3,340
    
    
    
    3,253
    
    
    
    3,457
    
    
    
    3,546(Reduction of provision) provision for loan losses
    
    
    
    
    
    
    (300
    )
    
    
    
    
    
    
    230Noninterest income
    
    
    525
    
    
    
    534
    
    
    
    786
    
    
    
    387Noninterest expenses
    
    
    3,516
    
    
    
    3,383
    
    
    
    3,340
    
    
    
    3,620Income before income taxes
    
    
    349
    
    
    
    704
    
    
    
    903
    
    
    
    83Income tax
    
    
    124
    
    
    
    239
    
    
    
    247
    
    
    
    (18
    )Net income
    
    $
    225
    
    
    $
    465
    
    
    $
    656
    
    
    $
    101Earnings per common share  basic
    
    $
    0.16
    
    
    $
    0.33
    
    
    $
    0.48
    
    
    $
    0.07Earnings per common share  diluted
    
    $
    0.16
    
    
    $
    0.33
    
    
    $
    0.48
    
    
    $
    0.07
 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
 Share-Based Payment"
 Allowance for Loan Losses. Allowance for Loan Losses Item 1.
 35




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##### Table of Contents



Business
 Income Taxes. Accounting
for Income Taxes
 Other Real Estate Owned
 Fair Value of Investments Accounting for Certain
Debt and Equity Securities
    Accounting for Goodwill and Impairment. Goodwill and Other
Intangible Assets e.g
 36




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




---



##### Table of Contents



Net Interest Rate Spread and Net Interest Margin.
 38




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##### Table of Contents



Years Ended March 31,2009
    
    
    2008Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost
    
    
    Balance
    
    
    Interest
    
    
    Cost(Dollars in Thousands)Assets:Interest-earning assets:Mortgage loans
    
    $
    455,782
    
    
    $
    27,141
    
    
    
    5.95
    %
    
    $
    450,047
    
    
    $
    27,212
    
    
    
    6.05
    %Other loans
    
    
    8,507
    
    
    
    533
    
    
    
    6.28
    
    
    
    12,117
    
    
    
    879
    
    
    
    7.25Total loans
    
    
    464,289
    
    
    
    27,674
    
    
    
    5.96
    
    
    
    462,164
    
    
    
    28,091
    
    
    
    6.08Short-term investments
    
    
    25,812
    
    
    
    150
    
    
    
    0.58
    
    
    
    9,324
    
    
    
    423
    
    
    
    4.54Investment securities
    
    
    45,374
    
    
    
    2,467
    
    
    
    5.44
    
    
    
    69,670
    
    
    
    3,569
    
    
    
    5.12Total investments
    
    
    71,186
    
    
    
    2,617
    
    
    
    3.68
    
    
    
    78,994
    
    
    
    3,992
    
    
    
    5.05Total interest-earnings assets
    
    
    535,475
    
    
    
    30,291
    
    
    
    5.66
    
    
    
    541,158
    
    
    
    32,083
    
    
    
    5.93Allowance for loan losses
    
    
    (4,066
    )
    
    
    
    
    
    
    
    
    
    
    (3,614
    )Noninterest-earning assets
    
    
    23,331
    
    
    
    
    
    
    
    
    
    
    
    19,504Total assets
    
    $
    554,740
    
    
    
    
    
    
    
    
    
    
    $
    557,048Liabilities and Stockholders Equity:Interest-bearing liabilities:Deposits
    
    $
    316,683
    
    
    
    6,984
    
    
    
    2.21
    
    
    $
    326,767
    
    
    
    10,733
    
    
    
    3.28Other borrowings
    
    
    12,126
    
    
    
    689
    
    
    
    5.68
    
    
    
    11,857
    
    
    
    838
    
    
    
    7.07Advances from FHLB of Boston
    
    
    147,108
    
    
    
    6,756
    
    
    
    4.59
    
    
    
    139,110
    
    
    
    6,916
    
    
    
    4.97Total interest-bearing liabilities
    
    
    475,917
    
    
    
    14,429
    
    
    
    3.03
    
    
    
    477,734
    
    
    
    18,487
    
    
    
    3.87Noninterest-bearing deposits
    
    
    38,807
    
    
    
    
    
    
    
    
    
    
    
    37,863Other liabilities
    
    
    2,818
    
    
    
    
    
    
    
    
    
    
    
    2,968Total liabilities
    
    
    517,542
    
    
    
    
    
    
    
    
    
    
    
    518,565Stockholders equity
    
    
    37,198
    
    
    
    
    
    
    
    
    
    
    
    38,483Total liabilities and stockholders
equity
    
    $
    554,740
    
    
    
    
    
    
    
    
    
    
    $
    557,048Net interest and dividend income
    
    
    
    
    
    $
    15,862
    
    
    
    
    
    
    
    
    
    
    $
    13,596Interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.63
    %
    
    
    
    
    
    
    
    
    
    
    2.06
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    2.96
    %
    
    
    
    
    
    
    
    
    
    
    2.51
    %
 39




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##### Table of Contents



Rate/Volume Analysis.
 2009 vs. 2008
    
    
    2008 vs. 2007Changes due to
    
    
    Changes due toIncrease (decrease) in:
    
    
    Increase (decrease) in:Volume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    
    Total(In Thousands)Interest income:Mortgage loans
    
    $
    361
    
    
    $
    (432
    )
    
    $
    (71
    )
    
    $
    1,413
    
    
    $
    (791
    )
    
    $
    622Other loans
    
    
    (238
    )
    
    
    (108
    )
    
    
    (346
    )
    
    
    356
    
    
    
    (58
    )
    
    
    298Total income from loans
    
    
    123
    
    
    
    (540
    )
    
    
    (417
    )
    
    
    1,769
    
    
    
    (849
    )
    
    
    920Short-term investments
    
    
    312
    
    
    
    (585
    )
    
    
    (273
    )
    
    
    120
    
    
    
    (25
    )
    
    
    95Investment securities
    
    
    (1,313
    )
    
    
    211
    
    
    
    (1,102
    )
    
    
    (1,472
    )
    
    
    253
    
    
    
    (1,219
    )Total income from investments
    
    
    (1,001
    )
    
    
    (374
    )
    
    
    (1,375
    )
    
    
    (1,352
    )
    
    
    228
    
    
    
    (1,124
    )Total interest and dividend income
    
    
    (878
    )
    
    
    (914
    )
    
    
    (1,792
    )
    
    
    417
    
    
    
    (621
    )
    
    
    (204
    )Interest expense:Deposits
    
    
    (324
    )
    
    
    (3,425
    )
    
    
    (3,749
    )
    
    
    (785
    )
    
    
    382
    
    
    
    (403
    )Other borrowings  including short-term
advances from FHLB
    
    
    19
    
    
    
    (168
    )
    
    
    (149
    )
    
    
    134
    
    
    
    (5
    )
    
    
    129Long-term advance  FHLB of Boston
    
    
    386
    
    
    
    (546
    )
    
    
    (160
    )
    
    
    1,451
    
    
    
    (528
    )
    
    
    923Total interest expense
    
    
    81
    
    
    
    (4,139
    )
    
    
    (4,058
    )
    
    
    800
    
    
    
    (151
    )
    
    
    649Net interest and dividend income
    
    $
    (959
    )
    
    $
    3,225
    
    
    $
    2,266
    
    
    $
    (383
    )
    
    $
    (470
    )
    
    $
    (853
    )
 Interest and Dividend Income.
 Interest Expense.
 40




---



##### Table of Contents



Provision for Loan Losses.
 Allowance for Loan Losses Item 1. Business
 Noninterest Income.
 41




---



##### Table of Contents



Noninterest Expenses.
      Income Taxes .
 Financial Condition
  42




---



##### Table of Contents



Allowance for Loan Losses
       Bank-Owned Life Insurance
  43




---



##### Table of Contents



Liquidity and Capital Resources
 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




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
      At March 31,2009
    
    2008Amount
    
    % Change
    
    Amount
    
    % Change(Dollars in Thousands)300 basis point increase in rates
    
    $
    (1,006
    )
    
    
    (6.16
    )%
    
    $
    (2,517
    )
    
    
    (14.63
    )%50 basis point decrease in rates
    
    
    (155
    )
    
    
    (0.95
    )
    
    
    
    
    
    
    100 basis point decrease in rates
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    0.99
  46




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 PageConsolidated Balance Sheets at March 31, 2009 and 2008
    
    
    48Consolidated Statements of Operations for the Years Ended March 31, 2009 and 2008
    
    
    49Consolidated Statement of Changes in Stockholders Equity and Comprehensive Income for the Years
Ended March 31, 2009 and 2008
    
    
    50Consolidated Statements of Cash Flows for the Years Ended March 31, 2009 and 2008
    
    
    52Notes to Consolidated Financial Statements
    
    
    53Report of Independent Registered Public Accounting Firm
    
    
    84
 47




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Balance Sheets
 (Dollars in Thousands, Except Per Share Data)
 March 31,2009
    
    
    2008ASSETSCash and due from banks
    
    $
    5,099
    
    
    $
    5,837Short-term investments
    
    
    37,323
    
    
    
    11,888Cash and cash equivalents
    
    
    42,422
    
    
    
    17,725Investment securities available for sale (Note 2)
    
    
    35,215
    
    
    
    52,960Stock in Federal Home Loan Bank of Boston (Notes 2 and 8)
    
    
    8,518
    
    
    
    8,518The Co-operative Central Bank Reserve Fund (Note 2)
    
    
    1,576
    
    
    
    1,576Total investments
    
    
    45,309
    
    
    
    63,054Loans held for sale (Note 1)
    
    
    3,208
    
    
    
    195Loans (Note 3)
    
    
    460,670
    
    
    
    474,942Less allowance for loan losses (Note 4)
    
    
    (3,191
    )
    
    
    (3,613
    )Loans, net
    
    
    457,479
    
    
    
    471,329Accrued interest receivable
    
    
    1,859
    
    
    
    1,981Banking premises and equipment, net (Note 5)
    
    
    3,323
    
    
    
    3,969Deferred tax asset, net (Note 9)
    
    
    7,585
    
    
    
    2,557Other real estate owned (Note 6)
    
    
    2,986
    
    
    
    Goodwill, net (Note 1)
    
    
    2,232
    
    
    
    2,232Bank owned life insurance (Note 1)
    
    
    6,391
    
    
    
    6,084Other assets
    
    
    3,033
    
    
    
    2,119Total assets
    
    $
    575,827
    
    
    $
    571,245LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 7)
    
    $
    375,074
    
    
    $
    361,089Short-term borrowings
    
    
    1,014
    
    
    
    141Federal Home Loan Bank advances (Notes 2 and 8)
    
    
    144,583
    
    
    
    156,691Subordinated debenture (Note 1)
    
    
    11,341
    
    
    
    11,341Advance payments by borrowers for taxes and insurance
    
    
    1,532
    
    
    
    1,308Accrued expenses and other liabilities
    
    
    2,044
    
    
    
    1,859Total liabilities
    
    
    535,588
    
    
    
    532,429Commitments 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, 2009, and no shares issued and outstanding at March 31, 2008,
with a liquidation preference and redemption value of $10,063,889
    
    
    9,476
    
    
    
    Common stock $1.00 par value; 15,000,000 shares authorized;
1,639,951 shares issued and outstanding at March 31, 2009
and March 31, 2008, respectively
    
    
    1,640
    
    
    
    1,640Additional paid-in capital
    
    
    4,371
    
    
    
    3,690Retained income
    
    
    33,393
    
    
    
    40,825Accumulated other comprehensive loss (Notes 1, 2 and 12)
    
    
    (2,226
    )
    
    
    (236
    )Unearned compensation  Employee Stock Ownership Plan (Note 12)
    
    
    (6,415
    )
    
    
    (7,103
    )Total stockholders equity
    
    
    40,239
    
    
    
    38,816Total liabilities and stockholders equity
    
    $
    575,827
    
    
    $
    571,245
 See accompanying notes to consolidated financial statements.
 48




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Operations
 (In Thousands, Except Per Share Data)
 Years Ended March 31,2009
    
    
    2008Interest and dividend income:Mortgage loans
    
    $
    27,141
    
    
    $
    27,212Other loans
    
    
    533
    
    
    
    879Short-term investments
    
    
    150
    
    
    
    423Investments
    
    
    2,467
    
    
    
    3,569Total interest and dividend income
    
    
    30,291
    
    
    
    32,083Interest expense:Deposits
    
    
    6,984
    
    
    
    10,733Advances from Federal Home Loan Bank of Boston
    
    
    6,756
    
    
    
    6,916Other borrowings
    
    
    689
    
    
    
    838Total interest expense
    
    
    14,429
    
    
    
    18,487Net interest and dividend income
    
    
    15,862
    
    
    
    13,596Provision (reduction of provision) for loan losses (Note 4)
    
    
    2,125
    
    
    
    (70
    )Net interest and dividend income after
provision (reduction of provision) for loan losses
    
    
    13,737
    
    
    
    13,666Noninterest income:Deposit service charges
    
    
    981
    
    
    
    991Loss on writedown of Fannie Mae and Freddie Mac Preferred Stock (Note 2)
    
    
    (9,394
    )
    
    
    Net (losses) gains from sales and write-downs of other investment securities (Note 2)
    
    
    (402
    )
    
    
    645Net gains on sales of loans
    
    
    111
    
    
    
    158Bank-owned life insurance income
    
    
    309
    
    
    
    84Brokerage income
    
    
    151
    
    
    
    157Other income
    
    
    199
    
    
    
    197Total noninterest (loss) income
    
    
    (8,045
    )
    
    
    2,232Noninterest expenses:Salaries and employee benefits (Note 12)
    
    
    8,288
    
    
    
    8,197Occupancy and equipment (Note 5)
    
    
    2,325
    
    
    
    2,208Data processing fees
    
    
    802
    
    
    
    885Professional fees (Note 13)
    
    
    925
    
    
    
    772Advertising and marketing
    
    
    416
    
    
    
    26Other expenses (Note 1)
    
    
    2,403
    
    
    
    1,771Total noninterest expenses
    
    
    15,159
    
    
    
    13,859(Loss) income before income taxes
    
    
    (9,467
    )
    
    
    2,039(Benefit) provision for income taxes (Note 1)
    
    
    (3,262
    )
    
    
    592Net (loss) income
    
    $
    (6,205
    )
    
    $
    1,447Net (loss) income available to common shareholders
    
    $
    (6,403
    )
    
    $
    1,447(Loss) earnings per common share (Note 1)Basic
    
    $
    (4.58
    )
    
    $
    1.07Diluted
    
    $
    (4.58
    )
    
    $
    1.07Weighted average common shares outstanding  basic
    
    
    1,398,175
    
    
    
    1,349,702Weighted average common and equivalent shares
outstanding  diluted
    
    
    1,398,175
    
    
    
    1,354,961
 See accompanying notes to consolidated financial statements.
 49




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income
 (In Thousands)
 AccumulatedSeries A
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    Unearned
    
    
    TotalPreferred
    
    
    Common
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Compensation
    
    
    StockholdersStock
    
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Income (Loss)
    
    
    ESOP
    
    
    EquityBalance at March 31, 2007
    
    $
    
    
    
    $
    1,640
    
    
    $
    3,479
    
    
    $
    40,394
    
    
    $
    (20
    )
    
    $
    (7,791
    )
    
    $
    37,702Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,447
    
    
    
    
    
    
    
    
    
    
    
    1,447Other comprehensive income, net of tax:Unrealized loss on securities, net
of reclassification adjustment (Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    (199
    )Unrealized loss on post-retirement
Benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    (17
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,231Stock-based compensation (Note 1)
    
    
    
    
    
    
    
    
    
    
    322
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    322Dividends paid ($0.72 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,016
    )
    
    
    
    
    
    
    
    
    
    
    (1,016
    )Amortization of unearned compensation  ESOP
    
    
    
    
    
    
    
    
    
    
    (111
    )
    
    
    
    
    
    
    
    
    
    
    688
    
    
    
    577Balance at March 31, 2008
    
    
    
    
    
    
    1,640
    
    
    
    3,690
    
    
    
    40,825
    
    
    
    (236
    )
    
    
    (7,103
    )
    
    
    38,816Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,205
    )
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    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
    
    $
    9,476
    
    
    $
    1,640
    
    
    $
    4,371
    
    
    $
    33,393
    
    
    $
    (2,226
    )
    
    $
    (6,415
    )
    
    $
    40,239
 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 (Benefit)
    
    
    After-TaxAmount
    
    
    Expense
    
    
    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 (loss)
    
    
    (9,796
    )
    
    
    (3,375
    )
    
    
    (6,421
    )Other comprehensive loss
    
    $
    (3,252
    )
    
    $
    (1,262
    )
    
    $
    (1,990
    )
 Before-Tax
    
    
    Tax (Benefit)
    
    
    After-TaxAmount
    
    
    Expense
    
    
    AmountYear ending March 31, 2008Unrealized loss on post-retirement benefits
    
    $
    (22
    )
    
    $
    (5
    )
    
    $
    (17
    )Unrealized losses on securities:Unrealized net holding gain during period
    
    
    241
    
    
    
    6
    
    
    
    235Less: reclassification adjustment for net gains included in net
income
    
    
    645
    
    
    
    194
    
    
    
    451Other comprehensive loss
    
    $
    (404
    )
    
    $
    (188
    )
    
    $
    (216
    )
 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 31,2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    (6,205
    )
    
    $
    1,447Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation and amortization
    
    
    905
    
    
    
    955Amortization of premiums
    
    
    58
    
    
    
    53Provision for loan losses
    
    
    2,125
    
    
    
    (70
    )Stock-based compensation and amortization of unearned compensation -ESOP
    
    
    775
    
    
    
    899Increase in deferred tax assets, net
    
    
    (3,650
    )
    
    
    (179
    )Net losses (gains) from sales and write-downs of investment securities
    
    
    9,796
    
    
    
    (645
    )Bank-owned life insurance income
    
    
    (309
    )
    
    
    (84
    )Gain on sales of loans held for sale
    
    
    (111
    )
    
    
    (158
    )Originations of loans held for sale
    
    
    (13,909
    )
    
    
    (13,225
    )Proceeds from the sale of loans originated for sale
    
    
    11,007
    
    
    
    13,763Gain on sale of other real estate
    
    
    (27
    )
    
    
    Decrease in accrued interest receivable
    
    
    122
    
    
    
    434Increase in other assets, net
    
    
    (912
    )
    
    
    (152
    )Increase in advance payments by borrowers for taxes and insurance
    
    
    224
    
    
    
    79Increase in accrued expenses and other liabilities, net
    
    
    185
    
    
    
    276Net cash provided by operating activities
    
    
    74
    
    
    
    3,393Cash flows from investing activities:Net decrease (increase) in loans
    
    
    8,488
    
    
    
    (14,598
    )Principal decrease payments on mortgage-backed securities
    
    
    5,510
    
    
    
    5,568Purchases of investment securities
    
    
    (13,108
    )
    
    
    (21,365
    )Proceeds from sales of investment securities
    
    
    3,621
    
    
    
    19,811Maturities and redemptions of investment securities
    
    
    8,500
    
    
    
    8,999Purchases of restricted equity  FHLB of Boston
    
    
    
    
    
    
    (1,152
    )Purchase of bank-owned life insurance
    
    
    
    
    
    
    (6,000
    )Purchase of banking premises and equipment
    
    
    (259
    )
    
    
    (168
    )Net expenditures on foreclosed real estate
    
    
    60
    
    
    
    Proceeds from sale of OREO
    
    
    218
    
    
    
    Net cash provided by investing activities
    
    
    13,030
    
    
    
    (8,905
    )Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    13,985
    
    
    
    (27,484
    )Proceeds from advances from FHLB of Boston
    
    
    
    
    
    
    136,700Repayment of advances from FHLB of Boston
    
    
    (12,108
    )
    
    
    (105,009
    )Net increase (decrease) in short-term borrowings
    
    
    873
    
    
    
    (571
    )Payments of dividends, net
    
    
    (1,127
    )
    
    
    (1,016
    )Issuance of Series A preferred stock and warrants
    
    
    9,970
    
    
    
    Net cash provided by financing activities
    
    
    11,593
    
    
    
    2,620Net increase (decrease) in cash and cash equivalents
    
    
    24,697
    
    
    
    (2,892
    )Cash and cash equivalents at beginning of year
    
    
    17,725
    
    
    
    20,617Cash and cash equivalents at end of year
    
    $
    42,422
    
    
    $
    17,725Cash paid during the period for:Interest
    
    $
    14,468
    
    
    $
    18,367Income taxes
    
    $
    935
    
    
    $
    680Supplemental disclosure of non-cash investing and financing activities:Loans transferred to other real estate owned
    
    $
    3,237
    
    
    $
    Accretion of Series A preferred stock discount and issuance costs
    
    $
    36
    
    
    $
    
 See accompanying notes to consolidated financial statements
 52




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##### Table of Contents



CENTRAL BANCORP, INC. AND SUBSIDIARY
 
 Notes to Consolidated Financial Statements
 For the Year Ended March 31, 2009
 Note 1. Summary of Significant Accounting Policies
     Consolidation of Variable Interest Entitiesan Interpretation of Accounting Research
Bulletin No. 51,
  Cash and Cash Equivalents
   Fair Value of Investments
  53




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##### Table of Contents



Loans
     Accounting by Debtors and Creditors for Troubled Debt Restructurings
 54




---



##### Table of Contents



Allowance for Loan Losses
  Accounting by Creditors for Impairment of a Loan  an amendment of FASB Statements No. 5 and
15 Accounting for Contingencies
  55




---



##### Table of Contents



Subordinated Debentures
    Income Taxes
 Accounting for Income
Taxes Accounting for
Uncertainty in Income Taxes
 56




---



##### Table of Contents



Banking Premises and Equipment
  Other Real Estate Owned
  Accounting for Goodwill and Impairment
 e.g.,
 Pension Benefits
  Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of
FASB Statements No. 87, 88, 106, and 132(R)
 Stock-Based Compensation
 Share-Based Payment
   57




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##### Table of Contents



Number of
    
    
    Weighted AverageShares
    
    
    Exercise PriceBalance at March 31, 2007
    
    
    69,121
    
    
    $
    25.411Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (903
    )
    
    
    28.990Granted
    
    
    
    
    
    
    Balance at March 31, 2008
    
    
    68,218
    
    
    
    25.364Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    Balance at March 31, 2009
    
    
    68,218
    
    
    $
    25.364Exercisable at March 31, 2009
    
    
    62,218
    
    
    $
    24.801
 58




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##### Table of Contents



Fiscal year ending
    
    2010
    
    2011
    
    2012
    
    TotalCompensation Expense
    
    $
    322,000
    
    
    $
    322,000
    
    
    $
    188,000
    
    
    $
    832,000
   Options Outstanding
    
    
    Options ExercisableWeightedAverageRemaining
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedNumber
    
    
    Contractual
    
    
    Average
    
    
    Aggregate
    
    
    Number of
    
    
    AverageExercise
    
    
    of Shares
    
    
    Life
    
    
    Exercise
    
    
    Intrinsic
    
    
    Shares
    
    
    ExercisePrice
    
    
    Outstanding
    
    
    (Years)
    
    
    Price
    
    
    Value (1)
    
    
    Outstanding
    
    
    Price$
    16.625
    
    
    
    12,077
    (2)
    
    
    1.7
    
    
    $
    16.625
    
    
    $
    
    
    
    
    12,077
    (2)
    
    $
    16.62520.250
    
    
    
    13,745
    (2)
    
    
    0.6
    
    
    
    20.250
    
    
    
    
    
    
    
    13,745
    (2)
    
    
    20.25028.990
    
    
    
    32,396
    (2)
    
    
    5.9
    
    
    
    28.990
    
    
    
    
    
    
    
    32,396
    (2)
    
    
    28.99031.200
    
    
    
    10,000
    (3)
    
    
    7.4
    
    
    
    31.200
    
    
    
    
    
    
    
    4,000
    (3)
    
    
    31.200Average/Total
    
    
    
    
    
    
    68,218
    
    
    
    4.4
    
    
    $
    25.364
    
    
    $
    
    
    
    
    62,218
    
    
    $
    24.801
 
 (1)
    
    Represents the total intrinsic value, based on the Companys closing stock price of $4.74 as of
March 31, 2009, 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, 40% vested at March 31, 2009.  Weighted AverageNumber of
    
    Grant DateNon-Vested Shares
    
    Shares
    
    Fair ValueBalance at March 31, 2008
    
    
    39,200
    
    
    $
    31.20Granted
    
    
    Vested
    
    
    9,800
    
    
    $
    31.20Forfeited
    
    
    Non-vested at March 31, 2009
    
    
    29,400
    
    
    $
    31.20
 Transition Election Related to Accounting for Tax Effects of Share-Based
Payment Awards.
 59




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##### Table of Contents



Earnings Per Share
 Earnings per Share
  2009
    
    
    2008(Amounts in thousands, exceptper share amounts)Net (loss) income as reported
    
    $
    (6,205
    )
    
    $
    1,447Less preferred dividends and accretion
    
    
    (198
    )
    
    
    Net (loss) income available to common stockholders
    
    $
    (6,403
    )
    
    $
    1,447Weighted average number of common shares outstanding
    
    
    1,640
    
    
    
    1,640Weighted average number of unallocated ESOP and unvested
restricted shares
    
    
    (242
    )
    
    
    (290
    )Weighted average number of common shares outstanding used in
calculation of basic earnings per share
    
    
    1,398
    
    
    
    1,350Incremental shares from the assumed exercise of dilutive
common stock shares
    
    
    
    
    
    
    5Weighted average number of common shares outstanding used in
calculating diluted earnings per share
    
    
    1,398
    
    
    
    1,355(Loss) earnings per share:Basic
    
    $
    (4.58
    )
    
    $
    1.07Diluted
    
    $
    (4.58
    )
    
    $
    1.07
  Bank-Owned Life Insurance
  60




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##### Table of Contents



Other Comprehensive Income (Loss)
  Recent Accounting Pronouncements
 Fair Value Measurements
 Effective Date of FASB Statement No.
157
 Determining the Fair Value of a Financial
Asset When the Market for that Asset is Not Active
 Business Combinations
 Non Controlling Interest in
Consolidated Financial Statements  An Amendment of ARB NO. 151
 61




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##### Table of Contents



Disclosures About Derivative Instruments and Hedging Activities- An Amendment of FASB
Statement No. 133
 The Hierarchy of Generally Accepted
Accounting Principles.
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities Participating
Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share
 Determining Whether an Instrument is Indexed to an Entitys Own Stock . The Meaning of Indexed to a Companys
Own Stock.
 Interim Disclosures about Fair
Value of Financial Instruments . Disclosures about Fair Value of Financial Instruments Interim Financial Reporting
 62




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##### Table of Contents



Recognition and
Presentation of Other- Than-Temporary Impairments
 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
 63




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##### Table of Contents



Note 2. Investments
  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
 March 31, 2008Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In Thousands)U.S. Government and agency obligations
    
    $
    3,495
    
    
    $
    52
    
    
    $
    
    
    
    $
    3,547Corporate bonds
    
    
    8,496
    
    
    
    8
    
    
    
    (192
    )
    
    
    8,312Mortgage-backed securities
    
    
    22,235
    
    
    
    257
    
    
    
    (42
    )
    
    
    22,450Trust preferred securities
    
    
    1,004
    
    
    
    8
    
    
    
    
    
    
    
    1,012Total debt securities
    
    
    35,230
    
    
    
    325
    
    
    
    (234
    )
    
    
    35,321Preferred stock
    
    
    12,173
    
    
    
    
    
    
    
    (751
    )
    
    
    11,422Common stock
    
    
    6,209
    
    
    
    384
    
    
    
    (376
    )
    
    
    6,217Total
    
    $
    53,612
    
    
    $
    709
    
    
    $
    (1,361
    )
    
    $
    52,960
  64




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##### Table of Contents



Less Than or Equal to
    
    
    Greater Than12 Months
    
    
    12 MonthsFair
    
    
    Unrealized
    
    
    
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In Thousands)Corporate bonds
    
    $
    
    
    
    $
    
    
    
    $
    701
    
    
    $
    (1,283
    )Mortgage-backed securities
    
    
    1,165
    
    
    
    (11
    )
    
    
    730
    
    
    
    (21
    )Trust Preferred Securities
    
    
    
    
    
    
    
    
    
    
    750
    
    
    
    (253
    )Preferred stock
    
    
    817
    
    
    
    (845
    )
    
    
    773
    
    
    
    (1,280
    )Common stock
    
    
    1,118
    
    
    
    (526
    )
    
    
    738
    
    
    
    (377
    )Total temporarily impaired securities
    
    $
    3,100
    
    
    $
    (1,382
    )
    
    $
    3,692
    
    
    $
    (3,214
    )
  Amortized
    
    
    Fair
    
    
    AnnualCost
    
    
    Value
    
    
    Yield(Dollars in Thousands)Due within one year
    
    $
    1,500
    
    
    $
    1,503
    
    
    
    4.03
    %Due after one year but within five years
    
    
    4,468
    
    
    
    4,549
    
    
    
    4.10Due after five years but within ten years
    
    
    5,101
    
    
    
    3,900
    
    
    
    5.39Due after ten years
    
    
    21,231
    
    
    
    21,355
    
    
    
    5.66Total
    
    $
    32,300
    
    
    $
    31,307
   2009
    
    
    2008(Dollars in Thousands)Proceeds from sales, maturities,
redemptions
    
    $
    12,121
    
    
    $
    28,810Gross gains
    
    
    415
    
    
    
    886Gross losses
    
    
    (77
    )
    
    
    (56
    )Other than temporary impairment
    
    
    (10,134
    )
    
    
    (185
    )Net realized (loss) gains
    
    $
    (9,796
    )
    
    $
    645
    65




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##### Table of Contents



Note 3. Loans
  2009
    
    
    2008Real estate loans:Residential real estate (1-4 family)
    
    $
    183,327
    
    
    $
    178,727Commercial real estate
    
    
    249,941
    
    
    
    244,496Construction
    
    
    14,089
    
    
    
    30,950Home equity lines of credit
    
    
    7,347
    
    
    
    6,559Total real estate loans
    
    
    454,704
    
    
    
    460,732Commercial loans
    
    
    4,834
    
    
    
    13,173Consumer loans
    
    
    1,132
    
    
    
    1,037Total loans
    
    
    460,670
    
    
    
    474,942Less: allowance for losses
    
    
    (3,191
    )
    
    
    (3,613
    )Total loans, net
    
    $
    457,479
    
    
    $
    471,329
    
 At March 31,2009
    
    
    2008Impaired loans with a valuation allowance
    
    $
    690
    
    
    $
    4,766Impaired loans without a valuation allowance
    
    
    3,335
    
    
    
    4,562Total impaired loans
    
    $
    4,025
    
    
    $
    9,328Specific valuation allowance related to impaired loans
    
    $
    300
    
    
    $
    601
 66




---



##### Table of Contents



Years ended March 31,2009
    
    2008Average recorded investment in impaired loans
    
    $
    8,597
    
    
    $
    5,910Cash receipts applied to reduce principal balance
    
    
    1,228
    
    
    
    355Interest income recognized for cash payments
    
    
    33
    
    
    
    99
      2009
    
    
    2008Balance at beginning of year
    
    $
    381
    
    
    $
    654New loans
    
    
    42
    
    
    
    11Repayment of principal
    
    
    (33
    )
    
    
    (284
    )Balance at end of year
    
    $
    390
    
    
    $
    381
  Note 4. Allowance for Loan Losses
  Years Ended March 31,2009
    
    
    2008Balance at beginning of year
    
    $
    3,613
    
    
    $
    3,881Provision (reduction of provision) charged to expense
    
    
    2,125
    
    
    
    (70
    )Less: Amounts charged-off
    
    
    (2,559
    )
    
    
    (249
    )Add: Recoveries on accounts previously charged-off
    
    
    12
    
    
    
    51Balance at end of year
    
    $
    3,191
    
    
    $
    3,613
 67




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##### Table of Contents



Note 5. Banking Premises and Equipment
  Estimated2009
    
    
    2008
    
    
    Useful LivesLand
    
    $
    589
    
    
    $
    589Buildings and improvements
    
    
    2,307
    
    
    
    2,213
    
    
    50 yearsFurniture and fixtures
    
    
    3,353
    
    
    
    3,187
    
    
    3-5 yearsLeasehold improvements
    
    
    1,561
    
    
    
    1,561
    
    
    5-10 years7,810
    
    
    
    7,550Less accumulated depreciation and amortization
    
    
    (4,487
    )
    
    
    (3,581
    )Total
    
    $
    3,323
    
    
    $
    3,969
  Note 6. Other Real Estate Owned
  2009Balance at beginning of year
    
    $
    Additions
    
    
    3,237Valuation adjustments
    
    
    (60
    )Sales
    
    
    (191
    )Balance at end of year
    
    $
    2,986
  Note 7. Deposits
  2009
    
    
    2008Demand deposit accounts
    
    $
    46,259
    
    
    $
    38,250NOW accounts
    
    
    30,976
    
    
    
    27,065Passbook and other savings accounts
    
    
    50,737
    
    
    
    50,252Money market deposit accounts
    
    
    67,398
    
    
    
    67,243Total non-certificate accounts
    
    
    195,370
    
    
    
    182,810Term deposit certificatesCertificates of $100,000 and above
    
    
    85,497
    
    
    
    74,052Certificates less than $100,000
    
    
    94,207
    
    
    
    104,227Total term deposit certificates
    
    
    179,704
    
    
    
    178,279Total deposits
    
    $
    375,074
    
    
    $
    361,089
 68




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##### Table of Contents



Weighted AverageAmount
    
    
    Interest RateWithin 1 year
    
    $
    174,021
    
    
    
    2.60
    %Over 1 to 3 years
    
    
    4,636
    
    
    
    2.74Over 3 years
    
    
    1,047
    
    
    
    3.00$
    179,704
 Note 8. Federal Home Loan Bank Advances
  2009
    
    
    2008Weighted Average
    
    
    
    
    
    
    Weighted AverageAmount
    
    
    Interest Rate
    
    
    Amount
    
    
    Interest RateWithin 1 year
    
    $
    27,000
    
    
    
    5.55
    %
    
    $
    12,000
    
    
    
    5.27
    %1-2 years
    
    
    26,000
    
    
    
    5.37
    
    
    
    27,000
    
    
    
    5.552-3 years
    
    
    
    
    
    
    
    
    
    
    26,000
    
    
    
    5.373-4 years
    
    
    29,583
    
    
    
    3.92
    
    
    
    
    
    
    
    4-5 years
    
    
    2,000
    
    
    
    5.49
    
    
    
    29,691
    
    
    
    3.92Over 5 to 10 years
    
    
    60,000
    
    
    
    3.94
    
    
    
    62,000
    
    
    
    3.99$
    144,583
    
    
    
    4.52
    %
    
    $
    156,691
    
    
    
    4.57
    %
   Note 9. Income Taxes
  Years Ended March 31,2009
    
    
    2008CurrentFederal
    
    $
    203
    
    
    $
    746State
    
    
    86
    
    
    
    136Total current provision
    
    
    289
    
    
    
    882Deferred benefit
    
    
    (3,551
    )
    
    
    (290
    )(Benefit) provision for income taxes
    
    $
    (3,262
    )
    
    $
    592
 69




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##### Table of Contents



Years Ended March 31,2009
    
    2008Statutory Federal tax rate
    
    
    (34.0
    )%
    
    
    34.0
    %Items affecting Federal income tax rate:Dividends received deduction
    
    
    (1.6
    )
    
    
    (4.4
    )State income taxes  net of federal
    
    
    (2.1
    )
    
    
    1.5Bank-owned life insurance deduction
    
    
    (1.1
    )
    
    
    (1.4
    )Securities write-down
    
    
    0.8
    
    
    
    Valuation allowance
    
    
    3.4
    
    
    
    Other
    
    
    0.1
    
    
    
    (0.7
    )Effective tax rate
    
    
    (34.5
    )%
    
    
    29.0
    %
  2009
    
    
    2008Deferred tax assets:Allowance for loan losses
    
    $
    1,306
    
    
    $
    1,479Depreciation
    
    
    860
    
    
    
    490Post-employee retirement benefit accrual
    
    
    221
    
    
    
    256Write-down of investments securities
    
    
    3,888
    
    
    
    85Unrealized loss on securities, net
    
    
    1,628
    
    
    
    250Capital loss carry forward
    
    
    
    
    
    
    30Other
    
    
    350
    
    
    
    234Gross deferred tax asset
    
    
    8,253
    
    
    
    2,824Less: Valuation Allowance
    
    
    (387
    )
    
    
    Net deferred tax asset
    
    
    7,866
    
    
    
    2,824Deferred tax liabilities:Deferred loan origination costs
    
    
    281
    
    
    
    267Gross deferred tax liability
    
    
    281
    
    
    
    267Net deferred tax asset
    
    $
    7,585
    
    
    $
    2,557
    70




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##### Table of Contents



AmountUnrecognized tax benefits at April 1, 2008
    
    $
    176,000Additions for tax positions related to the current year
    
    
    Additions for tax positions of prior years
    
    
    Reductions for tax positions of prior years
    
    
    Unrecognized tax benefits at March 31, 2009
    
    $
    176,000
  Note 10. Financial Instruments with Off-Balance Sheet Risk
    At March 31,2009
    
    
    2008Unused lines of credit
    
    $
    15,129
    
    
    $
    15,009Unadvanced portions of construction loans
    
    
    1,439
    
    
    
    3,852Unadvanced portions of commercial loans
    
    
    1,739
    
    
    
    1,681Commitments to originate commercial mortgage loans
    
    
    1,884
    
    
    
    4,372Commitments to originate residential mortgage loans
    
    
    23,187
    
    
    
    6,493Commitments to sell residential mortgage loans
    
    
    11,351
    
    
    
    4,524Total off-balance sheet commitments
    
    $
    54,729
    
    
    $
    35,931
  71




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##### Table of Contents



Years EndingMarch 31,2010
    
    $
    3522011
    
    
    3472012
    
    
    3402013
    
    
    3202014
    
    
    300Thereafter
    
    
    1,247Total
    
    $
    2,906
  Note 11. Stockholders Equity
   72




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##### Table of Contents



To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    Action provisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs 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
    
    
    
    22162
    
    
    34.00

    
    
    27,810
    
    
    35.00As of March 31, 2008:Company (consolidated)Total risk-based capital
    
    $
    51,444
    
    
    
    11.44
    %
    
    $
    35,975
    
    
    38.00%
    
    
    N/A
    
    
    
    N/ATier 1 capital
    
    
    47,831
    
    
    
    10.63
    
    
    
    17,998
    
    
    34.00
    
    
    N/A
    
    
    
    N/ATier 1 leverage capital
    
    
    47,831
    
    
    
    8.49
    
    
    
    22,535
    
    
    34.00
    
    
    N/A
    
    
    
    N/ABankTotal risk-based capital
    
    $
    43,646
    
    
    
    10.50
    %
    
    $
    33,254
    
    
    38.00%
    
    $
    41,568
    
    
    310.00%Tier 1 capital
    
    
    40,033
    
    
    
    9.63
    
    
    
    16,628
    
    
    34.00
    
    
    24,972
    
    
    36.00Tier 1 leverage capital
    
    
    40,033
    
    
    
    7.08
    
    
    
    22,618
    
    
    34.00
    
    
    28,272
    
    
    35.00
   Note 12. Employee Benefits
 Pension and Savings Plans
   73




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##### Table of Contents



Employee Stock Ownership Plan
   Employers Accounting for Employee Stock
Ownership Plans
  74




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##### Table of Contents



Other Post-Retirement Benefits
  Years Ended March 31,2009
    
    
    2008Life
    
    
    Medical
    
    
    Life
    
    
    MedicalActuarial present value of benefits obligation:Retirees
    
    $
    (165
    )
    
    $
    (168
    )
    
    $
    (235
    )
    
    $
    (216
    )Fully eligible participants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    (165
    )
    
    $
    (168
    )
    
    $
    (235
    )
    
    $
    (216
    )Change in projected benefit obligation:Accumulated benefit obligations at prior year-end
    
    $
    (235
    )
    
    $
    (216
    )
    
    $
    (230
    )
    
    $
    (199
    )Service cost less expense component
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest cost
    
    
    (12
    )
    
    
    (11
    )
    
    
    (13
    )
    
    
    (12
    )Actuarial gain
    
    
    66
    
    
    
    26
    
    
    
    7
    
    
    
    9Amendment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Assumptions
    
    
    15
    
    
    
    11
    
    
    
    
    
    
    
    (34
    )Benefits paid
    
    
    1
    
    
    
    22
    
    
    
    1
    
    
    
    20Accumulated benefit obligations at year-end
    
    $
    (165
    )
    
    $
    (168
    )
    
    $
    (235
    )
    
    $
    (216
    )Change in plan assets:Fair value of plan assets at prior year-end
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contribution
    
    
    1
    
    
    
    22
    
    
    
    1
    
    
    
    20Benefits paid and expenses
    
    
    (1
    )
    
    
    (22
    )
    
    
    (1
    )
    
    
    (20
    )Fair value of plan assets at current year-end
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Change in Other Comprehensive Income:Other Comprehensive Income at prior fiscal year-end
    
    $
    (62
    )
    
    $
    (104
    )
    
    $
    (54
    )
    
    $
    (130
    )Plan Amendment
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aGain (loss) Actuarial Experience
    
    
    (66
    )
    
    
    (26
    )
    
    
    (7
    )
    
    
    (9
    )Gain (loss) Assumptions
    
    
    (15
    )
    
    
    (11
    )
    
    
    n/a
    
    
    
    34Amortization included in Pension Expense
    
    
    2
    
    
    
    1
    
    
    
    (2
    )
    
    
    1Other Comprehensive Income at current year-end
    
    $
    (141
    )
    
    $
    (140
    )
    
    $
    (63
    )
    
    $
    (104
    )Amounts with Deferred Recognition
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aReconciliation of (accrual) prepaid:(Accrued) prepaid pension cost at beginning of year
    
    $
    (296
    )
    
    $
    (321
    )
    
    $
    (283
    )
    
    $
    (329
    )Minus net periodic cost
    
    
    (10
    )
    
    
    (9
    )
    
    
    (15
    )
    
    
    (12
    )Plus employer contributions, net
    
    
    1
    
    
    
    22
    
    
    
    1
    
    
    
    20(Accrued) prepaid cost at end of year
    
    $
    (305
    )
    
    $
    (308
    )
    
    $
    (297
    )
    
    $
    (321
    )Benefit obligation weighted average assumption as
Change in projected benefit obligation:Discount rate
    
    
    6.75
    %
    
    
    6.75
    %
    
    
    5.75
    %
    
    
    5.75
    %Expected return on plan assets
    
    
    6.75
    
    
    
    6.75
    
    
    
    5.75
    
    
    
    5.75Rate of compensation increase
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
 75




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##### Table of Contents



Years Ended March 31,2009
    
    
    2008Life
    
    
    Medical
    
    
    Life
    
    
    MedicalComponents of net periodic benefit cost:Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    12
    
    
    
    11
    
    
    
    13
    
    
    
    12Expected return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    9
    
    
    
    14
    
    
    
    9
    
    
    
    14Recognized actuarial (gain) loss
    
    
    (11
    )
    
    
    (15
    )
    
    
    (7
    )
    
    
    (14
    )Net periodic benefit cost
    
    $
    10
    
    
    $
    10
    
    
    $
    15
    
    
    $
    12Periodic benefit cost weighted average assumptions:Discount rate
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    5.75
    %Expected return on plan assets
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    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
    
    
    (22
    )
    
    
    (20
    )
    
    
    (22
    )
    
    
    (20
    )Noncurrent Liabilities
    
    
    (143
    )
    
    
    (148
    )
    
    
    (213
    )
    
    
    (196
    )$
    (165
    )
    
    $
    (168
    )
    
    $
    (235
    )
    
    $
    (216
    )Amounts recognized in Accumulated Other
Comprehensive Income consist of:Net Loss (Gain)
    
    $
    (175
    )
    
    $
    (165
    )
    
    $
    (104
    )
    
    $
    (143
    )Prior Service Cost (Credit)
    
    
    
    
    
    
    (74
    )
    
    
    
    
    
    
    (85
    )Transition Liability (Asset)
    
    
    34
    
    
    
    99
    
    
    
    43
    
    
    
    124$
    (141
    )
    
    $
    (140
    )
    
    $
    (61
    )
    
    $
    (104
    )Amounts anticipated to be recognized in expense
for fiscal year ending in 2009:
    
    $
    (19
    )
    
    $
    (18
    
    
    $
    (9
    )
    
    $
    (14
    )Net Loss (Gain)
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    (11
    )Prior Service Cost (Credit)
    
    
    9
    
    
    
    25
    
    
    
    9
    
    
    
    25Transition Liability (Asset)
    
    $
    (10
    )
    
    $
    (4
    )
    
    $
    
    
    
    $
    
  76




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##### Table of Contents



Note 13. Legal Proceedings
  Note 14. Troubled Asset Relief Program Capital Purchase Program
    Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock" Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants" Accounting
for the Issuance of Convertible Preferred Stock and Debt Equities with a Non-detachable Conversion
Feature" Accounting for Increasing Rate Preferred
 77




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##### Table of Contents



Stock
 Expected life in years
    
    
    10.00Expected volatility
    
    
    54.76
    %Dividend yield
    
    
    3.00
    %Risk-free interest rate
    
    
    2.67
    %
  Note 15. Fair Values of Financial Instruments
  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)Level 1
    
    Level 2
    
    Level 3
    
    TotalSecurities available for sale
    
    $
    2,258
    
    
$
    31,945


    
    $
    1,012
    
    
    $
    35,215Impaired loans carried at fair value
    
    $
    
    
    
    $
    

    
    
    $
    690
    
    
    $
    690
  78




---



##### Table of Contents



InvestmentSecuritiesAvailable for SaleBalance at March 31, 2008
    
    $
    717Total realized and unrealized gains (losses) included in income
    
    
    Total unrealized losses included in other comprehensive income
    
    
    (7
    )Net accretion of discount and repayment of principal
    
    
    (109
    )Net transfers in/out of Level 3
    
    
    411Balance at March 31, 2009
    
    $
    1,012
   ImpairedLoansBalance at March 31, 2008
    
    $
    4,226Total realized and unrealized losses included in income
    
    
    (1,934
    )Additional principal disbursement
    
    
    97Net transfers in/out of Level 3
    
    
    (1,699
    )Balance at March 31, 2009
    
    $
    690
    Cash and Due from Banks 
 Short-Term Investments 
 79




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##### Table of Contents



Investments and Mortgage-Backed Securities 
 Loans and Loans Held for Sale  Accounting by
Creditors for Impairment of a Loan  an amendment of FASB Statements No. 5 and 15
 Other Real Estate Owned 
 Goodwill Goodwill and
Other Intangible Assets e.g
 Accrued Interest Receivable 
 Stock in FHLB of Boston 
 The Co-operative Central Bank Reserve Fund 
 Deposits 
 Advances from FHLB of Boston 
 Short-Term Borrowings, Advance Payments by Borrowers for Taxes and Insurance and Accrued
Interest Payable 
 80




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##### Table of Contents



Off-Balance Sheet Instruments 
 81




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##### Table of Contents



March 31, 2009
    
    March 31, 2008Carrying
    
    Estimated
    
    Carrying
    
    EstimatedAmount
    
    Fair Value
    
    Amount
    
    Fair ValueAssetsCash and due from banks
    
    $
    5,099
    
    
    $
    5,099
    
    
    $
    5,837
    
    
    $
    5,837Short-term investments
    
    
    37,323
    
    
    
    37,323
    
    
    
    11,888
    
    
    
    11,888Investment securities
    
    
    35,215
    
    
    
    35,215
    
    
    
    52,960
    
    
    
    52,960Loans held for sale
    
    
    3,208
    
    
    
    3,208
    
    
    
    195
    
    
    
    195Net loans
    
    
    457,479
    
    
    
    453,974
    
    
    
    471,329
    
    
    
    471,131Stock 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
    
    
    1,859
    
    
    
    1,859
    
    
    
    1,981
    
    
    
    1,981LiabilitiesDeposits
    
    $
    375,074
    
    
    $
    366,052
    
    
    $
    361,089
    
    
    $
    349,506Short-term borrowings
    
    
    1,014
    
    
    
    1,014
    
    
    
    141
    
    
    
    141Advances from FHLB of Boston
    
    
    144,583
    
    
    
    153,318
    
    
    
    156,691
    
    
    
    164,667Subordinated debenture
    
    
    11,341
    
    
    
    9,013
    
    
    
    11,341
    
    
    
    11,341Advance payments by borrowers for taxes
and insurance
    
    
    1,532
    
    
    
    1,532
    
    
    
    1,308
    
    
    
    1,308Accrued interest payable
    
    
    619
    
    
    
    619
    
    
    
    677
    
    
    
    677
 Note 16. Parent Company Only Condensed Financial Statements
  At March 31,Balance Sheets
    
    2009
    
    
    2008AssetsCash deposit in subsidiary bank
    
    $
    337
    
    
    $
    238Investment in subsidiary
    
    
    44,005
    
    
    
    42,127ESOP loan (Note 11)
    
    
    6,819
    
    
    
    7,375Investment in unconsolidated subsidiary
    
    
    341
    
    
    
    341Other assets
    
    
    197
    
    
    
    113Total assets
    
    $
    51,699
    
    
    $
    50,194Liabilities and Stockholders EquitySubordinated debentures (Note 1)
    
    $
    11,341
    
    
    $
    11,341Accrued taxes and other liabilities
    
    
    119
    
    
    
    37Total stockholders equity
    
    
    40,239
    
    
    
    38,816Total liabilities and stockholders equity
    
    $
    51,699
    
    
    $
    50,194
 82




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##### Table of Contents



Years Ended March 31,Statements of Income
    
    2009
    
    
    2008Dividends from subsidiary
    
    $
    1,132
    
    
    $
    450Interest income
    
    
    564
    
    
    
    615Interest expense on subordinated debentures
    
    
    (692
    )
    
    
    (841
    )Noninterest expenses
    
    
    (522
    )
    
    
    (352
    )Gain (loss) before income tax benefit
    
    
    482
    
    
    
    (128
    )Income tax benefit
    
    
    221
    
    
    
    197Income before equity in undistributed net income of subsidiary
    
    
    703
    
    
    
    69Equity in undistributed net (loss) income of subsidiary
    
    
    (6,908
    )
    
    
    1,378Net (loss) income
    
    $
    (6,205
    )
    
    $
    1,447
 Years Ended March 31,Statements of Cash Flows
    
    2009
    
    
    2008Cash flows from operating activities:Net (loss) income
    
    $
    (6,205
    )
    
    $
    1,447Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Equity in undistributed net income of subsidiary
    
    
    6,908
    
    
    
    (1,378
    )(Increase) decrease in other assets
    
    
    (84
    )
    
    
    77Increase (decrease) increase in accrued taxes and other liabilities
    
    
    82
    
    
    
    (6
    )Net cash provided by operating activities
    
    
    701
    
    
    
    140Cash flows from investing activities:ESOP loans, net of repayment
    
    
    554
    
    
    
    542Investment in subsidiary
    
    
    (10,000
    )
    
    
    Net cash (used in)provided by investing activities
    
    
    (9,446
    )
    
    
    542Cash flows from financing activities:Issuance of Series A preferred stock and warrants
    
    
    9,970
    
    
    
    Cash dividends paid, net
    
    
    (1,126
    )
    
    
    (1,016
    )Net cash provided by (used in) financing activities
    
    
    8,844
    
    
    
    (1,016
    )Net increase (decrease) in cash in subsidiary bank
    
    
    99
    
    
    
    (334
    )Cash in subsidiary bank at beginning of year
    
    
    238
    
    
    
    572Cash in subsidiary bank at end of year
    
    $
    337
    
    
    $
    238
 83




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##### Table of Contents



[LETTERHEAD OF CATURANO AND COMPANY]
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Fair Value Measurements
   
 84




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 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, 2009 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, 2009.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 three months ended March 31, 2009 that have
materially affected, or are reasonable likely to materially affect, the Companys
internal control over financial reporting.
 
 Item 9B. Other Information
  85




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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.
 86




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##### Table of Contents



(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.(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.
  (a)

    
    (b)

    
    (c)Number of securities remainingavailable for future issuanceNumber of securities to be issued
    
    Weighted-average exercise
    
    under equity compensationupon exercise of outstanding
    
    price of outstanding
    
    plan (excluding securitiesPlan Category
    
    options, warrants and rights

    
    options, warrants and rights

    
    reflected in column (a))Equity compensation plans
approved by security holders
    
    
    68,218
    
    
    $
    25.364
    
    
    
    91,000Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total (1)
    
    
    68,218
    
    
    $
    25.364
    
    
    
    91,000
 
 (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
 87




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
 (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 David W. Kearn, dated December 14, 1994 10.101
    
    Severance Agreement between the Bank and Paul S. Feeley, dated May 14, 1998 10.111
    
    Amendments to Severance Agreements between the Bank and Messrs. Feeley, Kearn and Morrissey,
dated January 8, 1999 10.125
    
    1999 Stock Option and Incentive Plan 10.136
    
    Amended and Restated Deferred Compensation Plan for Non-Employee Directors 10.143
    
    Senior Management Incentive Plan, as amended 10.157
    
    Severance Agreement between the Bank and Bryan E. Greenbaum dated March 17, 200510.168
    
    Central Bancorp, Inc. 2006 Long-Term Incentive Plan 
 88




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##### Table of Contents



Exhibit No.
    
    Description149
    
    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 Certifications
 
 
    
    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, 2009.(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, 2008 (File
No. 0-25251) filed with the SEC on February 17, 2009).(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, 2008 filed
with the SEC on November 14, 2008 (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. 89




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##### Table of Contents



SIGNATURES
  CENTRAL BANCORP, INC.Date: June 22, 2009
    By:
    /s/ John D. DohertyJohn D. DohertyChairman and Chief Executive Officer
(Duly Authorized Representative)  /s/ John D. Doherty

John D. Doherty
    
    June 22, 2009Chairman and Chief Executive Officer/s/ Paul S. Feeley

Paul S. Feeley
    
    June 22, 2009Senior Vice President, Chief Financial Officer and Treasurer(Principal Financial and Accounting Officer)/s/ William P. Morrissey
    
    June 22, 2009William P. MorrisseyPresident and Director/s/ Gregory W. Boulos
    
    June 22, 2009Gregory W. BoulosDirector/s/ Paul E. Bulman
    
    June 22, 2009Paul E. BulmanDirector/s/ Robert J. Hardiman
    
    June 22, 2009Robert J. HardimanDirector/s/ James F. Linnehan
    
    June 22, 2009James F. LinnehanDirector/s/ Albert J. Mercuri, Jr.
    
    June 22, 2009Albert J. Mercuri, Jr.Director




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##### Table of Contents



/s/ John J. Morrissey
    
    June 22, 2009John J. MorrisseyDirector/s/ Richard E. Stevens
    
    June 22, 2009Richard E. StevensDirector/s/ Edward F. Sweeney, Jr.
    
    June 22, 2009Edward F. Sweeney, Jr.Director