================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended March 31, 2001

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from                to
                               --------------    --------------

                           Commission File No. 0-25251

                             CENTRAL BANCORP, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              MASSACHUSETTS                                      04-3447594
-----------------------------------                          ------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

399 HIGHLAND AVENUE, SOMERVILLE, MASSACHUSETTS                     02144
--------------------------------------------------              ----------
(Address of principal executive offices)                        (Zip Code)

       Registrant's telephone number, including area code: (617) 628-4000
                                                           --------------

           Securities registered under Section 12(b) of the Act: None
                                                                 ----

             Securities registered under Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $1.00 PER SHARE
                     ---------------------------------------
                                (Title of Class)
                              STOCK PURCHASE RIGHTS
                              ---------------------
                                (Title of Class)

     Indicate  by check mark  whether the  registrant  (l) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES  X     NO
                                             -----     ------

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment of this Form 10-K. [ ]

     The aggregate market value of the voting stock held by nonaffiliates of the
registrant was  approximately  $21.6 million based on the closing sales price of
the  registrant's  common stock as reported on the Nasdaq  National  MarketSM on
June 8, 2001  ($19.50  per  share).  Solely for  purposes  of this  calculation,
directors,  executive  officers and greater than 5% stockholders  are treated as
affiliates.

     As of June 8, 2001,  there were issued and outstanding  1,702,164 shares of
the  registrant's  common  stock,  par value  $1.00 per share (of which  594,620
shares were deemed held by affiliates).



================================================================================

<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------




                      CENTRAL BANCORP INC. AND SUBSIDIARIES

                   Index to Consolidated Financial Statements



                                                                            Page

Consolidated Balance Sheets...................................................3

Consolidated Statements of Income.............................................4

Consolidated Statement of Changes in Stockholders' Equity.....................5

Consolidated Statement of Cash Flows..........................................6

Notes to Consolidated Financial Statements....................................8

Independent Auditors' Report.................................................27




                                       2
<PAGE>

                     CENTRAL BANCORP, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                             (Dollars In Thousands)
<TABLE>
<CAPTION>
                                                                                                        March 31,
                                                                                               ---------------------------
                                                                                                  2001              2000
                                                                                                  ----              ----
<S>                                                                                             <C>               <C>
ASSETS
Cash and due from banks                                                                          $  5,351          $  6,588
Short-term investments                                                                             34,529            14,802
Investments available for sale:
     Investment securities (amortized cost of $31,702 in 2001
        and $32,839 in 2000) (notes 2 and 11)                                                      31,263            32,135
     Mortgage-backed securities (amortized cost of $19,623 in 2001 and
        $23,862 in 2000) (note 2)                                                                  19,314            23,308
Stock in Federal Home Loan Bank of Boston, at cost (note  7)                                        6,150             5,800
The Co-operative Central Bank Reserve Fund (note 8)
                                                                                                    1,576             1,576
                                                                                                 --------          --------
     Total investments                                                                             92,832            77,621

Loans:
   Mortgage loans (notes  3, 5 and 11)                                                            338,898           314,966
   Other loans  (notes 4 and 5)                                                                     6,895             5,047
                                                                                                 --------          --------
                                                                                                  345,793           320,013
  Less allowance for loan losses (note 6)                                                           3,106             2,993
                                                                                                 --------          --------
         Net loans                                                                                342,687           317,020
                                                                                                 --------          --------

Accrued interest receivable                                                                         2,426             2,036
Office properties and equipment, net (note  9)                                                      2,018             2,218
Deferred tax asset, net (note 12)                                                                     801             1,071
Goodwill, net                                                                                       2,520             2,808
Other assets                                                                                          702               195
                                                                                                 --------          --------
         Total assets                                                                            $449,337          $409,557
                                                                                                 ========          ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Deposits  (note 10)                                                                         $287,167          $258,339
     Advances from Federal Home Loan Bank of Boston (note 11)                                     121,000           111,000
     Advance payments by borrowers for taxes and insurance                                          1,220             1,053
     Accrued interest payable                                                                         608               542
     Accrued expenses and other liabilities                                                         1,130             1,226
                                                                                                 --------          --------
         Total liabilities                                                                        411,125           372,160
                                                                                                 --------          --------

Commitments and contingencies (notes 9, 13 and 16)
Stockholders' equity (note 14):

     Preferred stock $1.00 par value, authorized 5,000,000 shares;
       none issued or outstanding                                                                      --                --
     Common stock $1.00 par value, authorized 15,000,000 shares;
       1,970,000 shares issued; outstanding 1,684,164 and 1,810,450
       shares at March 31, 2001 and 2000, respectively                                              1,970             1,970
     Additional paid-in capital                                                                    11,190            11,190
     Retained income                                                                               30,950            28,538
     Treasury stock (285,836 and 159,550 shares at March 31, 2001
       and 2000, respectively), at cost                                                            (5,230)           (3,043)
     Accumulated other comprehensive (loss) income
                                                                                                     (431)             (825)
     Unearned compensation - ESOP (note 15)
                                                                                                     (237)             (433)
                                                                                                 --------          --------
         Total stockholders' equity                                                                38,212            37,397
                                                                                                 --------          --------
         Total liabilities and stockholders' equity                                              $449,337          $409,557
                                                                                                 ========          ========
</TABLE>

See accompanying notes to consolidated financial statements.




                                       3
<PAGE>

                     CENTRAL BANCORP, INC. AND SUBSIDIARIES
                        Consolidated Statements of Income
                      (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
                                                                       FISCAL YEARS ENDED MARCH 31,
                                                              ---------------------------------------------
                                                                 2001              2000             1999
                                                              ---------------------------------------------
Interest and dividend income:
<S>                                                           <C>               <C>              <C>
    Mortgage loans                                            $  25,613         $ 21,806         $  21,250
    Other loans                                                     716              599               423
    Short-term investments                                          487              421               650
    Investment securities                                         2,603            2,039             1,481
    Mortgage-backed securities                                    1,412            1,465             2,097
    The Co-operative Central Bank Reserve Fund                       86               94                95
                                                              --------------------------------------------
            Total interest and dividend income                   30,917           26,424            25,996
                                                              --------------------------------------------
Interest expense:
    Deposits                                                     10,087            8,553            10,770
    Advances from Federal Home Loan Bank of Boston                6,916            4,496             3,279
                                                              --------------------------------------------
            Total interest expense                               17,003           13,049            14,049
                                                              --------------------------------------------
            Net interest and dividend income                     13,914           13,375            11,947
Provision for loan losses (note 6)                                   --               --                --
                                                              --------------------------------------------
            Net interest and dividend income after
                 provision for loan losses                       13,914           13,375            11,947
                                                              --------------------------------------------
Non-interest income:
    Deposit service charges                                         428              414               431
    Net gain from sale of investment securities (note 2)            680            1,013               580
    Gain on sale of building                                         --               --               105
    Other income                                                    180              242               252
                                                              --------------------------------------------
            Total non-interest income                             1,288            1,669             1,368
                                                              --------------------------------------------
Operating expenses:
    Salaries and employee benefits (note 15)                      5,571            5,017             4,379
    Occupancy and equipment (note 9)                              1,192            1,167             1,468
    Data processing service fees                                    847              534               543
    Professional fees                                               757              875               756
    Foreclosure expenses, net                                         1               (6)                1
    Goodwill amortization                                           288              288               288
    Other expenses                                                1,674            1,470             1,338
                                                              --------------------------------------------
            Total operating expenses                             10,330            9,345             8,773
                                                              --------------------------------------------
            Income before income taxes                            4,872            5,699             4,452
Income tax expense (note 12)                                      1,763            2,132             1,860
                                                              --------------------------------------------
Net income before cumulative effect of change in
    accounting principle                                          3,109            3,567             2,682
Cumulative effect of change in accounting principle,
    net of taxes                                                     --             (234)               --
                                                              --------------------------------------------
            Net income                                        $   3,109         $  3,333         $   2,682
                                                              ============================================

Earnings per common share (note 1):
    Before cumulative effect of change in accounting
      principle                                               $    1.81         $   1.90         $    1.38
                                                              ============================================
    Before cumulative effect of change in accounting
      principle - assuming dilution                           $    1.81         $   1.89         $    1.38
                                                              ============================================
    After cumulative effect of change in accounting
      principle                                               $    1.81         $   1.77         $    1.38
                                                              ============================================
    After cumulative effect of change in accounting
      principle - assuming dilution                           $    1.81         $   1.77         $    1.38
                                                              ============================================
Weighted average common shares outstanding                        1,717            1,882             1,938
                                                              ============================================
Weighted average common shares outstanding, diluted               1,719            1,885             1,946
                                                              ============================================
</TABLE>
See accompanying notes to consolidated financial statements.

                                       4
<PAGE>


                     CENTRAL BANCORP, INC. AND SUBSIDIARIES
           Consolidated Statements of Changes in Stockholders' Equity
                      (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
                                                                                       ACCUMULATED
                                                      ADDITIONAL                          OTHER        UNEARNED        TOTAL
                                            COMMON     PAID-IN   RETAINED   TREASURY  COMPREHENSIVE  COMPENSATION  STOCKHOLDERS'
                                            STOCK      CAPITAL    INCOME     STOCK    (LOSS) INCOME      ESOP         EQUITY
                                            ------    ---------  --------   --------  -------------  ------------  ------------
<S>                                         <C>        <C>        <C>       <C>       <C>              <C>            <C>
 Balance at March 31, 1998                  $1,965     $11,159    $23,841   $    --   $   544          $(723)         $36,786
 Net income                                     --          --      2,682        --        --             --            2,682
 Other comprehensive income,
   net of tax:
     Unrealized (loss) on securities,
       net of reclassification
       adjustment                               --          --         --        --      (217)            --             (217)
                                                                                                                      -------
       Comprehensive income                     --          --         --        --        --             --            2,465
                                                                                                                      -------
 Proceeds from exercise of stock options         2          12         --        --        --             --               14
 Dividend paid ($0.32 per share)                --          --       (629)       --        --             --             (629)
 Amortization of unearned compensation
  - ESOP                                        --          --         --        --        --            106              106
                                            ---------------------------------------------------------------------------------
 Balance at March 31, 1999                   1,967      11,171     25,894        --       327           (617)          38,742

 Net income                                     --          --      3,333        --        --             --            3,333
 Other comprehensive income,
  net of tax:
     Unrealized (loss) on securities,
      net of reclassification adjustment        --          --         --        --    (1,152)            --           (1,152)
                                                                                                                      -------
       Comprehensive income                     --          --         --        --        --             --            2,181
                                                                                                                      -------
 Proceeds from exercise of stock options         3          19         --        --        --             --               22

 Purchase of treasury stock                     --          --         --    (3,043)       --             --           (3,043)
 Dividend paid ($0.36 per share)                --          --       (689)       --        --             --             (689)
 Amortization of unearned compensation
  - ESOP                                        --          --         --        --        --            184              184
                                            ---------------------------------------------------------------------------------
 Balance at March 31, 2000                   1,970      11,190     28,538    (3,043)     (825)          (433)          37,397
 Net income                                     --          --      3,109        --        --             --            3,109
 Other comprehensive income,
  net of tax:
     Unrealized gain on securities,
      net of reclassification
      adjustment (note 2)                       --          --         --        --       394             --              394
                                                                                                                      -------
       Comprehensive income                     --          --         --        --        --             --            3,503
                                                                                                                      -------
 Purchase of treasury stock                     --          --         --    (2,187)       --             --           (2,187)

 Dividend paid ($0.40 per share)                --          --       (697)       --        --             --             (697)
 Amortization of unearned compensation
  - ESOP                                        --          --         --        --        --            196              196
                                            ---------------------------------------------------------------------------------
 Balance at March 31, 2001                  $1,970     $11,190    $30,950   $(5,230)   $ (431)         $(237)         $38,212
                                            =================================================================================
</TABLE>


The Bank's  other  comprehensive  income  (loss) and  related tax effect for the
fiscal years ending March 31 are as follows:
<TABLE>
<CAPTION>
                                                                                           2001
                                                                        ----------------------------------------------
                                                                        BEFORE-TAX    TAX (BENEFIT)      AFTER-TAX
 in thousands                                                             AMOUNT         EXPENSE          AMOUNT
----------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>             <C>              <C>
 Unrealized gains (losses) on securities:
       Unrealized holding gains during
        period                                                           $ 1,188         $  360           $  828
       Less reclassification adjustment for (gains) realized in net
        income                                                              (680)          (246)            (434)
                                                                         --------------------------------------------
                 Other comprehensive income                              $   508         $  114           $  394
                                                                         ============================================
<CAPTION>

                                                                                                  2000
                                                                         --------------------------------------------------
                                                                         BEFORE-TAX   TAX (BENEFIT)      AFTER-TAX
 in thousands                                                             AMOUNT         EXPENSE          AMOUNT
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>             <C>              <C>
 Unrealized gains (losses) on securities:
       Unrealized holding (losses) during
        period                                                           $  (815)        $ (297)          $  (518)
       Less reclassification adjustment for (gains) realized in net
        income                                                            (1,013)          (379)             (634)
                                                                         --------------------------------------------
                 Other comprehensive income                              $(1,828)        $ (676)          $(1,152)
                                                                         ============================================
</TABLE>
See accompanying notes to consolidated financial statements.


                                       5
<PAGE>


                     CENTRAL BANCORP, INC. AND SUBSIDIARIES
                      Consolidated Statement of Cash Flows
                      (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
                                                                                    FISCAL YEARS ENDED MARCH 31,
                                                                                ---------------------------------------
                                                                                  2001          2000         1999
                                                                                  ----          ----         ----
<S>                                                                              <C>         <C>            <C>
Cash flows from operating activities:
Net income                                                                       $  3,109    $   3,333      $   2,682
Adjustments to reconcile net income to net cash provided by
 operating activities
   Depreciation and amortization                                                      438          462            729
   Amortization of premiums and discounts                                              86          132            461
   Amortization of goodwill                                                           288          288            288
   Decrease (increase) in deferred tax assets                                         270         (327)          (175)
   Net gains from sale of investment and mortgage-backed securities                  (680)      (1,013)          (580)
   Net gain from sale of building                                                      --           --           (105)
   Cumulative effect of change in accounting principle                                 --          234             --
(Increase) decrease in accrued interest receivable                                   (390)        (422)           296
(Increase) decrease in other assets                                                  (507)          59           (256)
Increase (decrease) in advance payments by borrowers for taxes and insurance          167         (336)           160
Increase (decrease) in accrued interest payable                                        66          251           (192)
(Decrease) increase in accrued expenses and other liabilities                         (96)         415           (560)
                                                                                ---------------------------------------
     Net cash provided by operating activities                                      2,751        3,076          2,748
                                                                                ---------------------------------------
Cash flows from investing activities:
  Principal collected on loans                                                     56,949       68,641        112,825
  Loan originations                                                               (82,616)    (108,363)      (111,231)
  Principal payments on mortgage-backed securities available for sale               4,069        9,420         14,942
  Purchase of mortgage-backed securities available for sale                            --       (3,216)            --
  Purchase of investment securities available for sale                             (6,170)     (18,500)       (16,622)
  Proceeds from sales of investment securities available for sale                   3,955        6,159          4,049
  Maturities and redemptions of investment securities held to maturity                 --           --          4,000
  Maturities and redemptions of investment securities available for sale            4,000        2,500         15,100
  Net (increase) decrease in short-term investments                               (19,727)       2,137        (13,618)
  Purchase of stock in FHLB of Boston                                                (350)      (2,450)          (200)
  Proceeds from sale of land and building                                              --           --            239
  Purchase of office properties and equipment, net                                   (238)        (130)          (576)
                                                                                ---------------------------------------
     Net cash used by investing activities                                        (40,128)     (43,802)         8,908
                                                                                ---------------------------------------
Cash flows from financing activities:
  Net increase (decrease) in deposits                                              28,828       (8,124)        (9,901)
  Proceeds from advances from FHLB of Boston                                      169,095      155,500         43,495
  Payments on advances from FHLB of Boston                                       (159,095)    (101,500)       (45,495)
  Proceeds from exercise of stock options                                             --            22             14
  Purchase of treasury stock                                                       (2,187)      (3,043)            --
  Payments of dividends on common stock                                              (697)        (689)          (629)
  Amortization of unearned compensation - ESOP                                        196          184            106
                                                                                ---------------------------------------
     Net cash provided by financing activities                                     36,140       42,350        (12,410)
                                                                                ---------------------------------------
     Net increase (decrease) in cash and due from banks                            (1,237)       1,624           (754)
  Cash and due from banks at beginning of year                                      6,588        4,964          5,718
                                                                                ---------------------------------------
  Cash and due from banks at end of year                                         $  5,351    $   6,588      $   4,964
                                                                                =======================================
</TABLE>

                                       6
<PAGE>

                     CENTRAL BANCORP, INC. AND SUBSIDIARIES
                 Consolidated Statement of Cash Flows, continued
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                                                                 FISCAL YEARS ENDED MARCH 31,
                                                                                           -----------------------------------------
                                                                                               2001          2000         1999
                                                                                               ----          ----         ----
<S>                                                                                          <C>          <C>           <C>
Supplemental disclosure of cash flow information: Cash paid during the year for:
      Interest                                                                               $16,937      $12,798       $14,241
      Income Taxes                                                                             1,850        2,094         2,413

Schedule of non-cash investing activities:
    Transfer from mortgage loans to real estate acquired by foreclosure                      $    --      $    --       $    --

</TABLE>

See accompanying notes to financial statements.


                                       7
<PAGE>


Notes to Consolidated Financial Statements

Fiscal Years Ended March 31, 2001, 2000 and 1999


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Central Bancorp, Inc. (the "Company"), a Massachusetts corporation,  was
organized by Central Bank (the "Bank") to be a bank holding company. The Company
was organized at the direction of the Bank on September 30, 1998, to acquire all
of the capital stock of the Bank upon the consummation of the  reorganization of
the Bank into the holding  company  form of  ownership,  which was  completed on
January 8, 1999.  The  Company's  common  stock,  par value $1.00 per share (the
"Common Stock"),  became registered under the Securities Exchange Act of 1934 on
January 8, 1999.  The Company has no  significant  assets  other than the common
stock of the  Bank and  various  other  liquid  assets  that it  invests  in the
ordinary  course  of  business.  For  that  reason,  substantially  all  of  the
discussion in these consolidated  financial statements relates to the operations
of the Bank and its subsidiaries.

        Central Bank (the "Bank") was  organized  as a  Massachusetts  chartered
co-operative  bank in 1915 and converted  from mutual to stock form in 1986. The
primary business of the Bank is to acquire funds in the form of deposits and use
the funds to make mortgage loans for the construction,  purchase and refinancing
of residential  properties,  and to a lesser extent, to make loans on commercial
real estate in its market area. The Bank also makes a limited amount of consumer
loans,  including home improvement and secured and unsecured personal loans. The
Bank is subject to competition from other financial institutions. The Company is
subject to the regulations of, and periodic examinations by, the Federal Reserve
Bank  ("FRB").  The Bank is also  subject to the  regulations  of, and  periodic
examination  by, the Federal  Deposit  Insurance  Corporation  ("FDIC")  and the
Massachusetts  Division of Banks.  The Bank's  deposits  are insured by the Bank
Insurance  Fund of the FDIC for deposits up to $100,000 and the Share  Insurance
Fund ("SIF") for deposits in excess of $100,000.

        The Company  conducts its business  through one operating  segment,  the
Bank.

        The consolidated  financial  statements have been prepared in conformity
with accounting  principles  generally accepted in the United States of America.
All significant  inter-company balances and transactions have been eliminated in
consolidation. In preparing the consolidated financial statements, management is
required to make estimates and assumptions  that affect the reported  amounts of
assets  and  liabilities  as of the date of the  balance  sheet and  income  and
expenses for the year.  Actual results could differ from those entities,  if the
conditions change.

        Material estimates that are particularly susceptible to change relate to
the  determination  of the  allowance for loan losses.  In  connection  with the
determination  of the allowance for loan losses and the valuation of real estate
acquired  by  foreclosure,   management  obtains   independent   appraisals  for
significant properties.

        Certain prior fiscal year amounts have been  reclassified  to conform to
the current year's  presentation.  The following is a summary of the significant
accounting policies adopted by the Bank.

        Cash and Due from Banks

        The Bank is  required to maintain  cash and  reserve  balances  with the
Federal Reserve Bank. Such reserves are calculated based upon deposit levels and
amounted to approximately $2,483,000 at March 31, 2001.

        Investments

        Investments  are  classified  as either held to maturity,  available for
sale or trading.  Investments  classified as trading  securities are reported at
fair value,  with unrealized gains and losses included in earnings.  Investments
classified  as available  for sale are reported at fair value,  with  unrealized
gains and losses  reported as other  comprehensive  income within  stockholders'
equity.  Securities that the Bank has the positive intent and ability to hold to
maturity are classified as held to maturity and reported at amortized cost.

        Gains and losses on sales of  securities  are  recognized  when realized
with the cost basis of investments sold determined on a  specific-identification
basis.  Premiums and discounts on investment and mortgage-backed  securities are
amortized  or accreted to interest  income over the actual or expected  lives of
the securities using the level-yield method.

     If a decline in fair value below the amortized  cost basis of an investment
or mortgage-backed security is judged to be other than temporary, the cost basis
of the investment is written down to fair value as a new cost basis


                                       8
<PAGE>

and the amount of the write-down is included as a charge against gain on sale of
investment and mortgage-backed securities.

        Derivative Instruments and Hedging Activities

        In June 1998, the Financial  Accounting  Standards Board ("FASB") issued
Statement of Financial  Accounting  Standard  ("SFAS") No. 133,  "Accounting for
Derivative  Instruments  and  Hedging  Activities,"  as amended by SFAS No. 138,
"Accounting for Certain Derivative  Instruments and Certain Hedging Activities."
These Statements establish comprehensive  accounting and reporting standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts,  (collectively  referred  to as  derivatives)  and for hedging
activities.  They require that an entity  recognize  all  derivatives  as either
assets or liabilities in its balance sheet and measure those instruments at fair
market  value.  Under  these  Statements,  an entity  that elects to apply hedge
accounting  is required to establish at the inception of the hedge the method it
will use for  assessing  the  effectiveness  of the hedging  derivative  and the
measurement  approach for determining the ineffective  aspect of the hedge.  The
Company  adopted  these  Statements  on April 1,  2001.  The  adoption  of these
Statements  did  not  have  a  material  effect  on the  Company's  consolidated
financial statements.

        Loans

        Loans are  reported at the  principal  amount  outstanding,  adjusted by
unamortized  discounts,  premiums, and net deferred loan origination fees. Loans
classified as held for sale in the  secondary  market are stated at the lower of
aggregate cost or market value.  Market value is estimated  based on outstanding
investor  commitments or, in the absence of cash  commitments,  current investor
yield  requirements.  Net  unrealized  losses,  if any,  are  provided  for in a
valuation allowance by charges to operations.

        Loans on which  the  accrual  of  interest  has  been  discontinued  are
designated as non-accrual  loans.  Accrual of interest on loans and amortization
of net deferred loan fees or costs are discontinued either when reasonable doubt
exists as to the full and timely collection of interest or principal,  or when a
loan  becomes  contractually  past  due 90 days  with  respect  to  interest  or
principal. The accrual on some loans, however, may continue even though they are
more than 90 days past due if management deems it appropriate, provided that the
loans are well secured and in the process of  collection,  When a loan is placed
on  non-accrual  status,  all interest  previously  accrued but not collected is
reversed against current period interest income.  Interest  accruals are resumed
on such loans only when they are brought  fully current with respect to interest
and principal and when, in the judgment of  management,  the loans are estimated
to be fully  collectible  as to both  principal and  interest.  The Bank records
interest  income  on  non-accrual  and  impaired  loans  on the  cash  basis  of
accounting.

        Loan origination fees, net of certain direct loan origination costs, are
considered  adjustments of  interest-rate  yield and are amortized into interest
income over the loan term using the level-yield  method.  When loans are sold in
the secondary  market,  the remaining balance of the amount deferred is included
in determining the gain or loss on the sale.

        Impaired loans are commercial and commercial real estate loans for which
it is  probable  that the Bank will not be able to collect  all  amounts  due in
accordance  with the contractual  terms of the loan  agreement.  Impaired loans,
except those loans that are  accounted  for at fair value or at lower of cost or
fair value,  are accounted for at the present value of the expected  future cash
flows  discounted  at the  loan's  effective  interest  rate  or as a  practical
expedient in the case of collateral dependent loans, the lower of the fair value
of the collateral or the recorded amount of the loan.  Management  considers the
payment status, net worth and earnings potential of the borrower,  and the value
and cash flow of the  collateral  as factors to determine if a loan will be paid
in accordance  with its contractual  terms.  Management does not set any minimum
delay of payments as a factor in reviewing for impaired classification. Impaired
loans are charged off when management  believes that the  collectibility  of the
loan's principal is remote.

        Allowance for Loan Losses

        The  allowance  for loan  losses  is  established  through  a charge  to
operations.  When management  believes that the collection of a loan's principal
balance is unlikely,  the  principal  amount is charged  against the  allowance.
Recoveries  on loans that have been  previously  charged off are credited to the
allowance as received.

        The allowance for loan losses is determined using a systematic  analysis
and procedural  discipline  based on historical  experience,  product types, and
industry  benchmarks.   The  allowance  is  segregated  into  three  components:
"general", "specific", and "unallocated". The general component is determined by
applying  coverage  percentages  to


                                       9
<PAGE>

groups of loans based on risk  ratings and product  types.  A system of periodic
loan reviews is performed to assess the inherent risk and assign risk ratings to
each loan  individually.  Coverage  percentages  applied are determined based on
industry  practice  and  management's   judgment.   The  specific  component  is
established  by  allocating  a  portion  of the  allowance  for loan  losses  to
individual  classified  loans  on  the  basis  of  specific   circumstances  and
assessments.  The  unallocated  component  supplements  the first two components
based on management's  judgment of the effect of current and forecasted economic
conditions on borrowers'  abilities to repay, an evaluation of the allowance for
loan losses in relation to the size of the overall portfolio,  and consideration
of the  relationship of the allowance for loan losses to  non-performing  loans,
net charge-off trends, and other factors. While this evaluation process utilizes
historical and other objective information,  the classification of loans and the
establishment  of the  allowance for loan losses relies to a great extent on the
judgment and experience of management. Additions to the allowance are charged to
earnings;  realized  losses,  net of  recoveries,  are charged to the allowance.
Management believes that the allowance for loan losses is adequate.

        Various  regulatory  agencies,  as an integral part of their examination
process, periodically review the Bank's allowance for loan losses. Such agencies
may require the Bank to  recognize  additions  to the  allowance  based on their
judgments of information available to them at their examination date.

        Income Taxes

        Deferred tax assets and  liabilities  are  recognized for the future tax
consequences  attributable to differences  between the accounting  basis and the
tax  basis of the  Bank's  assets  and  liabilities.  Deferred  tax  assets  and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
realized or settled. The Bank's deferred tax asset is reviewed  periodically and
adjustments  to such asset are  recognized  as  deferred  income tax  expense or
benefit based on management's  judgments  relating to the  realizability of such
asset.

        Office Properties and Equipment

        Office  properties and equipment are stated at cost, less allowances for
depreciation and amortization. Depreciation and amortization are computed on the
straight-line  method over the estimated  useful lives of the assets or terms of
the leases, if shorter.

        Goodwill

        Goodwill arising from acquisitions is amortized on a straight-line basis
over 15 years.  On an ongoing basis,  management  evaluates the valuation of the
remaining balance of goodwill.

        Pension and Other Benefits

        The Bank provides pension benefits for its employees in a multi-employer
pension plan through membership in the Co-operative  Banks Employees  Retirement
Association. The pension costs are funded as they are accrued.

        The Company continues to follow APB Opinion No. 25 "Accounting for Stock
Issued to Employees" as permitted by Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based  Compensation"  ("SFAS 123").  For companies
that elect to continue  using APB 25, SFAS 123  requires  disclosure  of the pro
forma  effect  of using the fair  value  method of  accounting  for  stock-based
compensation  that is  encouraged  by SFAS  123.  See  Note 15 for the  expanded
disclosures required by SFAS 123.

        Earnings Per Share

        Basic  earnings  per  share  ("EPS")  is  computed  by  dividing  income
available to common stockholders by the weighted-average number of common shares
outstanding  for the period.  Diluted EPS reflects the  potential  dilution that
could  occur  if  securities  or other  contracts  to issue  common  stock  were
exercised or converted into common stock-

        New Accounting Pronouncements

        In  September  2000,  the FASB  issued  SFAS  No.  140,  Accounting  for
Transfers and Servicing of Financial Assets and  Extinguishments of Liabilities,
which  supercedes  the guidance of SFAS No. 125. The  provisions of SFAS No. 140
will become  effective for certain  transactions  occurring after March 31, 2001
and for  disclosures


                                       10
<PAGE>

relating to certain  transactions  for fiscal years  ending  after  December 15,
2000.  Management  does not expect SFAS No. 140 to have a material impact on the
Company's consolidated financial statements.

        During 1998, the Financial  Accounting  Standards  Board ("FASB") issued
Statement of Position  ("SOP") 98-5,  Accounting for Costs of a Start-Up Entity.
SOP 98-5  requires  organizational  costs,  which  were being  amortized,  to be
expensed  and  accounted  for as a cumulative  effect of a change in  accounting
principle. On April 1, 1999, the Bank expensed unamortized  organizational costs
resulting in a charge to earnings,  net of taxes, of $234 thousand, or $0.13 per
share ($0.12 per share assuming dilution).

                                       11
<PAGE>


NOTE 2. INVESTMENTS AND MORTGAGE-BACKED SECURITIES (Dollars in Thousands)

        The amortized  cost and fair value of  investments  and  mortgage-backed
securities available for sale are summarized as follows:
<TABLE>
<CAPTION>

                                                                            MARCH 31, 2001
                                                       -----------------------------------------------------------------------
                                                                                  GROSS UNREALIZED
                                                          AMORTIZED      ------------------------------------      FAIR
                                                            COST                GAINS             LOSSES           VALUE
      ------------------------------------------------------------------------------------------------------------------------
      <S>                                                 <C>                <C>                 <C>             <C>
      Common and Preferred Stock                          $   7,748          $      605          $ (1,386)       $  6,967
      U.S. Government and Federal Agency obligations         18,970                  88                (7)         19,051
      Other bonds and obligations                             4,984                 261                --           5,245
                                                       ----------------  -------------------- --------------- ----------------
                                Total                     $  31,702          $      954          $ (1,393)       $ 31,263
                                                       ================  ==================== =============== ================
      Mortgage-backed securities:
                      GNMA                                $     361          $       --          $    (10)       $    351
                      FNMA                                   13,753                  86              (197)         13,642
                      FHLMC                                   3,479                  66               (37)          3,508
                      CMOs                                    2,030                  --              (217)          1,813
                                                       ----------------  -------------------- --------------- ----------------
                                Total                     $  19,623          $      152          $   (461)       $ 19,314
                                                       ================  ==================== =============== ================
<CAPTION>
                                                                            MARCH 31, 2000
                                                       -----------------------------------------------------------------------

                                                          AMORTIZED               GROSS UNREALIZED                 FAIR
                                                                         ------------------------------------
                                                            COST                GAINS             LOSSES           VALUE
      ------------------------------------------------------------------------------------------------------------------------
      <S>                                                 <C>                <C>                 <C>             <C>
      Common and Preferred Stock                          $   6,847          $      929          $   (631)       $  7,145
      U.S. Government and Federal Agency obligations         23,962                  --            (1,009)         22,953
      Other bonds and obligations                             2,030                   7                --           2,037
                                                       ----------------  -------------------- --------------- ----------------
                                                                                            ---
                                Total                     $  32,839          $      936          $ (1,640)       $ 32,135
                                                       ================  ==================== =============== ================

      Mortgage-backed securities:
                     GNMA                                 $     434          $       --          $    (14)       $    420
                     FNMA                                    17,091                   5              (400)         16,696
                     FHLMC                                    4,185                  --               (50)          4,135
                     CMOs                                     2,152                  --               (95)          2,057
                                                       ----------------- -------------------  --------------- ----------------
                                 Total                    $  23,862          $        5          $   (559)       $ 23,308
                                                       ================= ===================  =============== ================
</TABLE>


                                       12
<PAGE>

         The maturity distribution (based on contractual maturities) and annual
yields of mortgage-backed securities at March 31, 2001 and 2000 are as follows:
<TABLE>
<CAPTION>

                                                                            MARCH 31, 2001
                                                           --------------------------------------------------
                                                              AMORTIZED            FAIR           ANNUAL
                                                                COST              VALUE            YIELD
                                                                ----              -----            -----
<S>                                                          <C>               <C>                 <C>
         Due within one year                                 $      --         $     --            0.00%
         Due after one year but within five years                  703              702            6.71%
         Due after five years but within ten years               4,996            5,111            6.94%
         Due after ten years                                    13,924           13,501            7.21%
                                                             ---------         --------
              Total                                          $  19,623         $ 19,314            7.12%
                                                             =========         ========
         Weighted average remaining life (in years)              17.52
                                                             =========
<CAPTION>
                                                                            MARCH 31, 2000
                                                           --------------------------------------------------
                                                              AMORTIZED            FAIR           ANNUAL
                                                                COST              VALUE            YIELD
                                                                ----              -----            -----
<S>                                                          <C>               <C>                 <C>
         Due within one year                                        --               --            0.00%
         Due after one year but within five years                  687              410            6.56%
         Due after five years but within ten years               6,469            6,376            7.01%
         Due after ten years                                    16,706           16,522            6.26%
                                                             ---------         --------
              Total                                             23,862           23,308            6.47%
                                                             =========         ========
         Weighted average remaining life (in years)              18.33
                                                             =========
</TABLE>

        Maturities  on  mortgage-backed  securities  are  based  on  contractual
maturities  and  do  not  take  into  consideration  scheduled  amortization  or
prepayments.  Actual  maturities will differ from contractual  maturities due to
scheduled amortization and prepayments.

        The  amortized  cost and fair value of  adjustable-rate  federal  agency
obligations  and  mortgage-backed  securities  classified  as available for sale
amounted to $38,673 and $38,284,  respectively,  in 2001. The amortized cost and
fair value of  adjustable-rate  federal agency  obligations and  mortgage-backed
securities  classified  as available  for sale  amounted to $12,809 and $12,467,
respectively, in 2000.

        The Bank had  securities  classified as available for sale with callable
features that can be called prior to final  maturity  with an amortized  cost of
$8,974 and a fair value of $9,027 at March 31, 2001.

        Net  realized  gains on sales of  investment  securities  classified  as
available  for sale for the fiscal  years  ended March 31,  2001,  2000 and 1999
amounted to $680, $1,013 and $580, respectively.

        There  were  no  sales  of  mortgage-backed   securities  classified  as
available for sale during the fiscal years ended March 31, 2001 and 2000.


                                       13
<PAGE>
        The maturity  distribution (based on contractual  maturities) and annual
yields of investment securities (excluding common and preferred stocks) at March
31, 2001 and 2000 are as follows:
<TABLE>
<CAPTION>
                                                                   MARCH 31, 2001
                                                       ---------------------------------------
                                                       AMORTIZED          FAIR          ANNUAL
                                                         COST            VALUE           YIELD
                                                         ----            -----          ------
<S>                                                    <C>             <C>               <C>
Due within one year                                    $    --         $    --           0.00%
Due after one year but within five years                14,487          14,759           6.73
Due after five years but within ten years                9,467           9,537           6.63
                                                       ---------------------------------------
     Total                                             $23,954         $24,296           6.69%
                                                       =======================================

Weighted average remaining life (in years)                3.16
                                                       =======
<CAPTION>

                                                                   MARCH 31, 2000
                                                       ---------------------------------------
                                                       AMORTIZED          FAIR          ANNUAL
                                                         COST            VALUE           YIELD
                                                         ----            -----           -----
<S>                                                    <C>              <C>              <C>
Due within one year                                    $ 1,000          $   994          6.15%
Due after one year but within five years                 9,056            6,869          6.80
Due after five years but within ten years               15,936           17,127          6.48
                                                       ---------------------------------------
     Total                                             $25,992          $24,990          6.57%
                                                       =======================================

Weighted average remaining life (in years)                5.93
                                                       =======
</TABLE>

        A FNMA mortgage pool with an amortized  cost of $5,834 and fair value of
$5,673 at March 31, 2001,  was pledged to provide  collateral  for customers and
for the Bank's employee tax withholdings  that are to be remitted to the federal
government in excess of the $100 of withholdings insured by the FDIC.

NOTE 3.  MORTGAGE LOANS (In Thousands)

        Mortgage loans as of March 31 are summarized below:


<TABLE>
<CAPTION>

MORTGAGE LOANS:                                      2001                    2000
--------------------------------------------------------------------------------------
<S>                                                <C>                     <C>
     Residential
           Fixed                                   $   75,809              $   65,765
           Adjustable                                 170,694                 177,798
     Commercial                                        74,613                  54,228
     Construction                                       9,500                   9,765
     Second Mortgage and Home Equity                    8,282                   7,403
     FHA & VA                                              --                       7
                                                   ----------              ----------
                                                   $  338,898              $  314,966
                                                   ==========              ==========
</TABLE>
     At March  31,  2001 and 2000,  net  deferred  loan  costs of $160 and $280,
respectively, were reflected as an addition to the appropriate loan categories.

     Mortgage  and  other  loans on  which  the  accrual  of  interest  had been
discontinued  at March  31,  2001,  2000 and 1999  were  $000,  $235,  and $419,
respectively.  Interest income not recognized on such loans amounted to $00, $7,
and $16 in fiscal 2001, 2000 and 1999, respectively.

     At March 31, 2001 and 2000,  there were no impaired  loans.  Impaired loans
are measured  using the fair value of  collateral.  During fiscal 2001 and 2000,
there were no impaired  loans.  The Bank follows the same policy

                                       14
<PAGE>
for  recognition  of income on  impaired  loans as it does for all other  loans.
During  fiscal 2001 and 2000,  there was no interest  forgone on impaired  loans
that were not non-accrual loans.

     Mortgage  loans  serviced  by the Bank for  others  amounted  to $4,288 and
$5,790 at March 31, 2001 and 2000,  respectively.  The Bank's lending activities
are conducted  principally in communities in the suburban  Boston area. The Bank
grants  mortgage  loans  on  residential   property,   commercial  real  estate,
construction  of  residential  homes,  second  mortgages,  home equity and other
loans.  Substantially  all loans  granted by the Bank are secured by real estate
collateral.  The ability and  willingness of residential  mortgage  borrowers to
honor their repayment commitments are generally impacted by the level of overall
economic activity within the borrowers' geographic areas and real estate values.
The ability and  willingness  of commercial  real estate and  construction  loan
borrowers to honor their  repayment  commitments  are generally  impacted by the
health of the real  estate  market  in the  borrowers'  geographic  area and the
general economy.

NOTE 4. OTHER LOANS (In Thousands)

     Other loans at March 31 are summarized below:
<TABLE>
<CAPTION>
     OTHER LOANS                                 2001             2000
     ---------------------------------------------------------------------

                  <S>                           <C>              <C>
                  Commercial                    $   4,859        $   3,349

                  Secured by Deposits               1,137            1,023

                  Consumer                             36               38

                  Unsecured                           863              637
                                                --------------------------

                                                $   6,895        $   5,047
                                                ==========================
</TABLE>
NOTE 5. LOANS TO DIRECTORS AND OFFICERS (In Thousands)

     The following  summarizes  the activity  with respect to loans  included in
mortgage  and other  loans made to  directors  and  officers  and their  related
interests for the fiscal years ended March 31:
<TABLE>
<CAPTION>
                                                                          2001             2000
                                                                       --------------------------
         <S>                                                           <C>              <C>
         Balance at beginning of period                                $     243        $     563
                  New loans                                                  444               11
                  New officers with loans outstanding                        158               --
                  Repayment of principal                                    (265)            (187)
                  No longer a director                                        --             (144)
                                                                       --------------------------
         Balance at end of period                                      $     580        $     243
                                                                       ==========================
</TABLE>

     Loans included above were made in the Bank's  ordinary  course of business,
on  substantially  the same  terms,  including  interest  rates  and  collateral
requirements,  as those prevailing at the time for comparable  transactions with
unrelated  persons.  All loans included above are performing in accordance  with
the terms of the respective loan.

NOTE 6. ALLOWANCE FOR LOAN LOSSES (In Thousands)
<TABLE>
<CAPTION>
                                                                                           March 31,
                                                                              -------------------------------------
                                                                                    2001       2000        1999
         ----------------------------------------------------------------------------------------------------------
         <S>                                                                      <C>        <C>         <C>
         Balance at beginning of period                                           $2,993     $2,913      $2,886
             Provision charged to expense                                              -          -           -
             Amounts charged-off                                                      (4)        (9)        (99)
             Recoveries on accounts previously charged-off                           117         89         126
                                                                              ----------- ----------  -------------
         Balance at end of period                                                 $3,106     $2,993      $2,913
                                                                              =========== ==========  =============
</TABLE>
                                       15
<PAGE>

NOTE 7. STOCK IN FEDERAL HOME LOAN BANK OF BOSTON (In Thousands)

     As a member of the Federal Home Loan Bank of Boston ("FHLB of Boston"), the
Bank is  required  to invest in $100 par value stock of the FHLB of Boston in an
amount equal to 1% of its  outstanding  home loans or 1/20th of its  outstanding
advances  from the FHLB of Boston,  whichever is higher.  The Bank's  investment
exceeded  the  required  level  by $100 and $250 at  March  31,  2001 and  2000,
respectively.  If such stock is redeemed, the Bank will receive from the FHLB of
Boston an amount equal to the par value of the stock.

NOTE 8. THE CO-OPERATIVE CENTRAL BANK RESERVE FUND

     The  Co-operative  Central Bank Reserve Fund was  established for liquidity
purposes and consists of deposits required of all insured  co-operative banks in
Massachusetts.  The Fund is used by The  Co-operative  Central  Bank to  advance
funds to member banks or to make other investments.

NOTE 9. OFFICE PROPERTIES AND EQUIPMENT (In Thousands)

     A summary of cost,  accumulated  depreciation  and  amortization  of office
properties and equipment at March 31 follows:
<TABLE>
<CAPTION>
                                                                 2001            2000
                                                                 ----            ----
          <S>                                                     <C>             <C>
          Land                                                    $  589          $  589
          Buildings                                                2,304           2,287
          Furniture                                                5,596           5,376
          Leasehold improvements                                     475             474
                                                               --------------------------
                                                                   8,964           8,726
          Less accumulated depreciation and amortization          (6,946)         (6,508)
                                                               --------------------------
                                                                  $2,018          $2,218
                                                               ==========================
</TABLE>

     A summary  of  minimum  rentals  for future  periods  under  non-cancelable
operating leases follows:

                                                                MINIMUM
                                                                RENTALS
                                                                -------
          Years Ending March 31,
          2002                                                   $ 92
          2003                                                     78
          2004                                                     59
          2005                                                     14
          Thereafter                                                6



     Rental expense for the fiscal years ended March 31, 2001, 2000 and 1999 was
$125, $123 and $118, respectively.


                                       16
<PAGE>

NOTE 10. DEPOSITS (Dollars in Thousands)

     Deposits at March 31 are summarized as follows:
<TABLE>
<CAPTION>
                                                                 2001                                     2000
                                                                 ----                                     ----

                                                               AMOUNT INTEREST RATES                  AMOUNT  INTEREST RATES
                                                               ------ --------------                  ------  --------------

<S>                                                           <C>      <C>                            <C>      <C>
Demand (non-interest-bearing)                                 $24,434       --                        18,634        --

NOW Accounts                                                   31,377  1.01 - 1.52%                   32,218   1.01 - 1.52%

Regular, club and 90 day Notice                                64,011      2.00%                      61,475      2.00%

Money Market deposit Accounts                                  15,327  2.15 - 2.35%                   19,045   2.15 - 2.35%
                                                            ---------                               --------
                                                            $ 135,149                               $131,372


Term Deposit Certificates
       Six Month money market                                $ 20,437  4.00 - 6.25%                 $ 16,469   4.00 - 6.00%

        Other                                                 131,581  4.00 - 7.25%                  110,498   4.00 - 7.00%
                                                            ---------                               --------
              Total Term Deposit Certificates                 152,018                                126,967
                                                            ---------                               --------
                                                            $ 287,167                               $258,339
                                                            =========                               ========

Weighted average interest rate                                             3.80%                                  3.37%
</TABLE>

Contractual  maturities  of term  deposit  certificates  at March  31,  2001 are
--------------------------------------------------------------------------------
summarized as follows:
---------------------

Years Ending March 31,
              2002                                          $ 102,821
              2003                                             43,336
              2004                                              2,704
         2005/2006                                              3,157
                                                            ---------

                                                            $ 152,018
                                                            =========


     The aggregate amount of individual term deposit certificates with a minimum
denomination of $100 or more was $34,644 and $24,937 at March 31, 2001 and 2000,
respectively.  Interest expense on these deposits was $1,763,  $795 and $934 for
fiscal years ended March 31, 2001, 2000 and 1999, respectively.

                                       17
<PAGE>

NOTE 11. ADVANCES FROM FEDERAL HOME LOAN BANK OF BOSTON (Dollars in Thousands)

     Advances from FHLB of Boston,  by year of maturity,  at March 31 consist of
the following:
<TABLE>
<CAPTION>
                                                                              2001                     2000
         -------------------------------------------------------------------------------------------------------
              INTEREST RATE            DUE IN YEAR ENDING MARCH 31,
         <S>                                       <C>                    <C>                        <C>
         5.76% - 6.95%                             2001                   $         --               $   18,000
         5.21% - 6.95%                             2002                         25,000                    4,000
         6.60%                                     2003                          8,000                      --
         4.99% - 5.69%                             2004                            --                     5,000
         6.23%                                     2006                          4,000                      --
         6.10% - 6.42%                             2008                         13,000                      --
         4.49% - 5.89%                             2009                         15,000                   26,000
         4.49% - 6.21%                             2010                         20,000                   18,000
         3.99% - 6.56%                             2011                         34,000                   33,000
         5.49%                                     2014                          2,000                    2,000
         5.25%                                     2015                            --                     5,000
                                                                             ---------                ---------
                                                                             $ 121,000                $ 111,000
                                                                             =========                =========

            Weighted Average Rate                                            5.84%                        5.66%
</TABLE>

     At March 31, 2001, advances totaling $88 million were callable prior to the
scheduled maturity of the advances.

     The FHLB of Boston is authorized to make advances to its members subject to
such  regulations  and  limitations  as the  Federal  Home Loan  Bank  Board may
prescribe.  The  advances are secured by FHLB of Boston stock and a blanket lien
on certain qualified collateral, defined principally as 90% of the fair value of
U.S.  Government and federal agency obligations and 75% of the carrying value of
first  mortgage loans on  owner-occupied  residential  property.  Applying these
ratios,  the Bank's overall borrowing  capacity was  approximately  $201,200 and
$202,400 at March 31, 2001 and 2000, respectively.

     The highest  month-end  balance of FHLB of Boston advances  outstanding was
$121,000,  $113,000,  and $64,000  during the fiscal years ended March 31, 2001,
2000 and 1999, respectively.

NOTE 12. INCOME TAXES (Dollars in Thousands)

     The  objective of the asset and liability  method is to establish  deferred
tax assets and liabilities for the temporary  differences  between the financial
reporting  basis and the tax  basis of the  Bank's  assets  and  liabilities  at
enacted tax rates  expected to be in effect  when such  amounts are  realized or
settled.

     Income tax expense was allocated as follows:
<TABLE>
<CAPTION>
                                                                                Fiscal Years Ended March 31,
                                                                     ---------------------------------------------
                                                                        2001             2000              1999
                                                                     ---------------------------------------------
         <S>                                                         <C>              <C>               <C>
         Current income tax expense
              Federal                                                $  1,555         $   1,745         $  1,669
              State                                                        52                44              366
                                                                     -------------------------------------------
                   Total current tax expense                            1,607             1,789            2,035
         Deferred income tax expense (benefit)                            156               343             (175)
         Change in valuation reserve                                       --                --               --
                                                                     -------------------------------------------
                   Total income tax expense                          $  1,763         $   2,132         $  1,860
                                                                     ===========================================
</TABLE>

                                       18
<PAGE>

     Income tax expense for the periods  presented is different from the amounts
computed by applying  the  statutory  Federal  income tax rate to income  before
income taxes. The differences between expected tax rates and effective tax rates
are as follows:
<TABLE>
<CAPTION>
                                                                              FISCAL YEARS ENDED MARCH 31,
                                                                      -----------------------------------------------
                                                                           2001             2000              1999
                                                                      -----------------------------------------------
         <S>                                                                <C>              <C>               <C>
         Statutory Federal tax rate                                         34.0 %           34.0 %            34.0%
         Items affecting Federal income tax rate:
              Dividends received deduction                                  (0.6)            (0.4)             (0.6)
              Goodwill amortization                                          2.0              1.8               2.2
              State income taxes, net of
              Federal income tax benefit                                     1.2              1.6               4.7
              Other                                                         (0.4)             0.4               0.7
                                                                      ----------------------------------------------
                                                                            36.2 %           37.4 %            41.0 %
                                                                      ==============================================
</TABLE>


     The  components  of gross  deferred  tax  assets  and  gross  deferred  tax
liabilities that have been recognized as of March 31 are as follows:
<TABLE>
<CAPTION>
                                                                                   2001        2000
                                                                                -----------------------
<S>                                                                                <C>           <C>
          Deferred tax assets:
              Loan losses                                                          $ 548         $ 547
              Deferred loan origination fees                                          74            74
              Depreciation                                                           265           258
              Post-employee retirement benefit accrual                               227           201
              Unrealized depreciation on securities                                  319           433
              Other                                                                   74            56
                                                                                -----------------------
          Gross deferred tax asset                                                 1,507         1,569
              Valuation reserve                                                       --            --
                                                                                -----------------------
                   Net deferred tax asset                                          1,507         1,569
                                                                                -----------------------
          Deferred tax liabilities:
              Accrued dividend receivable                                             47            44
              Deferred loan origination fees                                         437           454
              Deferred income                                                        222            --
                                                                                ----------------------
          Gross deferred tax liability                                               706          498
                                                                                ----------------------
                   Net deferred tax asset                                          $ 801       $ 1,071
                                                                                =======================
</TABLE>

     Based on the Bank's  historical  and current  pretax  earnings,  management
believes it is more likely than not that the Bank will  realize the net deferred
tax asset existing at March 31, 2001. Further,  management believes the existing
net deductible  temporary  differences  will reverse during periods in which the
Bank generates net taxable income. At March 31, 2001,  recoverable income taxes,
plus estimated taxes for fiscal 2002,  exceed the amount of the net deferred tax
asset.  There can be no  assurance,  however,  that the Bank will  generate  any
earnings or any specific level of continuing earnings.


                                       19
<PAGE>

     The  unrecaptured  base year tax bad debt  reserves  will not be subject to
recapture  as long as the  institution  continues  to carry on the  business  of
banking. In addition, the balance of the pre-1988 bad debt reserves continues to
be subject to  provision of present law that  requires  recapture in the case of
certain excess  distributions  to  shareholders.  The tax effect of pre-1988 bad
debt reserves  subject to recapture in the case of certain excess  distributions
is approximately $1,300.

NOTE 13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (In Thousands)

     The Bank is party to financial  instruments with off-balance  sheet risk in
the normal  course of business  to meet the  financing  needs of its  customers.
These financial instruments include unused lines of credit,  unadvanced portions
of commercial and  construction  loans,  and commitments to originate loans. The
instruments  involve,  to varying degrees,  elements of credit and interest rate
risk in excess of the amounts  recognized in the balance sheets.  The amounts of
those  instruments  reflect the extent of the Bank's  involvement  in particular
classes of financial instruments.

     The Bank's  exposure to credit loss in the event of  nonperformance  by the
other party to its  financial  instruments  is  represented  by the  contractual
amount of those  instruments.  The Bank uses the same credit  policies in making
commitments  and  conditional  obligations  as  it  does  for  on-balance  sheet
instruments.

     Financial instruments with off-balance sheet risks as of March 31, follows:
<TABLE>
<CAPTION>
                                                                            2001            2000
                                                                        ---------------------------

<S>                                                                        <C>             <C>
Unused lines of credit                                                     $11,012         $10,243
Unadvanced portions of construction loans                                    8,239           4,427
Unadvanced portions of commercial loans                                      5,651           3,468
Commitments to originate commercial loans                                   14,189          15,713
Commitments to originate residential mortgage loans:
           Fixed rate                                                        1,868           1,104
           Adjustable rate                                                   1,032           1,270
</TABLE>


     Commitments  to  originate  loans,  unused  lines of credit and  unadvanced
portions  of  commercial  and  construction  loans are  agreements  to lend to a
customer,  provided  there is no violation of any condition  established  in the
contract. Commitments generally have fixed expiration dates or other termination
clauses  and may require  payment of a fee.  Since many of the  commitments  may
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash  requirements.  The Bank evaluates each customer's  credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's  credit
evaluation of the borrower.

NOTE 14. STOCKHOLDERS' EQUITY (Dollars in Thousands)

     The Bank may not declare or pay cash  dividends  on its common stock if the
effect  thereof  would cause its equity to be reduced below  regulatory  capital
requirements,  or if  such  declaration  and  payment  would  otherwise  violate
regulatory requirements.

     On October 24, 1991,  the Bank adopted a Shareholder  Rights Plan. The plan
entitles each  shareholder  to purchase the Bank's stock at a discount  price in
the  event  any  person  or group of  persons  exceeds  predetermined  ownership
limitations   of  the  Bank's   outstanding   common   stock  and,   in  certain
circumstances, engages in specific activities deemed adverse to the interests of
the Bank's shareholders. This plan expires on October 24, 2001.

     The minimum core (leverage) capital ratio (stockholders'  equity divided by
total  assets)  required  for  banks  with a  CAMEL  rating  of 1 is  3.00%  and
4.00%-5.00%  for all  others.  The Bank  must have a  minimum  total  risk-based
capital  ratio of 8.00% (of which  4.00% must be Tier I capital,  consisting  of
common  stockholders'  equity).  At March 31, 2001 and 2000,  the Bank's capital
ratios were in excess of all required standards.


                                       20
<PAGE>


     The Bank is subject to various regulatory capital requirements administered
by the federal banking  services.  Failure to meet minimum capital  requirements
can initiate certain mandatory and possibly additional  discretionary actions by
regulations  that, if  undertaken,  could have a direct  material  effect on the
Bank's  financial   statements.   Under  capital  adequacy  guidelines  and  the
regulatory  framework for prompt corrective  action, the Bank must meet specific
capital  guidelines  that involve  quantitative  measures of the Bank's  assets,
liabilities,  and certain off-balance sheet items as calculated under regulatory
accounting  practices.  The Bank's capital amounts and  classification  are also
subject to  qualitative  judgments  by the  regulators  about  components,  risk
weightings, and other factors.

     Quantitative  measures established by regulation to ensure capital adequacy
require  the Bank to  maintain  minimum  amounts  and  ratios  (set forth in the
following  table) of  risk-weighted,  core and  tangible  capital (as  defined).
Management  represents  that,  as of March 31,  2001,  the Bank met all  capital
adequacy requirements to which it is subject.

     The most recent  notification  from the FDIC  categorized the Bank as "well
capitalized" under the regulatory  framework for prompt corrective action. To be
categorized as "well capitalized," the Bank must maintain minimum  risk-weighted
capital,  Tier 1 capital and tangible  capital ratios as set forth in the table.
As of March 31, 2001, the Bank was  categorized as "well  capitalized"  based on
its  ratios  of  risk-weighted,  Tier  1 and  tangible  capital.  There  are  no
conditions or events,  since that notification,  that management  believes would
cause a change in the Bank's  categorization.  The Bank's actual capital amounts
and ratios are  presented in the table.  No deduction was taken from capital for
interest-rate  risk.  The Bank's Tier  1/leverage,  Tier 1 risk-based  and total
risk-based  capital together with related  regulatory  minimum  requirements are
summarized below:
<TABLE>
<CAPTION>
                                                                                    MARCH 31, 2001
                                                                     ----------------------------------------------
                                                                        TIER 1          TIER 1           TOTAL
                                                                       LEVERAGE       RISK-BASED      RISK-BASED
                                                                       CAPITAL          CAPITAL         CAPITAL
                                                                       --------       ----------      ----------
<S>                                                                       <C>              <C>             <C>
   Regulatory capital measure
              Amount                                                      $33,256          $33,256         $36,362
              Ratio                                                          7.75 %          11.76 %         12.86 %
    Adequately capitalized requirement:
              Amount                                                      $17,156          $11,308         $22,617
              Ratio                                                          4.00 %           4.00 %          8.00 %
    Well capitalized requirement
              Amount                                                      $21,445          $16,963         $28,271
              Ratio                                                          5.00 %           6.00 %         10.00 %

<CAPTION>

                                                                                    MARCH 31, 2000
                                                                     ----------------------------------------------
                                                                        TIER 1          TIER 1           TOTAL
                                                                       LEVERAGE       RISK-BASED      RISK-BASED
                                                                       CAPITAL          CAPITAL         CAPITAL
                                                                       --------       ----------      ----------
<S>                                                                       <C>              <C>             <C>
   Regulatory capital measure
              Amount                                                     $ 34,268        $  34,268       $  37,376
              Ratio                                                          8.66 %          13.31 %         14.52 %
    Adequately capitalized requirement:
              Amount                                                     $ 15,836        $  10,295       $  20,591
              Ratio                                                          4.00 %           4.00 %          8.00 %
    Well capitalized requirement
              Amount                                                     $ 19,795        $  15,443       $  25,739
              Ratio                                                          5.00 %           6.00 %         10.00 %
</TABLE>

                                       21
<PAGE>

NOTE 15.  EMPLOYEE BENEFITS (Dollars in Thousands, Except Per Share Data)

PENSION PLAN

     As a participating employer in the Co-operative Banks Employees' Retirement
Association  ("CBERA"),  a  multi-employer  plan,  the  Bank  has  in  effect  a
noncontributory defined benefit plan ("Pension Plan") and a defined contribution
plan  ("Savings  Plan")  covering   substantially   all  eligible  officers  and
employees.

     Benefits  under the Pension Plan are determined at the rate of 1% and 1.5%,
respectively,  of certain  elements of final average pay times years of credited
service and are  generally  provided at age 65 based on years of service and the
average of the  participants'  three highest  consecutive  years of compensation
from the Bank.  Employee  contributions are made to a revised Savings Plan which
qualifies  under  section  401 (k) of the  Internal  Revenue  Code of  1986,  as
amended.  Such contributions are matched on a one-half for-one basis by the Bank
up to a maximum of 5% of each employee's  salary.  Pension benefits and employer
contributions to the Savings Plan become vested over six years.

     Expenses for the Pension Plan and the Savings Plan were $371, $363 and $202
for the  fiscal  years  ended  March  31,  2001,  2000 and  1999,  respectively.
Forfeitures are used to reduce expenses of the plans.

STOCK OPTION PLAN

     The Company has adopted two Stock  Option Plans for the benefit of officers
and other employees.

     Under the first plan, the Company reserved 184,000 shares of authorized but
unissued  common stock for issuance  under the Plan.  At the beginning of fiscal
1999, options to purchase 30,000 shares were outstanding at an exercise price of
$16.25 per share.  During fiscal 1999, 2,000 options were exercised resulting in
an additional $14 of capital being recorded.  At the end of fiscal 1999, options
to purchase  28,000 shares were  outstanding  at an exercise price of $16.25 per
share.

     During fiscal 2000, 3,000 shares were exercised  resulting in an additional
$22 of capital being  recorded.  At the end of fiscal 2000,  options to purchase
25,000  shares were  outstanding  at an exercise  price of $16.25 per share.  No
options were  exercised  during fiscal 2001. Of the 25,000  options  outstanding
under the first plan, at March 31, 2001,  all were  exercisable  with an average
exercise price per share of $16.25.

     Under the second plan, the Company reserved 97,500 shares of authorized but
unissued  common shares for issuance under the plan.  The first options  granted
under this plan were awarded during fiscal 2000. During fiscal 2000,  options to
purchase  32,499 shares were granted at an average  exercise price of $20.25 per
share and none of these options were exercised.  During fiscal 2001,  options to
purchase 32,501 shares were granted at an average exercise price of $16.625.

     Of the 65,000 options outstanding under the second plan, at March 31, 2001,
all were exercisable  with an average  exercise price per share of $18.437.  The
weighted  average  exercise price of all outstanding  options at March 31, 2001,
was $17.830.  The exercise price of any option granted will not be less than the
fair market value of the common stock on the date of grant of the option.


                                       22
<PAGE>

     The Company applies APB Opinion No. 25 in accounting for stock options and,
accordingly,  no  compensation  expense  has been  recognized  in the  financial
statements.  Had the Company determined  compensation  expense based on the fair
value at the grant date for its stock  options under SFAS 123, the Company's net
income  would have been reduced to the pro forma  amounts  indicated  below.  No
options were granted during fiscal 1999.
<TABLE>
<CAPTION>
                                                                                                        2001           2000

<S>                                                                                                     <C>            <C>
Net income before cumulative effect of change in accounting principle, as reported                      3,109          3,567
Cumulative effect of change in accounting principle, as reported                                          -             (234)
Net income after cumulative effect of change in accounting principle, as reported                       3,109          3,333

Pro forma net income before cumulative effect of change in accounting principle                         2,934          3,308
Pro forma cumulative effect of change in accounting principle                                             -             (234)
Pro forma net income after cumulative effect of change in accounting principle                          2,934          3,074

Earnings per common share
        Before cumulative effect of change in accounting principle, as reported                         $1.81          $1.90
        Before cumulative effect of change in accounting principle, pro forma                           $1.71          $1.76

        Before cumulative effect of change in accounting principle--assuming dilution, as reported      $1.81          $1.89
        Before cumulative effect of change in accounting principle--assuming dilution, pro forma        $1.71          $1.75

        After cumulative effect of change in accounting principle, as reported                          $1.81          $1.77
        After  cumulative effect of change in accounting principle, pro forma                           $1.71          $1.63

        After cumulative effect of change in accounting principle--assuming dilution, as reported       $1.81          $1.77
        After cumulative effect of change in accounting principle--assuming dilution, pro forma         $1.71          $1.63

</TABLE>

The per share weighted  average fair value of stock options  granted during 2001
and 2000 was $5.39 and  $7.98,  respectively,  on the date of grant.  These fair
values were  determined  using the Black Scholes  option  pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
                                                             2001      2000
                                                             ----      ----

<S>                                                          <C>      <C>
Expected dividend yield.....................                 2.00%    2.00%
Risk-free interest rate.....................                 5.20     6.00
Expected volatility.........................                 31.00    39.00
Expected life in years......................                 6.00 yrs 6.00 yrs
</TABLE>

EMPLOYEE STOCK OWNERSHIP PLAN

     During fiscal 1991, the Bank  established an Employee Stock  Ownership Plan
("ESOP") that is authorized to purchase  shares of  outstanding  common stock of
the Bank from time to time in the open market or in negotiated transactions. The
ESOP is a tax-qualified  defined contribution plan established for the exclusive
benefit of the Bank's employees.

     The ESOP is  repaying  its  loan to the Bank  with  funds  from the  Bank's
contributions  to the plan and earnings  from the ESOP's  assets.  Repayments of
$196, $183 and $184 were made during fiscal 2001,  2000 and 1999,  respectively.
The  scheduled  repayment  of the  amount  outstanding  at March 31,  2001 is as
follows:

              2002                           130
              2003                            96


     Compensation  expense is  recognized  as the ESOP shares are  allocated  to
participants in the plan and was $130, $130, $51 for fiscal 2001, 2000 and 1999,
respectively.


                                       23
<PAGE>
     As amended by SFAS 132,  the  components  of the life plan and medical plan
for the years ended March 31, 2001 and 2000, respectively, follow:
<TABLE>
<CAPTION>
                                                                           2001                      2000
                                                              --------------------------------------------------
                                                              LIFE         MEDICAL      LIFE         MEDICAL
                                                              ----         -------      ----         -------
<S>                                                           <C>          <C>          <C>          <C>
         Actuarial present value of benefits obligation:
            Retirees                                          $  (222)     $  (413)     $  (193)     $  (397)
            Fully eligible participants                           (44)        (307)         (40)        (283)
            Other plan participants                                                          --           --
                                                              -------      -------      -------      -------
                   Total                                      $  (266)     $  (720)     $  (233)     $  (680)
                                                              =======      =======      =======      =======

         Change in projected benefit obligation:
            Accumulated benefit obligations at prior year-end $  (233)     $  (680)     $  (256)     $  (781)
            Service cost less expense component                                 --           --
            Interest cost                                         (19)         (51)         (17)         (48)
            Actuarial gain (loss)                                  (7)           2           21           69
            Assumptions                                            (8)         (29)          18           46
            Benefits paid                                           1           38            1           34
                                                              -------      -------      -------      -------
                   Accumulated benefit obligations at
                     year-end                                 $  (266)     $  (720)     $  (233)        (680)
                                                              =======      =======      =======      =======

         Change in plan assets:
            Fair value of plan assets at prior fiscal
               year-end                                       $    --      $    --      $    --      $    --
            Actual return on plan assets                           --           --           --           --
            Employer contribution                                   1           38            1           34
            Benefits paid end expenses                             (1)         (38)          (1)         (34)
                                                              -------      -------      -------      -------
                   Fair value of plan assets at current
                      fiscal year-end                         $    --      $    --      $    --      $    --
                                                              =======      =======      =======      =======

         Funded                                               $  (266)     $  (720)     $  (233)     $  (680)
         Unrecognized net obligation                              103          297          111          322
         Unrecognized prior year service                           --           --           --           --
         Unrecognized net (loss) gain                             (48)          80          (64)          53
                                                              -------      -------      -------      -------

                                                              $  (211)     $  (343)     $  (186)     $  (305)
                                                              =======      =======      =======      =======

         Reconciliation of (accrual) prepaid:
            (Accrued) prepaid pension cost at prior year-end  $  (186)     $  (305)     $  (159)     $  (241)
            Minus net periodic cost                               (26)         (76)         (28)         (98)
            Plus employee contributions                             1           38            1           34
                                                              -------      -------      -------      -------
                    (Accrued) prepaid cost                    $  (211)     $  (343)     $  (186)     $  (305)
                                                              =======      =======      =======      =======

         Benefit obligation weighted average assumption as
          of fiscal year-end:
             Discount rate                                      7.25%        7.25%         7.75%        7.75%
             Expected return on plan assets                     7.25%        7.25%         7.75%        7.75%
             Rate of compensation increase                       --            --           --           --
</TABLE>
<TABLE>
<CAPTION>
                                                                                 1 PERCENTAGE POINT INCREASE
                                                                         --------------------------------------------
                                                                               2001                      2000
         <S>                                                             <C>     <C>             <C>          <C>
         Impact of 1% change in health care trend rates:
            Effect on total service and interest cost components           n/a      $   (5)          n/a      $    (5)
            Effect on the post retirement benefit obligations              n/a           63          n/a           72
         Components of net periodic benefit obligations:
            Service cost                                                 $  --      $    --      $    --      $    --
            Interest cost                                                   19           51           17           49
            Expected return on plan assets                                  --           --           --           --
            Amortization of prior service cost                               9           25           17           25
            Recognized actuarial (gain) loss                                (1)          --           (6)          24
                                                                         -----      -------      -------      -------
                    Net periodic benefit cost for fiscal year ending     $  27      $    76      $    28      $    98
                                                                         =====      =======      =======      =======
         Periodic benefit cost weighted average assumptions:
            Discount rate                                                 7.75%        7.25%        7.00%        7.00%
            Expected return on plan assets                                7.75%        7.25%        7.00%        7.00%
            Rate of compensation increase                                   --            --          --           --
</TABLE>

                                       24
<PAGE>
     For measurement purposes, an 8.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for the fiscal year ended March
31, 2000. The rate was assumed to decrease gradually to 5.5% for the fiscal year
ending March 31, 2003 and remain at that level thereafter.

NOTE 16. LEGAL PROCEEDINGS

     The Bank is a party to certain litigation in the normal course of business.
Management and counsel are of the opinion that the aggregate liability,  if any,
resulting  from such  litigation  would not be material to the Bank's  financial
position.

NOTE 17. FAIR VALUES OF FINANCIAL INSTRUMENTS (In Thousands)

     The FASB  issued SFAS No. 107,  Disclosures  about Fair Value of  Financial
Instruments, which requires disclosure of fair value information about financial
instruments,  whether or not  recognized in the balance  sheet,  for which it is
practicable to estimate that value.  Fair value  estimates are based on existing
on- and off-balance sheet financial  instruments  without attempting to estimate
the value of anticipated future business and the value of assets and liabilities
that are not considered financial instruments.

     Other significant assets and liabilities that are not considered  financial
assets or liabilities  include real estate  acquired by  foreclosure  and office
properties  and equipment.  In addition,  the tax  ramifications  related to the
realization of the unrealized gains and losses can have a significant  effect on
fair values and have not been  considered in any of the estimates.  Accordingly,
the aggregate fair value amounts presented do not represent the underlying value
of the Bank.

     The following  methods and assumptions  were used by the Bank in estimating
fair values of its financial instruments:

     CASH AND DUE FROM BANKS

     The  carrying  values  reported in the balance  sheet for cash and due from
banks  approximate  their fair  value  because  of the short  maturity  of these
instruments.

     SHORT-TERM INVESTMENTS

     The  carrying   values   reported  in  the  balance  sheet  for  short-term
investments  approximate  fair  value  because  of the short  maturity  of these
investments.

     INVESTMENT AND MORTGAGE-BACKED SECURITIES

     The fair values presented for investment and mortgage-backed securities are
based on quoted market prices, where available.  If quoted market prices are not
available,  fair  values  are  based  on  quoted  market  prices  of  comparable
instruments.

     LOANS

     The fair values of loans are estimated using discounted cash flow analysis,
using  interest  rates  currently  being offered for loans with similar terms to
borrowers  of  similar  credit  quality.   The   incremental   credit  risk  for
nonperforming  loans has been considered in the  determination of the fair value
of loans.

     ACCRUED INTEREST RECEIVABLE

     The  carrying  value  reported  in the balance  sheet for accrued  interest
receivable  approximates  its fair value because of the short  maturity of these
accounts.

     STOCK IN FHLB OF BOSTON

     The  carrying   amount  reported  in  the  balance  sheet  for  FHLB  stock
approximates its fair value. If redeemed,  the Bank will receive an amount equal
to the par value of the stock.

     THE CO-OPERATIVE CENTRAL BANK RESERVE FUND

     The  carrying  amount  reported in the balance  sheet for the  Co-operative
Central Bank Reserve Fund approximates its fair value.

                                       25
<PAGE>

     DEPOSITS

     The fair values of deposits  (excluding term deposit  certificates) are, by
definition,  equal to the amount payable on demand at the reporting  date.  Fair
values for term deposit  certificates are estimated using a discounted cash flow
technique that applies interest rates currently being offered on certificates to
a schedule of  aggregated  monthly  maturities  on time  deposits  with  similar
remaining maturities.

     OFF-BALANCE SHEET INSTRUMENTS

     The Bank's  commitments for unused lines of credit and unadvanced  portions
of loans are at floating rates,  which  approximate  current market rates,  and,
therefore, no fair value adjustment has been made.

     ADVANCES FROM FHLB OF BOSTON

     Fair  values  of  advances  from  FHLB  of  Boston  are  estimated  using a
discounted  cash flow technique  that applies  interest  rates  currently  being
offered on advances  to a schedule  of  aggregated  monthly  maturities  on FHLB
advances.

     ADVANCE  PAYMENTS BY BORROWERS FOR TAXES AND INSURANCE AND ACCRUED INTEREST
PAYABLE

     The carrying values  reported in the balance sheet for advance  payments by
borrowers for taxes and insurance and accrued interest payable approximate their
fair value because of the short maturity of these accounts.

     The  estimated  carrying  amounts and fair  values of the Bank's  financial
instruments are as follows:
<TABLE>
<CAPTION>
                                                                          AT MARCH 31, 2001          AT MARCH 31, 2000
                                                                          -----------------          -----------------
                                                                        CARRYING     ESTIMATED     CARRYING     ESTIMATED
                                                                         AMOUNT      FAIR VALUE     AMOUNT     FAIR VALUE
                                                                        --------     ----------    --------    ----------
ASSETS
<S>                                                                     <C>           <C>          <C>          <C>
Cash and due from banks                                                 $  5,351      $  5,351     $  6,588     $  6,588

Short-term investments                                                    34,529        34,529       14,802       14,802
Investments available for sale:

     Investment securities                                                31,263        31,263       32,135       32,135

     Mortgage-backed securities                                           19,314        19,314       23,308       23,308

         Net loans                                                       342,687       350,028      317,020      310,543

Accrued interest receivable                                                2,426         2,426        2,036        2,036

Stock in Federal Home Loan Bank of Boston, at cost                         6,150         6,150        5,800        5,800

The Co-operative Central Bank Reserve Fund                                 1,576         1,576        1,576        1,576

LIABILITIES
     Deposits                                                          $ 287,167      $288,297    $ 258,339     $258,332

     Advances from Federal Home Loan Bank of Boston                      121,000       119,965      111,000      110,200

     Advance payments by borrowers for taxes and insurance                 1,220         1,220        1,053        1,053

     Accrued interest payable                                                608           608          542          542
</TABLE>

                                       26
<PAGE>

NOTE 18. PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS (In Thousands)

     The following are the condensed  financial  statements for Central Bancorp,
Inc. (the "Parent") only:
<TABLE>
<CAPTION>
         BALANCE SHEETS                                                                  MARCH 31,
                                                                                      2001        2000
         ---------------------------------------------------------------------------------------------------
         <S>                                                                          <C>           <C>
         ASSETS
         Cash deposit in subsidiary bank                                              $  2,153      $ 1,046
         Investment in subsidiary, at equity                                            36,129       36,251

         Other assets                                                                       --          100
                                                                                      ----------------------
                 Total assets                                                         $ 38,282     $ 37,397
                                                                                      ======================
         LIABILITIES AND STOCKHOLDERS' EQUITY
         Accrued expenses and other liabilities                                         $   70      $    --
         Total stockholders' equity                                                     38,212       37,397
                                                                                      ----------------------
                 Total liabilities and stockholders' equity                           $ 38,282     $ 37,397
                                                                                      ======================
</TABLE>
<TABLE>
<CAPTION>
         STATEMENTS OF INCOME
                                                                                      FISCAL YEARS ENDED MARCH 31,
                                                                                2001              2000              1999
---------------------------------------------------------------------------------------------------------------------------
         <S>                                                                    <C>              <C>                <C>
         Dividend income                                                        $  4,000         $   3,012          $ 2,500
         Non-interest expense                                                        266               331               62
                                                                                -------------------------------------------
                 Income before income taxes                                        3,734             2,681            2,438
         Income tax benefit                                                          (87)             (109)              20
                                                                                -------------------------------------------
                 Net income before cumulative effect of change in
                      accounting principle                                         3,821             2,790            2,458
         Cumulative effect of change in accounting principle                          --              (234)              --
                                                                                -------------------------------------------
                 Net income before equity in net income of subsidiary              3,821             2,556            2,458
         Equity in net income of subsidiary                                         (712)              777              224
                                                                                -------------------------------------------
                 Net income                                                     $  3,109         $   3,333          $ 2,682
                                                                                ===========================================
</TABLE>
<TABLE>
<CAPTION>
         STATEMENTS OF CASH FLOWS
                                                                                       FISCAL YEARS ENDED MARCH 31,
                                                                                2001              2000              1999
---------------------------------------------------------------------------------------------------------------------------
         <S>                                                                    <C>              <C>                <C>
         Net cash flows from operating activities:
                 Net income                                                     $  3,109         $   3,333          $ 2,682
                 Adjustment to reconcile net income to net cash provided
                     by operating activities
                         Equity in undistributed income of subsidiary                712              (777)            (224)
                         Decrease (increase) in other assets                         100              (100)            (235)
                         Increase (decrease) in accrued expenses and other
                             liabilities                                              70               (15)              15
                         Cumulative effect of change in accounting principle          --               234               --
                                                                                -------------------------------------------
                              Net cash provided by operating activities            3,991             2,675            2,238
         Cash flows from financing activities:
                 Proceeds from exercise of stock options                              --                22               --
                 Purchase of treasury stock                                       (2,187)           (3,043)              --
                 Cash dividends paid                                                (697)             (689)            (157)
                                                                                -------------------------------------------
                         Net cash used by financing activities                    (2,884)           (3,710)            (157)
                                                                                -------------------------------------------
         Net increase (decrease) in cash deposit in subsidiary bank                1,107            (1,035)           2,081
         Cash deposit in subsidiary bank at beginning of year                      1,046             2,081               --
                                                                                -------------------------------------------
         Cash deposit in subsidiary bank at end of year                         $  2,153         $   1,046            2,081
                                                                                ===========================================
</TABLE>

                                       27
<PAGE>


NOTE 19. QUARTERLY RESULTS OF OPERATIONS  (UNAUDITED) (In Thousands,  Except Per
Share Data)
<TABLE>
<CAPTION>

                                                                          2001 QUARTERS
                                                     -----------------------------------------------------
                                                       FIRST        SECOND         THIRD         FOURTH
                                                       -----        ------         -----         -------
<S>                                                  <C>          <C>             <C>            <C>
Interest and dividend income.......................  $   7,230    $   7,759       $  8,122       $   7,805
Interest expense...................................      3,793        4,297          4,472           4,440
                                                     -----------------------------------------------------
     Net interest and dividend income..............      3,437        3,462          3,650           3,365
Non-interest income................................        338          354            444             152
Operating expenses.................................      2,576        2,440          2,685           2,629
                                                     -----------------------------------------------------
     Income before income taxes....................      1,199        1,376          1,409             888
Income tax.........................................        434          499            509             321
                                                     -----------------------------------------------------
     Net income....................................  $     765    $     877       $    900       $     567
                                                     =====================================================
Earnings per common share..........................  $    0.43    $    0.51       $   0.53       $    0.34
                                                     =====================================================
Earnings per common share - assuming dilution......  $    0.43    $    0.51       $   0.53       $    0.34
                                                     =====================================================
<CAPTION>

                                                                          2000 QUARTERS
                                                     -----------------------------------------------------
                                                       FIRST        SECOND         THIRD         FOURTH
                                                       -----        ------         -----         -------
<S>                                                  <C>          <C>             <C>            <C>
Interest and dividend income.......................  $   6,227    $   6,314       $  6,779       $   7,104
Interest expense...................................      3,097        3,038          3,302           3,612
                                                     -----------------------------------------------------
     Net interest and dividend income..............      3,130        3,276          3,477           3,492
Non-interest income................................        278          660            394             337
Operating expenses.................................      2,233        2,268          2,248           2,596
                                                     -----------------------------------------------------
     Income before income taxes....................      1,175        1,668          1,623           1,233
Income tax.........................................        462          636            603             431
                                                     -----------------------------------------------------
Net income before cumulative effect of change
     in accounting principle.......................        713        1,032          1,020             802
Cumulative effect of change in accounting
     principle, net of taxes.......................       (234)          --             --              --
                                                     -----------------------------------------------------
     Net income....................................  $     479    $   1,032       $  1,020       $     802
                                                     =====================================================
Earnings per common share:
   Before cumulative effect of change in
     accounting principle..........................  $    0.37    $    0.54       $   0.55       $    0.44
                                                     =====================================================
   Before cumulative effect of change in
     accounting principle - assuming dilution......  $    0.37    $    0.54       $   0.55       $    0.44
                                                     =====================================================
   After cumulative effect of change in
     accounting principle..........................  $    0.25    $    0.54       $   0.55       $    0.44
                                                     =====================================================
   After cumulative effect of change in
     accounting principle - assuming dilution......  $    0.25    $    0.54       $   0.55       $    0.44
                                                     =====================================================
</TABLE>

                                       28
<PAGE>


Independent Auditors' Report



The Board of Directors and Stockholders

Central Bancorp, Inc.:





We have audited the  consolidated  balance sheets of Central  Bancorp,  Inc. and
subsidiary  as of  March  31,  2001  and  2000,  and  the  related  consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the years in the  three-year  period  ended March 31, 2001.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Central Bancorp,
Inc.  and  subsidiary  as of March 31,  2001 and 2000,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  March 31,  2001,  in  conformity  with  accounting  principles  generally
accepted in the United States of America.



                                        /s/ KPMG LLP



Boston, Massachusetts
May 9, 2001


                                       29
<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------

(a)  The  following  documents  are filed as part of this Annual  Report on Form
     10-K.

     (1)  FINANCIAL STATEMENTS
          --------------------

          For 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 SCHEDULES
          -----------------------------

          All 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)  EXHIBITS REQUIRED BY PARAGRAPH (C) OF ITEM 14
          ---------------------------------------------

          See "Item 14(c) -- Exhibits"

(b)  REPORTS ON FORM 8-K -- No current reports on Form 8-K were filed during the
     -------------------
     last quarter of the fiscal year covered by this report.

(c)  EXHIBITS
     --------

     The following exhibits are filed as exhibits to this report.

           Exhibit No.          Description
           -----------          -----------

           3.1*            Articles of Organization of Central Bancorp, Inc.
           3.2*            Bylaws of Central Bancorp, Inc.
           4.1**           Rights Agreement, dated as of January 8, 1999, by and
                           between the Central Bancorp, Inc. and State Street
                           Bank & Trust Company, as Rights Agent
           10.1*           Employment  Agreement  between  the  Bank  and  John
                           D. Doherty, dated October 24, 1986 +
           10.2*           First  Amendment to  Employment  Agreement  between
                           the Bank and John D. Doherty, dated March 31, 1992 +
           10.3*           Second  Amendment to Employment  Agreement  between
                           the Bank and John D. Doherty, dated June 8, 1995 +
           10.4*           Third Amendment to the Employment Agreement between
                           the Bank and John D. Doherty, dated January 8, 1999 +
           10.5*           Termination  Agreement,  dated March 31,  1992,  by
                           and between the Bank and Joseph R. Doherty +
           10.6*           Consulting  Agreement,  dated  March 31,  1992,  by
                           and between the Bank and Joseph R. Doherty +
           10.7*           Amendment  to  Consulting  Agreement  between  the
                           Bank and  Joseph  R. Doherty, dated August 11, 1994 +
           10.8***         1986 Stock Option Plan, as amended +
           10.9***         Severance  Agreement  between the Bank and William
                           P.  Morrissey,  dated December 14, 1994 +

                                       30
<PAGE>

           10.10***        Severance   Agreement  between  the  Bank  and  David
                           W. Kearn, dated December 14, 1994 +
           10.11***        Severance Agreement between the Bank and Paul S.
                           Feeley, dated May 14, 1998 +
           10.12***        Amendments to Severance  Agreements between the Bank
                           and Messrs.  Feeley, Kearn and Morrissey, dated
                           January 8, 1999. +
           10.13****       1999 Stock Option and Incentive Plan +
           10.14*****      Deferred Compensation Plan for Non-Employee
                           Directors +
           10.15******     Management Incentive Plan +
           21******        Subsidiaries of Registrant
           23              Consent of KPMG LLP

_________
+      Management  contract or compensatory  plan required to be filed pursuant
       to Item 14(c).
*      Incorporated herein by reference to the Form 10-K for the fiscal year
       ended March 31, 1999, filed with the SEC on June 28, 1999.
**     Incorporated  by reference to the Form 8-A filed with the SEC on January
       8, 1999.
***    Incorporated herein by reference to the Registration  Statement on Form
       S-8 (File No. 333-71165) filed on January 26, 1999.
****   Incorporated by reference to the  Registration  Statement on Form S-8
       (File No. 333-87005) filed on September 13, 1999.
*****  Incorporated by reference to the  Registration  Statement on Form S-8
       (File No. 333-49264) filed on November 3, 2000.
****** Incorporated  by  reference  to the Form 10-K for the fiscal years ended
       March 31, 2001 filed on June 26, 2001.

                                       31
<PAGE>


                                   SIGNATURES

        In  accordance  with  Section  13 or  15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                       CENTRAL BANCORP, INC.


Date: August 9, 2001                  By:/s/ John D. Doherty
                                          --------------------------------------
                                          John D. Doherty
                                          President, Chief Executive Officer and
                                          Duly Authorized Representative