UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from _____ to _____
 Commission file number 0-25251
 CENTRAL BANCORP, INC.
  Massachusetts
    
    04-3447594(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 399 Highland Avenue, Somerville, Massachusetts
    
    02144(Address of Principal Executive Offices)
    
    (Zip Code)
 (617) 628-4000
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value $1.00
per share,and Related Stock Purchase Rights
    
    The NASDAQ Stock Market LLC
 None
 o þ
 o þ
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   Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-accelerated Filer o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
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   DOCUMENTS INCORPORATED BY REFERENCE




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CENTRAL BANCORP, INC.
 ANNUAL REPORT ON FORM 10-K
 TABLE OF CONTENTS
 PART I
 PageItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    24Item 1B.
    
    Unresolved Staff Comments
    
    
    31Item 2.
    
    Properties
    
    
    32Item 3.
    
    Legal Proceedings
    
    
    33Item 4.
    
    [Removed and Reserved]
    
    
    33PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    33Item 6.
    
    Selected Financial Data
    
    
    34Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    36Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    50Item 8.
    
    Financial Statements and Supplementary Data
    
    
    51Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    94Item 9A.
    
    Controls and Procedures
    
    
    95Item 9B.
    
    Other Information
    
    
    95PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    96Item 11.
    
    Executive Compensation
    
    
    96Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    96Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    97Item 14.
    
    Principal Accounting Fees and Services
    
    
    97PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    98SIGNATURES




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##### 



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




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##### 



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




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##### 



Lending Activities
   3




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##### 



Loan Portfolio Composition.
 At March 31,2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in Thousands)Mortgage loans:Residential
    
    $
    183,157
    
    
    
    46.56
    %
    
    $
    217,053
    
    
    
    47.03
    %
    
    $
    183,327
    
    
    
    39.80
    %
    
    $
    178,727
    
    
    
    37.6
    %
    
    $
    175,259
    
    
    
    38.1
    %Commercial
    
    
    199,074
    
    
    
    50.50
    
    
    
    227,938
    
    
    
    49.39
    
    
    
    249,941
    
    
    
    54.25
    
    
    
    244,496
    
    
    
    51.5
    
    
    
    235,535
    
    
    
    51.1Construction and Land
    
    
    456
    
    
    
    0.12
    
    
    
    2,722
    
    
    
    0.59
    
    
    
    14,089
    
    
    
    3.06
    
    
    
    30,950
    
    
    
    6.5
    
    
    
    35,011
    
    
    
    7.6Home equity
    
    
    8,426
    
    
    
    2.14
    
    
    
    8,817
    
    
    
    1.91
    
    
    
    7,347
    
    
    
    1.59
    
    
    
    6,559
    
    
    
    1.4
    
    
    
    6,901
    
    
    
    1.5Total mortgage loans
    
    
    391,113
    
    
    
    99.21
    
    
    
    456,530
    
    
    
    98.92
    
    
    
    454,704
    
    
    
    98.70
    
    
    
    460,732
    
    
    
    97.0
    
    
    
    452,706
    
    
    
    98.3Other loans:Commercial and industrial
    
    
    2,212
    
    
    
    0.56
    
    
    
    4,037
    
    
    
    0.88
    
    
    
    4,834
    
    
    
    1.05
    
    
    
    13,173
    
    
    
    2.8
    
    
    
    6,605
    
    
    
    1.4Consumer
    
    
    892
    
    
    
    0.23
    
    
    
    943
    
    
    
    0.20
    
    
    
    1,132
    
    
    
    0.25
    
    
    
    1,037
    
    
    
    0.2
    
    
    
    1,231
    
    
    
    0.3Total other loans
    
    
    3,104
    
    
    
    0.79
    
    
    
    4,980
    
    
    
    1.08
    
    
    
    5,966
    
    
    
    1.30
    
    
    
    14,210
    
    
    
    3.0
    
    
    
    7,836
    
    
    
    1.7Total loans
    
    
    394,217
    
    
    
    100.0
    %
    
    
    461,510
    
    
    
    100.0
    %
    
    
    460,670
    
    
    
    100.0
    %
    
    
    474,942
    
    
    
    100.0
    %
    
    
    460,542
    
    
    
    100.0
    %Less:Allowance for loan losses
    
    
    3,892
    
    
    
    
    
    
    
    3,038
    
    
    
    
    
    
    
    3,191
    
    
    
    
    
    
    
    3,613
    
    
    
    
    
    
    
    3,881Loans, net
    
    $
    390,325
    
    
    
    
    
    
    $
    458,472
    
    
    
    
    
    
    $
    457,479
    
    
    
    
    
    
    $
    471,329
    
    
    
    
    
    
    $
    456,661
 Loan Portfolio Sensitivity.
 Due AfterDue Within
    
    
    One Through
    
    
    Due AfterOne Year
    
    
    Five Years
    
    
    Five Years
    
    
    Total(In Thousands)Commercial and industrial loans
    
    $
    1,087
    
    
    $
    733
    
    
    $
    392
    
    
    $
    2,212Land loans
    
    
    305
    
    
    
    22
    
    
    
    129
    
    
    
    456Total
    
    $
    1,392
    
    
    $
    755
    
    
    $
    521
    
    
    $
    2,668
 Residential Lending.
 e.g.,
   4




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##### 



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




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##### 



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




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##### 



At March 31,2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007(Dollars in Thousands)Loans accounted for on a nonaccrual
basis:Nonperforming loans
    
    $
    8,578
    
    
    $
    5,575
    
    
    $
    4,617
    
    
    $
    9,606
    
    
    $
    330Restructured loans
    
    
    1,003
    
    
    
    671
    
    
    
    150
    
    
    
    
    
    
    
    Real estate acquired by foreclosure or
deed in lieu of foreclosure
    
    
    132
    
    
    
    60
    
    
    
    2,986
    
    
    
    
    
    
    
    Total nonperforming assets
    
    $
    9,713
    
    
    $
    6,306
    
    
    $
    7,753
    
    
    $
    9,606
    
    
    $
    330Impaired loans, accruing
    
    $
    7,171
    
    
    $
    10,597
    
    
    $
    
    
    
    $
    136
    
    
    $
    Nonperforming loans to total loans
    
    
    2.49
    %
    
    
    1.35
    %
    
    
    1.03
    %
    
    
    2.02
    %
    
    
    0.07
    %Nonperforming assets to total assets
    
    
    1.99
    %
    
    
    1.16
    %
    
    
    1.35
    %
    
    
    1.68
    %
    
    
    0.06
    %
     7




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##### 



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




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##### 



At or For the Years Ended March 31,2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007(Dollars in Thousands)Balance at beginning of year
    
    $
    3,038
    
    
    $
    3,191
    
    
    $
    3,613
    
    
    $
    3,881
    
    
    $
    3,788Provision (reduction of provision)
    
    
    1,100
    
    
    
    600
    
    
    
    2,125
    
    
    
    (70
    )
    
    
    80Charge-offs:Construction
    
    
    
    
    
    
    
    
    
    
    (2,201
    )
    
    
    
    
    
    
    Residential mortgage
    
    
    (69
    )
    
    
    (250
    )
    
    
    (144
    )
    
    
    
    
    
    
    Commercial mortgage
    
    
    (171
    )
    
    
    (469
    )
    
    
    (178
    )
    
    
    (173
    )
    
    
    Other loans
    
    
    (10
    )
    
    
    (54
    )
    
    
    (36
    )
    
    
    (76
    )
    
    
    (48
    )Total charge-offs
    
    
    (250
    )
    
    
    (773
    )
    
    
    (2,559
    )
    
    
    (249
    )
    
    
    (48
    )Recoveries:Residential mortgage
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Commercial mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    43Other loans
    
    
    4
    
    
    
    20
    
    
    
    9
    
    
    
    14
    
    
    
    18Total recoveries
    
    
    4
    
    
    
    20
    
    
    
    12
    
    
    
    51
    
    
    
    61Net (charge-offs) recoveries
    
    
    (246
    )
    
    
    (753
    )
    
    
    (2,547
    )
    
    
    (198
    )
    
    
    13Balance at end of year
    
    $
    3,892
    
    
    $
    3,038
    
    
    $
    3,191
    
    
    $
    3,613
    
    
    $
    3,881Average loans outstanding during the
year*
    
    $
    424,993
    
    
    $
    461,592
    
    
    $
    464,288
    
    
    $
    462,164
    
    
    $
    433,935Ratio of net charge-offs to average loans
    
    
    0.06
    %
    
    
    0.16
    %
    
    
    0.55
    %
    
    
    0.04
    %
    
    
    n/aTotal loans outstanding at end of year
    
    $
    394,217
    
    
    $
    461,510
    
    
    $
    460,670
    
    
    $
    474,942
    
    
    $
    460,542Ratio of allowance for loan losses to
loans at end of year
    
    
    0.99
    %
    
    
    0.66
    %
    
    
    0.69
    %
    
    
    0.76
    %
    
    
    0.84
    %
 
  *
    
    Does not include loans held for sale 9




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##### 



At March 31,2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofLoans to
    
    
    
    
    
    
    Loans to
    
    
    
    
    
    
    Loans to
    
    
    
    
    
    
    Loans to
    
    
    
    
    
    
    Loans toTotal
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    TotalAmount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans(Dollars in Thousands)Mortgage loans:Residential
    
    $
    771
    
    
    
    46.56
    %
    
    $
    721
    
    
    
    47.03
    %
    
    $
    655
    
    
    
    39.80
    %
    
    $
    520
    
    
    
    37.60
    %
    
    $
    456
    
    
    
    38.10
    %Commercial
    
    
    2,669
    
    
    
    50.50
    
    
    
    2,023
    
    
    
    49.39
    
    
    
    1,941
    
    
    
    54.25
    
    
    
    1,616
    
    
    
    51.50
    
    
    
    2,642
    
    
    
    51.10Construction and land loans
    
    
    14
    
    
    
    0.12
    
    
    
    14
    
    
    
    0.59
    
    
    
    406
    
    
    
    3.06
    
    
    
    1,246
    
    
    
    6.50
    
    
    
    587
    
    
    
    7.60Home equity
    
    
    129
    
    
    
    2.14
    
    
    
    133
    
    
    
    1.91
    
    
    
    114
    
    
    
    1.59
    
    
    
    86
    
    
    
    1.40
    
    
    
    84
    
    
    
    1.50Total mortgage loans
    
    
    3,583
    
    
    
    99.21
    
    
    
    2,891
    
    
    
    98.92
    
    
    
    3,116
    
    
    
    98.70
    
    
    
    3,468
    
    
    
    97.00
    
    
    
    3,769
    
    
    
    98.30Other loans
    
    
    309
    
    
    
    0.79
    
    
    
    147
    
    
    
    1.08
    
    
    
    75
    
    
    
    1.30
    
    
    
    145
    
    
    
    3.00
    
    
    
    112
    
    
    
    1.70Total
    
    $
    3,892
    
    
    
    100.00
    %
    
    $
    3,038
    
    
    
    100.00
    %
    
    $
    3,191
    
    
    
    100.00
    %
    
    $
    3,613
    
    
    
    100.00
    %
    
    $
    3,881
    
    
    
    100.00
    %
 10




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##### 



Investment Activities
    11




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##### 



At March 31,2011
    
    
    2010
    
    
    2009(Dollars in Thousands)U.S. Government and agency obligations
    
    $
    
    
    
    $
    
    
    
    $
    1,503Corporate bonds
    
    
    
    
    
    
    1,752
    
    
    
    701Government agency and government sponsored enterprise
mortgage-backed securities
    
    
    18,823
    
    
    
    24,993
    
    
    
    28,353Single issuer trust preferred securities issued by
financial institutions
    
    
    1,049
    
    
    
    1,045
    
    
    
    750Total debt securities
    
    
    19,872
    
    
    
    27,790
    
    
    
    31,307Perpetual preferred stock issued by financial institutions
    
    
    3,185
    
    
    
    3,255
    
    
    
    1,650Common stock
    
    
    2,128
    
    
    
    3,323
    
    
    
    2,258Total investment securities
    
    $
    25,185
    
    
    $
    34,368
    
    
    $
    35,215Percentage of total assets
    
    
    5.16
    %
    
    
    6.35
    %
    
    
    6.12
    %
   One Year or Less
    
    
    One to Five Years
    
    
    Five to Ten Years
    
    
    More than Ten  Years
    
    
    Total Investment PortfolioAmortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Fair
    
    
    AverageCost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Cost
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Value
    
    
    Yield(Dollars in Thousands)Government agency
and government
sponsored
enterprise
mortgage-backed
securities
    
    $
    
    
    
    
    
    %
    
    $
    2,970
    
    
    
    4.18
    %
    
    $
    11
    
    
    
    4.75
    %
    
    $
    15,148
    
    
    
    4.71
    %
    
    $
    18,129
    
    
    $
    18,823
    
    
    
    4.62
    %Single issuer trust
preferred
securities issued
by financial
institutions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,002
    
    
    
    7.78
    
    
    
    1,002
    
    
    
    1,049
    
    
    
    7.78Total
    
    $
    
    
    
    
    
    
    
    $
    2,970
    
    
    
    
    
    
    $
    11
    
    
    
    
    
    
    $
    16,150
    
    
    
    
    
    
    $
    19,131
    
    
    $
    19,872
 Deposits, Borrowed Funds, and Other Sources of Funds
 General .
 Deposits .
 12




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##### 



Deposit Accounts.
 Years Ended March 31,2011
    
    
    2010
    
    
    2009Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    % of
    
    
    Rate
    
    
    Average
    
    
    % of
    
    
    Rate
    
    
    Average
    
    
    % of
    
    
    RateBalance
    
    
    Deposits
    
    
    Paid
    
    
    Balance
    
    
    Deposits
    
    
    Paid
    
    
    Balance
    
    
    Deposits
    
    
    Paid(Dollars in Thousands)Demand deposit accounts
    
    $
    42,534
    
    
    
    12.84
    %
    
    
    
    %
    
    $
    42,247
    
    
    
    12.04
    %
    
    
    
    %
    
    $
    38,807
    
    
    
    10.92
    %
    
    
    
    %NOW accounts
    
    
    28,697
    
    
    
    8.66
    
    
    
    0.27
    
    
    
    27,856
    
    
    
    7.93
    
    
    
    0.29
    
    
    
    26,029
    
    
    
    7.32
    
    
    
    0.37Passbook and other
savings accounts
    
    
    54,584
    
    
    
    16.48
    
    
    
    0.23
    
    
    
    51,577
    
    
    
    14.69
    
    
    
    0.45
    
    
    
    50,240
    
    
    
    14.13
    
    
    
    0.51Money market deposit
accounts
    
    
    79,089
    
    
    
    23.88
    
    
    
    0.69
    
    
    
    79,583
    
    
    
    22.67
    
    
    
    1.32
    
    
    
    67,111
    
    
    
    18.88
    
    
    
    2.30Term deposit certificates
    
    
    126,326
    
    
    
    38.14
    
    
    
    1.31
    
    
    
    149,814
    
    
    
    42.67
    
    
    
    2.08
    
    
    
    173,303
    
    
    
    48.75
    
    
    
    2.95Total deposits
    
    $
    331,230
    
    
    
    100.00
    %
    
    
    0.83
    %
    
    $
    351,077
    
    
    
    100.00
    %
    
    
    1.45
    %
    
    $
    355,490
    
    
    
    100.00
    %
    
    
    1.97
    %
 Time Deposits in Excess of $100,000.
 Maturity Period:Three months or less
    
    $
    13,522Three through six months
    
    
    8,107Six through twelve months
    
    
    11,366Over twelve months
    
    
    7,848Total
    
    $
    40,843
 Borrowings .
  At or for theYears Ended March 31,2011
    
    
    2010
    
    
    2009(Dollars in Thousands)Amounts outstanding at end of period
    
    $
    117,351
    
    
    $
    143,469
    
    
    $
    144,583Weighted average rate at end of period
    
    
    3.68
    %
    
    
    3.98
    %
    
    
    4.52
    %Maximum amount of borrowings outstanding at any month end
    
    $
    139,460
    
    
    $
    161,509
    
    
    $
    156,682Approximate average amounts outstanding at any month end
    
    $
    129,505
    
    
    $
    146,210
    
    
    $
    147,117Approximate weighted average rate during the year
    
    
    3.83
    %
    
    
    4.43
    %
    
    
    4.59
    %
 13




---



##### 



Troubled Asset Relief Program Capital Purchase Program
 Subsidiaries
       14




---



##### 



REGULATION AND SUPERVISION
 Regulation and Supervision of the Company
   Recent Regulatory Reform
    15




---



##### 



General .
 Activities.
  Acquisitions.
  16




---



##### 



Capital Requirements. Regulation and
Supervision of the BankCapital Requirements.
 Dividends . Regulation and Supervision of the BankPrompt Corrective
Regulatory Action.
  Stock Repurchases.
 The Sarbanes-Oxley Act of 2002
  17




---



##### 



Regulation and Supervision of the Bank
 General .
 Massachusetts State Law .
 Capital Requirements .
  18




---



##### 



Dividend Limitations .
  Regulation and Supervision of the BankPrompt Corrective
Regulatory Action.
  Investment Activities.
 Insurance of Deposit Accounts.
  19




---



##### 



20




---



##### 



Prompt Corrective Regulatory Action .
  Adequately
    
    
    
    SignificantlyWell Capitalized
    
    Capitalized
    
    Undercapitalized
    
    UndercapitalizedTotal risk-based capital ratio
    
    10.0% or more
    
    8.0% or more
    
    Less than 8.0%
    
    Less than 6.0%Tier 1 risk-based capital ratio
    
    6.0% or more
    
    4.0% or more
    
    Less than 4.0%
    
    Less than 3.0%Leverage ratio
    
    5.0% or more
    
    4.0% or more *
    
    Less than 4.0% *
    
    Less than 3.0%
 
 *
    
    3.0% if the institution has a composite 1 CAMELS rating.  Loans to Executive Officers, Directors and Principal Stockholders .
 21




---



##### 



Transactions with Affiliates .
 Enforcement.
 Prompt Corrective Regulatory Action.
 Federal Reserve System.
 22




---



##### 



Community Reinvestment Act.
  Federal Home Loan Bank System.
   Employees
  23




---



##### 



Item 1A. Risk Factors
 An investment in shares of our common stock involves various risks. Before deciding to invest
in our common stock, you should carefully consider the risks described below in conjunction with
the other information in this Annual Report on Form 10-K and information incorporated by reference
into this Annual Report on Form 10-K , including our consolidated financial statements and related
notes. Our business, financial condition and results of operations could be harmed by any of the
following risks or by other risks that have not been identified or that we may believe are
immaterial or unlikely. The value or market price of our common stock could decline due to any of
these risks, and you may lose all or part of your investment. The risks discussed below also
include forward-looking statements and our actual results may differ substantially from those
discussed in these forward-looking statements.
 Our nonresidential real estate, land and construction lending may expose us to a greater risk of
loss and hurt our earnings and profitability.
    Severe, adverse and precipitous economic and market conditions have adversely affected us and our
industry.
  24




---



##### 




    
    We potentially face increased regulation of our industry including heightened legal
standards and regulatory requirements or expectations imposed in connection with recent
and anticipated legislation. Compliance with such regulation may increase our costs and
limit our ability to pursue business opportunities.
    
    The process we use to estimate losses inherent in our credit exposure requires
difficult, subjective and complex judgments, including forecasts of economic conditions
and how these economic conditions might impair the ability of our borrowers to repay
their loans. The level of uncertainty concerning economic conditions may adversely
affect the accuracy of our estimates which may, in turn, impact the reliability of the
process.
    
    We may be required to pay significantly higher FDIC premiums because market
developments have significantly depleted the insurance fund of the FDIC and reduced the
ratio of reserves to insured deposits, also our current risk profile may cause us to
pay higher premiums.
    
    The number of our borrowers that may be unable to make timely repayments of their
loans, or the decrease in value of real estate collateral securing the payment of such
loans could continue to escalate and result in significant credit losses, increased
delinquencies, foreclosures and customer bankruptcies, any of which could have a
material adverse effect on our operating results.
    
    Further disruptions in the capital markets or other events, including actions by
rating agencies and deteriorating investor expectations, may result in an inability to
borrow on favorable terms or on any terms from other financial institutions.
    
    Increased competition among financial services companies due to the recent
consolidation of certain competing financial institutions, the conversion of certain
investment banks to bank holding companies and the favorable governmental treatment
afforded to the largest of the financial institutions may adversely affect our ability
to market our products and services and continue to obtain market share.
 Legislative and regulatory initiatives to address difficult market and economic conditions may not
stabilize the U.S. banking system. If current levels of market disruption and volatility continue
or worsen, there can be no assurance that we will not experience an adverse effect, which may be
material, on our ability to access capital and on our business, financial condition, results of
operations, and cash flows.
   25




---



##### 



U.S. and international financial markets and economic conditions, particularly in our market area,
could adversely affect our liquidity, results of operations and financial condition.
  Recently enacted regulatory reform may have a material impact on our operations.
  Liquidity is essential to our businesses and we rely on external sources to finance a
significant portion of our operations.
  26




---



##### 



The limitations on executive compensation imposed through our participation in the TARP Capital
Purchase Program may restrict our ability to attract, retain and motivate key employees, which
could adversely affect our operations.
  Future dividend payments and common stock repurchases are restricted by the terms of the U.S.
Treasurys equity investment in us.
  The terms governing the issuance of the preferred stock to the U.S. Treasury may be changed, the
effect of which may have an adverse effect on our operations.
  Our business is subject to the success of the local economy in which we operate.
  27




---



##### 



If the value of real estate in northwestern suburbs of Boston were to decline materially, a
significant portion of our loan portfolio could become under-collateralized, which could have a
material adverse effect on us.
  Our continued pace of growth may require us to raise additional capital in the future, but that
capital may not be available when it is needed.
   Competition from financial institutions and other financial service providers may adversely affect
our growth and profitability.
  28




---



##### 



Future FDIC assessments may reduce our earnings.
  Fluctuations in interest rates could reduce our profitability and affect the value of our assets.
 e.g.
 .
   29




---



##### 



Item 7A.,
Quantitative and Qualitative Disclosures About Market Risk.
 Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.
    We are dependent upon the services of our management team.
  Our failure to continue to recruit and retain qualified loan originators could adversely affect our
ability to compete successfully and affect our profitability.
  We operate in a highly regulated environment and we may be adversely affected by changes in laws
and regulations.
  30




---



##### 



We are subject to security and operational risks relating to our use of technology that could
damage our reputation and our business.
  We may have fewer resources than many of our competitors to invest in technological improvements.
  Our ability to service our debt, pay dividends and otherwise pay our obligations as they come due
is substantially dependent on capital distributions from Central Co-operative Bank, and these
distributions are subject to regulatory limits and other restrictions.
  Item 1B. Unresolved Staff Comments
  31




---



##### 



Item 2. Properties
  Net BookYear
    
    
    Value atOffice Location
    
    Opened
    
    
    March 31, 2011(In Thousands)Main Office

399 Highland Avenue 

Somerville, MA (owned)
    
    
    1974
    
    
    $
    366Branch Offices:175 BroadwayArlington, MA (owned)
    
    
    1982
    
    
    
    10585 Wilmington RoadBurlington, MA (leased)
    
    
    1978
    (a)
    
    
    151192 Boylston StreetChestnut Hill (Brookline), MA (owned)
    
    
    1954
    
    
    
    250137 Pleasant StreetMalden, MA (leased)
    
    
    1975
    (b)
    
    
    27846 Main StreetMelrose, MA (owned)
    
    
    1994
    
    
    
    175275 Main StreetWoburn, MA (owned)
    
    
    1980
    
    
    
    433198 Lexington StreetWoburn, MA (owned)
    
    
    1974
    
    
    
    164Woburn High SchoolWoburn, MA (leased)
    
    
    2002
    (c)
    
    
    11Stand-Alone ATM94 Highland AvenueSomerville, MA (leased)
    
    
    2004
    (d)
    
    
    Loan Center401 Highland AvenueSomerville, MA (leased)
    
    
    2002
    (e)
    
    
    170Operations Center/Branch Office270 Mystic AvenueMedford, MA (leased)
    
    
    2006
    (f)
    
    
    384
 
 (a)
    
    The lease for the Burlington branch expires October 31, 2012 with a five-year renewal option.(b)
    
    The lease for the Malden branch expires August 31, 2015.(c)
    
    The lease for the Woburn High School branch is for one year, renewable annually on an automatic
basis.(d)
    
    The lease for the stand-alone ATM expires November 30, 2013 with an option to extend for two
additional three-year terms.(e)
    
    The lease for the Commercial Loan Center expires May 1, 2015 with two five-year renewal
options.(f)
    
    In March 2005, the Bank signed a lease for a combined retail branch and operations center to
be located at 270 Mystic Avenue, Medford. The lease was subsequently renegotiated and the
Bank took occupancy in May 2006. The initial rent under the lease is for $150,000 per year
and the initial term is 10 years. There are options to extend the lease by two five-year
terms.  32




---



##### 



Item 3. Legal Proceedings
  Item 4. [Removed and Reserved]
 PART II
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters and Issuer
Purchases of Equity Securities
 SM
  Common Stock Prices
    
    
    
    
    
    
    
    
    
    Cash Dividends(payable dates)Fiscal 2011
    
    High
    
    
    Low
    
    
    Fiscal 2011
    
    
    AmountJune 30, 2010
    
    $
    11.51
    
    
    $
    8.56
    
    
    May 21, 2010
    
    $
    0.05September 30, 2010
    
    
    14.17
    
    
    
    9.80
    
    
    August 20, 2010
    
    
    0.05December 31, 2010
    
    
    15.30
    
    
    
    12.43
    
    
    November 19, 2010
    
    
    0.05March 31, 2011
    
    
    20.00
    
    
    
    13.50
    
    
    February 18, 2011
    
    
    0.05Fiscal 2010
    
    High
    
    
    Low
    
    
    Fiscal 2010
    
    
    AmountJune 30, 2009
    
    $
    8.00
    
    
    $
    4.05
    
    
    May 15, 2009
    
    $
    0.05September 30, 2009
    
    
    9.40
    
    
    
    5.60
    
    
    August 21, 2009
    
    
    0.05December 31, 2009
    
    
    10.80
    
    
    
    7.96
    
    
    November 20, 2009
    
    
    0.05March 31, 2010
    
    
    10.09
    
    
    
    8.11
    
    
    February 19, 2010
    
    
    0.05
  33




---



##### 



Item 6. Selected Financial Data
  At or for the Year Ended March 31,2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007(Dollars in Thousands, Except Share and Per Share Data)Balance SheetTotal assets
    
    $
    487,625
    
    
    $
    542,444
    
    
    $
    575,827
    
    
    $
    571,245
    
    
    $
    566,140Total loans
    
    
    394,217
    
    
    
    461,510
    
    
    
    460,670
    
    
    
    474,942
    
    
    
    460,542Investments available for sale
    
    
    25,185
    
    
    
    34,368
    
    
    
    35,215
    
    
    
    52,960
    
    
    
    65,763Deposits
    
    
    309,077
    
    
    
    339,169
    
    
    
    375,074
    
    
    
    361,089
    
    
    
    388,573Total borrowings
    
    
    128,692
    
    
    
    154,810
    
    
    
    156,938
    
    
    
    168,173
    
    
    
    137,053Total stockholders equity
    
    
    47,121
    
    
    
    45,113
    
    
    
    40,239
    
    
    
    38,816
    
    
    
    37,702Shares outstanding
    
    
    1,681,071
    
    
    
    1,667,151
    
    
    
    1,639,951
    
    
    
    1,639,951
    
    
    
    1,639,951Statements of OperationsNet interest and dividend income
    
    $
    17,382
    
    
    $
    17,013
    
    
    $
    15,862
    
    
    $
    13,596
    
    
    $
    14,449Provision for loan losses (reduction of provision)
    
    
    1,100
    
    
    
    600
    
    
    
    2,125
    
    
    
    (70
    )
    
    
    80Net gain (loss) from sales and write-downs of
investment securities
    
    
    136
    
    
    
    (465
    )
    
    
    (9,796
    )
    
    
    645
    
    
    
    581Gain on sales of loans
    
    
    251
    
    
    
    329
    
    
    
    111
    
    
    
    158
    
    
    
    99Other noninterest income
    
    
    1,671
    
    
    
    1,547
    
    
    
    1,640
    
    
    
    1,429
    
    
    
    1,314Total noninterest expenses
    
    
    15,669
    
    
    
    15,146
    
    
    
    15,159
    
    
    
    13,859
    
    
    
    14,856Net income (loss)
    
    
    1,725
    
    
    
    1,993
    
    
    
    (6,205
    )
    
    
    1,447
    
    
    
    1,020Earnings (loss) per common share  diluted
    
    
    0.68
    
    
    
    0.92
    
    
    
    (4.58
    )
    
    
    1.07
    
    
    
    0.70Selected RatiosInterest rate spread
    
    
    3.25
    %
    
    
    2.92
    %
    
    
    2.63
    %
    
    
    2.06
    %
    
    
    2.21
    %Net yield on interest-earning assets
    
    
    3.50
    
    
    
    3.21
    
    
    
    2.96
    
    
    
    2.51
    
    
    
    2.68Noninterest expenses to average assets
    
    
    3.01
    
    
    
    2.73
    
    
    
    2.73
    
    
    
    2.49
    
    
    
    2.69Book equity-to-assets
    
    
    9.66
    
    
    
    8.32
    
    
    
    6.99
    
    
    
    6.79
    
    
    
    6.66Return on average assets
    
    
    0.33
    
    
    
    0.36
    
    
    
    (1.12
    )
    
    
    0.26
    
    
    
    0.18Return on average stockholders equity
    
    
    3.74
    
    
    
    4.66
    
    
    
    (16.68
    )
    
    
    3.76
    
    
    
    2.59Dividend payout ratio for common shares
    
    
    29.41
    
    
    
    21.74
    
    
    
    n/a
    
    
    
    67.29
    
    
    
    100.00Book value per common share
    
    $
    22.26
    
    
    $
    21.31
    
    
    $
    18.76
    
    
    $
    23.67
    
    
    $
    22.99Tangible book value per common share
    
    $
    20.93
    
    
    $
    19.97
    
    
    $
    17.40
    
    
    $
    22.31
    
    
    $
    21.63
 34




---



##### 



Quarterly Results of Operations (In Thousands, Except Per Share Data)
  2011First
    
    
    Second
    
    
    Third
    
    
    FourthInterest and dividend income
    
    $
    6,845
    
    
    $
    6,605
    
    
    $
    6,187
    
    
    $
    5,668Interest expense
    
    
    2,210
    
    
    
    2,070
    
    
    
    1,939
    
    
    
    1,704Net interest and dividend income
    
    
    4,635
    
    
    
    4,535
    
    
    
    4,248
    
    
    
    3,964Provision for loan losses
    
    
    300
    
    
    
    300
    
    
    
    300
    
    
    
    200Noninterest income
    
    
    578
    
    
    
    291
    
    
    
    552
    
    
    
    686Noninterest expenses
    
    
    3,752
    
    
    
    3,927
    
    
    
    3,825
    
    
    
    4,163Income before income taxes
    
    
    1,111
    
    
    
    599
    
    
    
    675
    
    
    
    287Income tax provision
    
    
    372
    
    
    
    198
    
    
    
    330
    
    
    
    46Net income
    
    $
    739
    
    
    $
    401
    
    
    $
    345
    
    
    $
    241Earnings per common share  basic
    
    $
    0.39
    
    
    $
    0.16
    
    
    $
    0.13
    
    
    $
    0.06Earnings per common share  diluted
    
    $
    0.37
    
    
    $
    0.15
    
    
    $
    0.12
    
    
    $
    0.05
 2010First
    
    
    Second
    
    
    Third
    
    
    FourthInterest and dividend income
    
    $
    7,188
    
    
    $
    7,225
    
    
    $
    7,088
    
    
    $
    7,037Interest expense
    
    
    3,340
    
    
    
    3,039
    
    
    
    2,711
    
    
    
    2,435Net interest and dividend income
    
    
    3,848
    
    
    
    4,186
    
    
    
    4,377
    
    
    
    4,602Provision for loan losses
    
    
    50
    
    
    
    200
    
    
    
    100
    
    
    
    250Noninterest income
    
    
    534
    
    
    
    410
    
    
    
    379
    
    
    
    87Noninterest expenses
    
    
    3,922
    
    
    
    3,485
    
    
    
    3,983
    
    
    
    3,756Income before income taxes
    
    
    410
    
    
    
    911
    
    
    
    673
    
    
    
    683Income tax provision (benefit)
    
    
    112
    
    
    
    307
    
    
    
    307
    
    
    
    (42
    )Net income
    
    $
    298
    
    
    $
    604
    
    
    $
    366
    
    
    $
    725Earnings per common share  basic
    
    $
    0.10
    
    
    $
    0.31
    
    
    $
    0.15
    
    
    $
    0.39Earnings per common share  diluted
    
    $
    0.10
    
    
    $
    0.31
    
    
    $
    0.14
    
    
    $
    0.37
 35




---



##### 



Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 General
    Application of Critical Accounting Policies
 Compensation  Stock Compensation
 Allowance for Loan Losses.
  36




---



##### 



Contingencies
  
    
    Apartments
    
    Offices
    
    Retail
    
    Mixed Use
    
    Industrial/Other
     37




---



##### 



Loans.
       38




---



##### 



Receivables
  Income Taxes.
 Accounting for Goodwill and Impairment. e.g
 39




---



##### 



Fair Value of Other Real Estate Owned
 Investments.
  If a decline in fair value below the amortized cost basis of an investment is judged to be
other-than-temporary, the cost basis of the investment is written down to fair value as a new cost
basis and the amount of the write-down is included in the results of operations. For debt
securities, when the Bank does not intend to sell the security, and it is more-likely-than-not that
the Bank will not have to sell the security before recovery of its cost basis, it will recognize
the credit component of an other-than-temporary impairment loss in earnings, and the remaining
portion in other comprehensive income. The credit loss component recognized in earnings is
identified as the amount of principal cash flows not expected to be received over the remaining
term of the security as estimated based on the cash flows projections discounted at the applicable
original yield of the security.
 Stock-Based Compensation . Compensation-Stock Compensation
   40




---



##### 



Troubled Asset Relief Program Capital Purchase Program
  Results of Operations
 Overview.
     41




---



##### 



Net Interest Rate Spread and Net Interest Margin.
 42




---



##### 



Years Ended March 31,2011
    
    
    2010Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost
    
    
    Balance
    
    
    Interest
    
    
    Cost(Dollars in Thousands)Assets:Interest-earning assets:Mortgage loans
    
    $
    425,720
    
    
    $
    23,707
    
    
    
    5.57
    %
    
    $
    458,214
    
    
    $
    26,694
    
    
    
    5.83
    %Other loans
    
    
    4,112
    
    
    
    226
    
    
    
    5.50
    
    
    
    5,560
    
    
    
    320
    
    
    
    5.76Total loans
    
    
    429,832
    
    
    
    23,933
    
    
    
    5.57
    
    
    
    463,774
    
    
    
    27,014
    
    
    
    5.82Short-term investments
    
    
    27,506
    
    
    
    71
    
    
    
    0.26
    
    
    
    20,504
    
    
    
    50
    
    
    
    0.24Investment securities
    
    
    30,235
    
    
    
    1,295
    
    
    
    4.28
    
    
    
    36,667
    
    
    
    1,473
    
    
    
    4.02Federal Home Loan Bank Stock
    
    
    8,518
    
    
    
    6
    
    
    
    0.07
    
    
    
    8,518
    
    
    
    
    
    
    
    Total investments
    
    
    66,259
    
    
    
    1,372
    
    
    
    2.07
    
    
    
    65,689
    
    
    
    1,523
    
    
    
    2.32Total interest-earnings assets
    
    
    496,091
    
    
    
    25,305
    
    
    
    5.10
    
    
    
    529,463
    
    
    
    28,537
    
    
    
    5.39Allowance for loan losses
    
    
    ( 3,527
    )
    
    
    
    
    
    
    
    
    
    
    ( 2,962
    )Noninterest-earning assets
    
    
    27,945
    
    
    
    
    
    
    
    
    
    
    
    28,537Total assets
    
    $
    520,509
    
    
    
    
    
    
    
    
    
    
    $
    555,038Liabilities and Stockholders Equity:Interest-bearing liabilities:Deposits
    
    $
    288,696
    
    
    
    2,399
    
    
    
    0.83
    
    
    $
    308,830
    
    
    
    4,468
    
    
    
    1.45Other borrowings
    
    
    11,341
    
    
    
    558
    
    
    
    4.92
    
    
    
    11,892
    
    
    
    578
    
    
    
    4.86Advances from FHLB of Boston
    
    
    129,616
    
    
    
    4,966
    
    
    
    3.83
    
    
    
    146,210
    
    
    
    6,478
    
    
    
    4.43Total interest-bearing liabilities
    
    
    429,653
    
    
    
    7,923
    
    
    
    1.84
    
    
    
    466,932
    
    
    
    11,524
    
    
    
    2.47Noninterest-bearing deposits
    
    
    42,534
    
    
    
    
    
    
    
    
    
    
    
    42,247Other liabilities
    
    
    1,911
    
    
    
    
    
    
    
    
    
    
    
    3,056Total liabilities
    
    
    474,098
    
    
    
    
    
    
    
    
    
    
    
    512,235Stockholders equity
    
    
    46,411
    
    
    
    
    
    
    
    
    
    
    
    42,803Total liabilities and stockholders
equity
    
    $
    520,509
    
    
    
    
    
    
    
    
    
    
    $
    555,038Net interest and dividend income
    
    
    
    
    
    $
    17,382
    
    
    
    
    
    
    
    
    
    
    $
    17,013Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.25
    %
    
    
    
    
    
    
    
    
    
    
    2.92
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.50
    %
    
    
    
    
    
    
    
    
    
    
    3.21
    %
 43




---



##### 



Rate/Volume Analysis.
 2011 vs. 2010
    
    
    2010 vs. 2009Changes due to
    
    
    
    
    
    
    Changes due toIncrease (decrease) in:
    
    
    Increase (decrease) in:Volume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    
    Total(In Thousands)Interest income:Mortgage loans
    
    $
    (1,834
    )
    
    $
    (1,153
    )
    
    $
    (2,987
    )
    
    $
    136
    
    
    $
    (583
    )
    
    $
    (447
    )Other loans
    
    
    (80
    )
    
    
    (14
    )
    
    
    (94
    )
    
    
    (173
    )
    
    
    (40
    )
    
    
    (213
    )Total income from loans
    
    
    (1,913
    )
    
    
    (1,167
    )
    
    
    (3,081
    )
    
    
    (37
    )
    
    
    (623
    )
    
    
    (660
    )Short-term investments
    
    
    17
    
    
    
    4
    
    
    
    21
    
    
    
    (26
    )
    
    
    (74
    )
    
    
    (100
    )Investment securities
    
    
    (269
    )
    
    
    91
    
    
    
    (178
    )
    
    
    (10
    )
    
    
    (984
    )
    
    
    (994
    )Federal Home Loan Bank Stock
    
    
    
    
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Total income from investments
    
    
    (252
    )
    
    
    101
    
    
    
    (151
    )
    
    
    (36
    )
    
    
    (1,058
    )
    
    
    (1,094
    )Total interest and dividend income
    
    
    (2,165
    )
    
    
    (1,066
    )
    
    
    (3,232
    )
    
    
    (73
    )
    
    
    (1,681
    )
    
    
    (1,754
    )Interest expense:Deposits
    
    
    (285
    )
    
    
    (1,783
    )
    
    
    (2,069
    )
    
    
    (170
    )
    
    
    (2,346
    )
    
    
    (2,516
    )Other borrowings  including
short-term
advances from FHLB
    
    
    (689
    )
    
    
    (823
    )
    
    
    (1,512
    )
    
    
    (13
    )
    
    
    (98
    )
    
    
    (111
    )Long-term advance  FHLB of Boston
    
    
    (27
    )
    
    
    7
    
    
    
    (20
    )
    
    
    (41
    )
    
    
    (237
    )
    
    
    (278
    )Total interest expense
    
    
    (1,001
    )
    
    
    (2,599
    )
    
    
    (3,601
    )
    
    
    (224
    )
    
    
    (2,681
    )
    
    
    (2,905
    )Net interest and dividend income
    
    $
    (1,164
    )
    
    $
    1,533
    
    
    $
    369
    
    
    $
    151
    
    
    $
    1,000
    
    
    $
    1,151
 Interest and Dividend Income.
 Interest Expense.
 44




---



##### 



Provision for Loan Losses.
 Provision for Loan Losses.
  Noninterest Income.Noninterest income increased by $647 thousand from $1.4 million for the
year ended March 31, 2010 to $2.1 million for the year ended March 31, 2011. The increase of $647
thousand was primarily due to net gains on the sales and write-downs of investment securities which
totaled $136 thousand for the year ended March 31, 2011 compared to net losses of $465 during the
prior year, a $67 thousand increase in other income and a $44 thousand increase in brokerage income
to $181 thousand as compared to $137 thousand at March 31, 2011. The aforementioned $67 thousand
increase in other income was primarily the result of the change in net gain on sale of foreclosed
property, which totaled $2 thousand for fiscal 2011, compared to a net loss of $62 thousand for
fiscal 2010. These increases were partially offset by a $78 thousand decrease in gains on sale of
loans. Income on bank-owned life insurance policies totaled $300 thousand during the year ended
March 31, 2010 compared to $295 thousand during the year ended March 31, 2011.
 Noninterest Expenses.
  45




---



##### 



Income Taxes .
 Comparison of Financial Condition at March 31, 2011 and March 31, 2010
   46




---



##### 



Bank-Owned Life Insurance
    47




---



##### 



Liquidity and Capital Resources
 Troubled Asset
Relief Program Capital Purchase Program
  
    Commitments, Contingencies and Off-Balance Sheet Risk
  48




---



##### 



Impact of Inflation and Changing Prices
  Capital Resources
   49




---



##### 



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
      Twelve months following at March 31,2011
    
    
    2010Amount
    
    
    % Change
    
    
    Amount
    
    
    % Change(Dollars in Thousands)300 basis point increase in rates
    
    $
    (1,095
    )
    
    
    (6.58
    )%
    
    $
    (1,631
    )
    
    
    (9.00
    )%50 basis point decrease in rates
    
    
    (282
    )
    
    
    (1.69
    )
    
    
    (131
    )
    
    
    (0.72
    )
  50




---



##### 



Item 8. Financial Statements and Supplementary Data
 PageConsolidated Balance Sheets at March 31, 2011 and 2010
    
    
    52Consolidated Statements of Operations for the Years Ended March 31, 2011 and 2010
    
    
    53Consolidated Statement of Changes in Stockholders Equity and Comprehensive Income for the Years
Ended March 31, 2011 and 2010
    
    
    54Consolidated Statements of Cash Flows for the Years Ended March 31, 2011 and 2010
    
    
    56Notes to Consolidated Financial Statements
    
    
    57Reports of Independent Registered Public Accounting Firms
    
    
    92
 51




---



##### 



CENTRAL BANCORP, INC. AND SUBSIDIARY
 Consolidated Balance Sheets  (Dollars in Thousands, Except Share and Per Share Data)
 March 31,2011
    
    
    2010ASSETSCash and due from banks
    
    $
    3,728
    
    
    $
    4,328Short-term investments
    
    
    37,190
    
    
    
    12,208Cash and cash equivalents
    
    
    40,918
    
    
    
    16,536Investment securities available for sale, at fair value (Note 2)
    
    
    25,185
    
    
    
    34,368Stock in Federal Home Loan Bank of Boston, at cost (Notes 2 and 7)
    
    
    8,518
    
    
    
    8,518The Co-operative Central Bank Reserve Fund, at cost (Note 2)
    
    
    1,576
    
    
    
    1,576Total investments
    
    
    35,279
    
    
    
    44,462Loans held for sale, at fair value
    
    
    
    
    
    
    392Loans (Note 3)
    
    
    394,217
    
    
    
    461,510Less allowance for loan losses (Note 3)
    
    
    (3,892
    )
    
    
    (3,038
    )Loans, net
    
    
    390,325
    
    
    
    458,472Accrued interest receivable
    
    
    1,496
    
    
    
    1,896Banking premises and equipment, net (Note 4)
    
    
    2,705
    
    
    
    2,759Deferred tax asset, net (Note 8)
    
    
    3,600
    
    
    
    4,681Other real estate owned (Note 5)
    
    
    132
    
    
    
    60Goodwill, net
    
    
    2,232
    
    
    
    2,232Bank-owned life insurance
    
    
    6,972
    
    
    
    6,686Other assets
    
    
    3,966
    
    
    
    4,268Total assets
    
    $
    487,625
    
    
    $
    542,444LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits (Note 6)
    
    $
    309,077
    
    
    $
    339,169Federal Home Loan Bank advances (Notes 2 and 7)
    
    
    117,351
    
    
    
    143,469Subordinated debentures
    
    
    11,341
    
    
    
    11,341Advance payments by borrowers for taxes and insurance
    
    
    1,387
    
    
    
    1,649Accrued expenses and other liabilities
    
    
    1,348
    
    
    
    1,703Total liabilities
    
    
    440,504
    
    
    
    497,331Commitments and Contingencies (Notes 8, 9 and 12)Stockholders equity (Note 10):Preferred stock  Series A Fixed Rate Cumulative Perpetual, $1.00 par value;
5,000,000 shares authorized; 10,000 shares issued and outstanding at March
31,
2011 and 2010, with a liquidation preference and redemption value of
$10,063,889 at March 31, 2011 and 2010 (Note 13)
    
    
    9,709
    
    
    
    9,589Common stock $1.00 par value; 15,000,000 shares authorized; 1,681,071 and
1,667,151 shares issued and outstanding at March 31, 2011 and 2010,
respectively
    
    
    1,681
    
    
    
    1,667Additional paid-in capital
    
    
    4,589
    
    
    
    4,291Retained income
    
    
    35,288
    
    
    
    34,482Accumulated other comprehensive income (Notes 1,2 and 11)
    
    
    892
    
    
    
    810Unearned compensation  Employee Stock Ownership Plan (Note 11)
    
    
    (5,038
    )
    
    
    (5,726
    )Total stockholders equity
    
    
    47,121
    
    
    
    45,113Total liabilities and stockholders equity
    
    $
    487,625
    
    
    $
    542,444
 See accompanying notes to consolidated financial statements.
 52




---



##### 



CENTRAL BANCORP, INC. AND SUBSIDIARY
 Consolidated Statements of Operations  (In Thousands, Except Share And Per Share Data)
 Years Ended March 31,2011
    
    
    2010Interest and dividend income:Mortgage loans
    
    $
    23,707
    
    
    $
    26,694Other loans
    
    
    226
    
    
    
    320Investments
    
    
    1,301
    
    
    
    1,473Short-term investments
    
    
    71
    
    
    
    50Total interest and dividend income
    
    
    25,305
    
    
    
    28,537Interest expense:Deposits
    
    
    2,399
    
    
    
    4,468Advances from Federal Home Loan Bank of Boston
    
    
    4,966
    
    
    
    6,478Other borrowings
    
    
    558
    
    
    
    578Total interest expense
    
    
    7,923
    
    
    
    11,524Net interest and dividend income
    
    
    17,382
    
    
    
    17,013Provision for loan losses (Note 3)
    
    
    1,100
    
    
    
    600Net interest and dividend income after
provision for loan losses
    
    
    16,282
    
    
    
    16,413Noninterest income:Deposit service charges
    
    
    1,003
    
    
    
    985Net gain (loss) from sales and write-downs of investment securities (Note 2)
    
    
    136
    
    
    
    (465
    )Net gains on sales of loans
    
    
    251
    
    
    
    329Bank-owned life insurance income
    
    
    295
    
    
    
    300Brokerage income
    
    
    181
    
    
    
    137Other income
    
    
    192
    
    
    
    125Total noninterest income
    
    
    2,058
    
    
    
    1,411Noninterest expenses:Salaries and employee benefits (Note 11)
    
    
    9,145
    
    
    
    7,991Occupancy and equipment (Note 4)
    
    
    2,137
    
    
    
    2,184Data processing fees
    
    
    844
    
    
    
    854Professional fees
    
    
    1,044
    
    
    
    895FDIC deposit premiums
    
    
    561
    
    
    
    1,151Advertising and marketing
    
    
    193
    
    
    
    163Other expenses
    
    
    1,745
    
    
    
    1,908Total noninterest expenses
    
    
    15,669
    
    
    
    15,146Income before income taxes
    
    
    2,671
    
    
    
    2,678Provision for income taxes (Note 8)
    
    
    946
    
    
    
    685Net income
    
    $
    1,725
    
    
    $
    1,993Net income available to common stockholders
    
    $
    1,105
    
    
    $
    1,380Earnings per common share (Note 1)Basic
    
    $
    0.74
    
    
    $
    0.95Diluted
    
    $
    0.68
    
    
    $
    0.92Weighted average common shares outstanding  basic
    
    
    1,503,719
    
    
    
    1,457,232Weighted average common and equivalent shares outstanding  diluted
    
    
    1,621,182
    
    
    
    1,499,912
 See accompanying notes to consolidated financial statements.
 53




---



##### 



CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income
(In Thousands, except per share data)
 Number ofShares of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedSeries A
    
    
    Series A
    
    
    Number of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    Unearned
    
    
    TotalPreferred
    
    
    Preferred
    
    
    Shares of
    
    
    Common
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Compensation-
    
    
    StockholdersStock
    
    
    Stock
    
    
    Common Stock
    
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Income (Loss)
    
    
    ESOP
    
    
    EquityBalance at March 31, 2009
    
    
    10,000
    
    
    $
    9,476
    
    
    
    1,639,951
    
    
    $
    1,640
    
    
    $
    4,371
    
    
    $
    33,393
    
    
    $
    (2,226
    )
    
    $
    (6,415
    )
    
    $
    40,239Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,993
    
    
    
    
    
    
    
    
    
    
    
    1,993Other comprehensive income, net of taxes of
$2.0 million:Unrealized gain on post retirement benefits, net of
taxes of $17 thousand
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    24Unrealized gain on securities, net of reclassification
adjustment (Note 2) and taxes of $2.0 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,012
    
    
    
    
    
    
    
    3,012Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,029Dividends paid to common stockholder ($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (291
    )
    
    
    
    
    
    
    
    
    
    
    (291
    )Preferred stock accretion of discount and issuance costs
    
    
    
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (113
    )
    
    
    
    
    
    
    
    
    
    
    Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    (500
    )Grant of restricted common stock
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    30
    
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeiture of restricted common stock
    
    
    
    
    
    
    
    
    
    
    (2,800
    )
    
    
    (3
    )
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation (Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    321
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    321Amortization of unearned compensation  ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (374
    )
    
    
    
    
    
    
    
    
    
    
    689
    
    
    
    315Balance at March 31, 2010
    
    
    10,000
    
    
    $
    9,589
    
    
    
    1,667,151
    
    
    $
    1,667
    
    
    $
    4,291
    
    
    $
    34,482
    
    
    $
    810
    
    
    $
    (5,726
    )
    
    $
    45,113Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,725
    
    
    
    
    
    
    
    
    
    
    
    1,725Other comprehensive gain, net of tax expense of $50
thousand:Unrealized loss on post retirement benefits, net of
tax benefit of $22 thousand
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    (30
    )Unrealized gain on securities, net of
reclassification
adjustment (Note 2) and taxes of $72 thousand
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    112Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,807Dividends paid to common stockholders ($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299
    )
    
    
    
    
    
    
    
    
    
    
    (299
    )Preferred stock accretion of discount and issuance costs
    
    
    
    
    
    
    120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    
    
    
    
    Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    (500
    )Grants of restricted and unrestricted common stock
    
    
    
    
    
    
    
    
    
    
    13,920
    
    
    
    14
    
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation (Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    512Amortization of unearned compensation  ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200
    )
    
    
    
    
    
    
    
    
    
    
    688
    
    
    
    488Balance at March 31, 2011
    
    
    10,000
    
    
    $
    9,709
    
    
    
    1,681,071
    
    
    $
    1,681
    
    
    $
    4,589
    
    
    $
    35,288
    
    
    $
    892
    
    
    $
    (5,038
    )
    
    $
    47,121
 See accompanying notes to consolidated financial statements
 54




---



##### 



CENTRAL BANCORP, INC. AND SUBSIDIARY


Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income (continued)


(In Thousands)
  Before-Tax
    
    
    Tax Expense
    
    
    After-TaxAmount
    
    
    (Benefit)
    
    
    AmountYear ended March 31, 2011Unrealized loss on post-retirement benefits
    
    $
    (52
    )
    
    $
    (22
    )
    
    $
    (30
    )Unrealized gains on securities:Unrealized net holding gains during period
    
    
    320
    
    
    
    127
    
    
    
    193Less: reclassification adjustment for net
gains included in net
income
    
    
    136
    
    
    
    55
    
    
    
    81Other comprehensive income
    
    $
    132
    
    
    $
    50
    
    
    $
    82
 Before Tax
    
    
    Tax Expense
    
    
    After-TaxAmount
    
    
    (Benefit)
    
    
    AmountYear ended March 31, 2010Unrealized gain on post-retirement benefits
    
    $
    41
    
    
    $
    17
    
    
    $
    24Unrealized gains on securities:Unrealized net holding gains during period
    
    
    4,553
    
    
    
    1,816
    
    
    
    2,737Less: reclassification adjustment for net losses included in net
income
    
    
    (465
    )
    
    
    (190
    )
    
    
    (275
    )Other comprehensive income
    
    $
    5,059
    
    
    $
    2,023
    
    
    $
    3,036
 See accompanying notes to consolidated financial statements.
 55




---



##### 



CENTRAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Dollars in Thousands)
 Years Ended March 31,2011
    
    
    2010Cash flows from operating activities:Net income
    
    $
    1,725
    
    
    $
    1,993Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    623
    
    
    
    773Amortization of premiums
    
    
    218
    
    
    
    369Provision for loan losses
    
    
    1,100
    
    
    
    600Stock-based compensation and amortization of unearned
compensation  ESOP
    
    
    1,000
    
    
    
    636Deferred tax provision
    
    
    941
    
    
    
    896Net (gains) losses from sales and write-downs of investment securities
    
    
    (136
    )
    
    
    465Bank-owned life insurance income
    
    
    (286
    )
    
    
    (300
    )Gains on sales of loans held for sale
    
    
    (251
    )
    
    
    (329
    )Originations of loans held for sale
    
    
    (20,795
    )
    
    
    (36,052
    )Proceeds from the sale of loans originated for sale
    
    
    21,438
    
    
    
    39,197(Gain) loss on sale of other real estate
    
    
    (2
    )
    
    
    60Gain on sale of equipment
    
    
    
    
    
    
    (5
    )Decrease (increase) in accrued interest receivable
    
    
    400
    
    
    
    (37
    )Decrease (increase) in other assets, net
    
    
    302
    
    
    
    (1,230
    )Decrease in accrued expenses and other liabilities, net
    
    
    (317
    )
    
    
    (317
    )Net cash provided by operating activities
    
    
    5,960
    
    
    
    6,719Cash flows from investing activities:Loan principal collections (originations), net
    
    
    66,915
    
    
    
    (1,670
    )Principal payments on mortgage-backed securities
    
    
    9,137
    
    
    
    14,225Purchases of investment securities
    
    
    (3,223
    )
    
    
    (11,026
    )Proceeds from sales of investment securities
    
    
    3,371
    
    
    
    335Maturities and calls of investment securities
    
    
    
    
    
    
    1,500Purchases of banking premises and equipment
    
    
    (569
    )
    
    
    (214
    )Net expenditures on other real estate
    
    
    
    
    
    
    16Proceeds from sale of equipment
    
    
    
    
    
    
    10Proceeds from sales of other real estate
    
    
    62
    
    
    
    2,926Net cash provided by investing activities
    
    
    75,693
    
    
    
    6,102Cash flows from financing activities:Net decrease in deposits
    
    
    (30,092
    )
    
    
    (35,905
    )(Increase) decrease in payments by borrowers for taxes and insurance
    
    
    (262
    )
    
    
    117Advances from FHLB of Boston
    
    
    
    
    
    
    26,000Repayment of advances from FHLB of Boston
    
    
    (26,118
    )
    
    
    (27,114
    )Repayments of short-term borrowings
    
    
    
    
    
    
    (1,014
    )Cash dividends paid
    
    
    (799
    )
    
    
    (791
    )Net cash used in financing activities
    
    
    (57,271
    )
    
    
    (38,707
    )Net increase (decrease) in cash and cash equivalents
    
    
    24,382
    
    
    
    (25,886
    )Cash and cash equivalents at beginning of year
    
    
    16,536
    
    
    
    42,422Cash and cash equivalents at end of year
    
    $
    40,918
    
    
    $
    16,536Cash paid (received) during the period for:Interest
    
    $
    8,043
    
    
    $
    11,610Income taxes
    
    
    
    
    
    
    (813
    )Supplemental disclosure of non-cash investing and financing activities:Loans transferred to other real estate owned
    
    $
    132
    
    
    $
    77Accretion of Series A preferred stock discount and issuance costs
    
    
    120
    
    
    
    113
 See accompanying notes to consolidated financial statements
 56




---



##### 



CENTRAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED MARCH 31, 2011
 Note 1. Summary of Significant Accounting Policies
     Transfers and Servicing
  Cash and Cash Equivalents
  57




---



##### 



Investments
     Loans
     58




---



##### 



Receivables
  59




---



##### 



Allowance for Loan Losses
   Contingencies
  
    
    Apartments
    
    Offices
    
    Retail
    
    Mixed Use
    
    Industrial/Other
   60




---



##### 



Subordinated Debentures
  61




---



##### 



Income Taxes
   Banking Premises and Equipment
  62




---



##### 



Other Real Estate Owned
  Accounting for Goodwill and Impairment
 Intangibles  Goodwill and Other e.g
 Pension Benefits and Other Post-Retirement Benefits
   Compensation  Retirement Benefits
 Related Party Transactions
  63




---



##### 



Stock-Based Compensation
 CompensationStock
Compensation
     Number of
    
    
    Weighted AverageShares
    
    
    Exercise PriceBalance at March 31, 2009
    
    
    68,218
    
    
    $
    25.36Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (865
    )
    
    
    28.99Expired
    
    
    (13,745
    )
    
    
    20.25Balance at March 31, 2010
    
    
    53,608
    
    
    
    26.62Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (12,466
    )
    
    
    23.64Expired
    
    
    (6,684
    )
    
    
    16.63Balance at March 31, 2011
    
    
    34,458
    
    
    
    29.63Exercisable at March 31, 2011
    
    
    32,458
    
    
    
    29.53
   64




---



##### 



Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AverageRemaining
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    Remaining
    
    
    WeightedNumber
    
    
    Contractual
    
    
    Average
    
    
    Aggregate
    
    
    Number of
    
    
    Contractual
    
    
    AverageExercise
    
    of Shares
    
    
    Life
    
    
    Exercise
    
    
    Intrinsic
    
    
    Shares
    
    
    Life
    
    
    ExercisePrice
    
    Outstanding
    
    
    (Years)
    
    
    Price
    
    
    Value (1)
    
    
    Outstanding
    
    
    (Years)
    
    
    Price$28.99
    
    
    24,458
    (2)
    
    
    3.9
    
    
    $
    28.99
    
    
    $
    
    
    
    
    24,458
    (2)
    
    
    3.9
    
    
    $
    28.9931.20
    
    
    10,000
    (3)
    
    
    5.5
    
    
    
    31.20
    
    
    
    
    
    
    
    8,000
    (3)
    
    
    5.5
    
    
    
    31.2034,458
    
    
    
    4.4
    
    
    
    29.63
    
    
    
    
    
    
    
    32,458
    
    
    
    4.4
    
    
    
    29.53
 
 (1)
    
    Represents the total intrinsic value, based on the Companys closing stock price of $19.00 as
of March 31, 2011, which would have been received by the option holders had all option holders
exercised their options as of that date. As of March 31, 2011, the intrinsic value of
outstanding stock options and exercisable stock options was $0.(2)
    
    Fully vested and exercisable at the time of grant.(3)
    
    Subject to vesting over five years, 80% vested at March 31, 2011.  Weighted AverageNumber of
    
    
    Grant DateNon-Vested Shares
    
    Shares
    
    
    Fair ValueBalance at March 31, 2009
    
    
    29,400
    
    
    $
    31.20Granted
    
    
    30,000
    
    
    
    8.28Vested
    
    
    (9,800
    )
    
    
    31.20Forfeited
    
    
    (2,800
    )
    
    
    31.20Non-vested at March 31, 2010
    
    
    46,800
    
    
    
    16.51Granted
    
    
    8,049
    
    
    
    18.48Vested
    
    
    (15,900
    )
    
    
    20.39Forfeited
    
    
    
    
    
    
    Non-vested at March 31, 2011
    
    
    38,949
    
    
    
    15.33
  Earnings Per Share
 , Earnings Per Share
 65




---



##### 



2011
    
    
    2010(Amounts in thousands, except shareand per share amounts)Net income as reported
    
    $
    1,725
    
    
    $
    1,933Less preferred dividends and accretion
    
    
    (620
    )
    
    
    (613
    )Net income available to common stockholders
    
    $
    1,105
    
    
    $
    1,380Weighted average number of common shares outstanding
    
    
    1,667,685
    
    
    
    1,642,705Weighted average number of unallocated ESOP shares
    
    
    (163,966
    )
    
    
    (185,473
    )Weighted average number of common shares
outstanding used in calculation of basic earnings per
share
    
    
    1,503,719
    
    
    
    1,457,232Incremental shares from the assumed exercise of
dilutive common stock equivalents
    
    
    117,463
    
    
    
    42,680Weighted average number of common shares
outstanding used in calculating diluted earnings per
share
    
    
    1,621,182
    
    
    
    1,499,912Earnings per share:Basic
    
    $
    0.74
    
    
    $
    0.95Diluted
    
    $
    0.68
    
    
    $
    0.92
  Bank-Owned Life Insurance
 Investments  Other
 Other Comprehensive Income
  66




---



##### 



2011
    
    
    2010(In Thousands)Net unrealized gain on securities available for sale
    
    $
    1,184
    
    
    $
    1,000Tax effect
    
    
    (452
    )
    
    
    (380
    )Net-of-tax amount
    
    
    732
    
    
    
    620Unrealized gain on pension benefits
    
    
    270
    
    
    
    321Tax effect
    
    
    (110
    )
    
    
    (131
    )Net-of-tax amount
    
    
    160
    
    
    
    190Accumulated other comprehensive income
    
    $
    892
    
    
    $
    810
  Recent Accounting Pronouncements
 Accounting for Transfers of Financial Assets Transfers and Servicing,
 Amendments to
FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities,
 67




---



##### 



Improving
Disclosures About Fair Value Measurements
 Disclosures About the Credit Quality of Financing
Receivables Receivables
 Receivables
(Topic 310): A Creditors Determination of Whether a Restructuring is a Troubled Debt Restructuring.
 Transfers and
Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements.
 Fair Value
Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs.
 68




---



##### 



Note 2. Investments
  March 31, 2011Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In Thousands)Corporate bonds
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Government agency and
government sponsored
enterprise
mortgage-backed
securities
    
    
    18,129
    
    
    
    764
    
    
    
    (70
    )
    
    
    18,823Single issuer trust
preferred securities
issued by financial
institutions
    
    
    1,002
    
    
    
    47
    
    
    
    
    
    
    
    1,049Total debt securities
    
    
    19,131
    
    
    
    811
    
    
    
    (70
    )
    
    
    19,872Perpetual preferred
stock issued by
financial institutions
    
    
    3,071
    
    
    
    194
    
    
    
    (80
    )
    
    
    3,185Common stock
    
    
    1,799
    
    
    
    354
    
    
    
    (25
    )
    
    
    2,128Total
    
    $
    24,001
    
    
    $
    1,359
    
    
    $
    (175
    )
    
    $
    25,185
 March 31, 2011Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In Thousands)Corporate bonds
    
    $
    1,752
    
    
    $
    
    
    
    $
    
    
    
    $
    1,752Government agency and government
sponsored enterprise mortgage-backed
securities
    
    
    24,253
    
    
    
    752
    
    
    
    (12
    )
    
    
    24,993Single issuer trust preferred
securities issued by financial
institutions
    
    
    1,002
    
    
    
    43
    
    
    
    
    
    
    
    1,045Total debt securities
    
    
    27,007
    
    
    
    795
    
    
    
    (12
    )
    
    
    27,790Perpetual preferred stock issued by
financial institutions
    
    
    3,394
    
    
    
    56
    
    
    
    (195
    )
    
    
    3,255Common stock
    
    
    2,967
    
    
    
    508
    
    
    
    (152
    )
    
    
    3,323Total
    
    $
    33,368
    
    
    $
    1,359
    
    
    $
    (359
    )
    
    $
    34,368
  69




---



##### 



Less Than or Equal to
    
    
    Greater Than12 Months
    
    
    12 MonthsFair
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In Thousands)Government agency and government sponsored
enterprise mortgage-backed securities
    
    $
    3,209
    
    
    $
    (63
    )
    
    $
    306
    
    
    $
    (7
    )Perpetual preferred stock issued by financial
institutions
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    (80
    )Common stock
    
    
    199
    
    
    
    (14
    )
    
    
    182
    
    
    
    (11
    )Total temporarily impaired securities
    
    $
    3,408
    
    
    $
    (77
    )
    
    $
    1,426
    
    
    $
    (98
    )
    70




---



##### 



Amortized
    
    
    Fair
    
    
    AnnualCost
    
    
    Value
    
    
    Yield(Dollars in Thousands)Government agency and government sponsored
enterprise mortgage-backed securitiesDue within one year
    
    $
    
    
    
    $
    
    
    
    
    
    %Due after one year but within five years
    
    
    2,970
    
    
    
    3,079
    
    
    
    4.18Due after five years but within ten years
    
    
    11
    
    
    
    12
    
    
    
    4.75Due after ten years
    
    
    15,148
    
    
    
    15,732
    
    
    
    4.71Total
    
    $
    18,129
    
    
    $
    18,823Single issuer trust preferred securities
issued by financial institutions:Due after ten years
    
    
    1,002
    
    
    
    1,049
    
    
    
    7.78
    %Total
    
    $
    19,131
    
    
    $
    19,872
   2011
    
    
    2010(Dollars in Thousands)Proceeds from sales, maturities,
redemptions
    
    $
    3,371
    
    
    $
    1,835Gross gains
    
    
    552
    
    
    
    46Gross losses
    
    
    (72
    )
    
    
    (170
    )Other than temporary impairments
    
    
    (344
    )
    
    
    (341
    )Net realized gain (loss)
    
    $
    136
    
    
    $
    (465
    )
    71




---



##### 



Note 3. Loans and the Allowance for Loan Losses
  2011
    
    
    2010Real estate loans:Residential real estate (1-4 family)
    
    $
    183,157
    
    
    $
    217,053Commercial real estate
    
    
    199,074
    
    
    
    227,938Land and Construction
    
    
    456
    
    
    
    2,722Home equity lines of credit
    
    
    8,426
    
    
    
    8,817Total real estate loans
    
    
    391,113
    
    
    
    456,530Commercial loans
    
    
    2,212
    
    
    
    4,037Consumer loans
    
    
    892
    
    
    
    943Total loans
    
    
    394,217
    
    
    
    461,510Less: allowance for losses
    
    
    (3,892
    )
    
    
    (3,038
    )Total loans, net
    
    $
    390,325
    
    
    $
    458,472
  Years EndedMarch 31,2011
    
    
    2010Balance at beginning of period
    
    $
    3,038
    
    
    $
    3,191Provision charged to expense
    
    
    1,100
    
    
    
    600Less: charge-offs
    
    
    (250
    )
    
    
    (773
    )Add: recoveries
    
    
    4
    
    
    
    20Balance at end of period
    
    $
    3,892
    
    
    $
    3,038
  72




---



##### 



Financing Receivables on Nonaccrual Status as of:March 31,
    
    
    March 31,2011
    
    
    2010Commercial real estate:Mixed use
    
    $
    1,616
    
    
    $
    4,729Industrial (other)
    
    
    1,500
    
    
    
    Retail
    
    
    769
    
    
    
    Apartments
    
    
    2,757
    
    
    
    Residential:Residential (1-4 family)
    
    
    2,587
    
    
    
    1,199Condominium
    
    
    352
    
    
    
    318Commercial
    
    
    
    
    
    
    $
    9,581
    
    
    $
    6,246
    73




---



##### 



At March 31,
    
    
    At March 31,2011
    
    
    2010Impaired loans with a valuation allowance
    
    $
    6,439
    
    
    $
    3,009Impaired loans without a valuation allowance
    
    
    9,635
    
    
    
    13,506Total impaired loans
    
    $
    16,074
    
    
    $
    16,515Specific valuation allowance related to impaired loans
    
    $
    1,417
    
    
    $
    354
   Age Analysis of Past Due Financing Receivablesas of March 31, 2011Greater30-59 Days
    
    
    60-89 Days
    
    
    than
    
    
    TotalPast Due
    
    
    Past Due
    
    
    90 Days
    
    
    Past Due
    
    
    Current
    
    
    TotalCommercial real estate:Mixed use
    
    $
    398
    
    
    $
    
    
    
    $
    1,616
    
    
    $
    2,014
    
    
    $
    36,605
    
    
    $
    38,619Apartments
    
    
    
    
    
    
    258
    
    
    
    2,757
    
    
    
    3,015
    
    
    
    75,655
    
    
    
    78,670Industrial (other)
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    1,500
    
    
    
    36,005
    
    
    
    37,505Retail
    
    
    
    
    
    
    
    
    
    
    769
    
    
    
    769
    
    
    
    28,276
    
    
    
    29,045Offices
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,235
    
    
    
    15,235Land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    456
    
    
    
    456Residential:Residential real estate loans
    
    
    782
    
    
    
    247
    
    
    
    2,587
    
    
    
    3,616
    
    
    
    152,978
    
    
    
    156,594Residential (condominium)
    
    
    
    
    
    
    
    
    
    
    352
    
    
    
    352
    
    
    
    26,211
    
    
    
    26,563Home equity lines of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,426
    
    
    
    8,426Commercial and industrial
loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,212
    
    
    
    2,212Consumer loans
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    888
    
    
    
    892$
    1,184
    
    
    $
    505
    
    
    $
    9,851
    
    
    $
    11,270
    
    
    $
    382,947
    
    
    $
    394,217
  Credit Quality Indicators.
 74




---



##### 



Commercial and
    
    
    ResidentialIndustrial
    
    
    Real
    
    
    Home Equity
    
    
    Commercial
    
    
    
    
    
    
    ConsumerLoans
    
    
    Estate
    
    
    Lines of Credit
    
    
    Real Estate
    
    
    Land
    
    
    Loans
    
    
    TotalPass
    
    $
    2,212
    
    
    $
    181,587
    
    
    $
    8,426
    
    
    $
    188,917
    
    
    $
    456
    
    
    $
    892
    
    
    $
    382,490Special mention
    
    
    
    
    
    
    1,570
    
    
    
    
    
    
    
    7,128
    
    
    
    
    
    
    
    
    
    
    
    8,698Substandard
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,029
    
    
    
    
    
    
    
    
    
    
    
    3,029$
    2,212
    
    
    $
    183,157
    
    
    $
    8,426
    
    
    $
    199,074
    
    
    $
    456
    
    
    $
    892
    
    
    $
    394,217
  Apartments
    
    
    Offices
    
    
    Mixed Use
    
    
    Industrial (Other)
    
    
    Retail
    
    
    Total< 40%
    
    $
    12,720
    
    
    $
    1,028
    
    
    $
    10,083
    
    
    $
    6,646
    
    
    $
    6,883
    
    
    $
    37,36040% - 60%
    
    
    22,994
    
    
    
    8,299
    
    
    
    7,899
    
    
    
    9,055
    
    
    
    16,220
    
    
    
    64,467> 60%
    
    
    32,165
    
    
    
    5,494
    
    
    
    18,658
    
    
    
    10,396
    
    
    
    2,660
    
    
    
    69,373Participations
    
    
    4,576
    
    
    
    
    
    
    
    
    
    
    
    9,352
    
    
    
    1,116
    
    
    
    15,044Total
    
    $
    72,455
    
    
    $
    14,821
    
    
    $
    36,640
    
    
    $
    35,449
    
    
    $
    26,879
    
    
    $
    186,244
  Commercial RealResidential
    
    
    EstateReal
    
    
    and
    
    
    Commercial
    
    
    ConsumerEstate
    
    
    Land
    
    
    Loans
    
    
    Loans
    
    
    Unallocated
    
    
    TotalAllowance for loan losses
ending balance:Individually evaluated for
impairment
    
    $
    110
    
    
    $
    1,307
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,417Collectively evaluated for
impairment
    
    
    763
    
    
    
    1,513
    
    
    
    17
    
    
    
    16
    
    
    
    166
    
    
    
    2,475$
    873
    
    
    $
    2,820
    
    
    $
    17
    
    
    $
    16
    
    
    $
    166
    
    
    $
    3,892Loans ending balance:Individually evaluated for
impairment
    
    $
    3,588
    
    
    $
    12,486
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    16,074Collectively evaluated for
impairment
    
    
    187,833
    
    
    
    187,572
    
    
    
    690
    
    
    
    2,048
    
    
    
    
    
    
    
    378,143$
    191,421
    
    
    $
    200,058
    
    
    $
    690
    
    
    $
    2,048
    
    
    $
    
    
    
    $
    394,217
 75




---



##### 



Recorded
    
    
    Unpaid Principal
    
    
    RelatedInvestment *
    
    
    Balance
    
    
    AllowanceWith no related allowance recorded:Residential 1-4 Family
    
    $
    2,119
    
    
    $
    2,123
    
    
    $
    Commercial Real Estate and Multi-Family
    
    
    8,894
    
    
    
    8,920
    
    
    
    With an allowance recorded:Residential 1-4 Family
    
    $
    1,468
    
    
    $
    1,630
    
    
    $
    110Commercial Real Estate and Multi-Family
    
    
    3,629
    
    
    
    4,580
    
    
    
    1,307TotalResidential 1-4 Family
    
    $
    3,587
    
    
    $
    3,753
    
    
    $
    110Commercial Real Estate and Multi-Family
    
    
    12,523
    
    
    
    13,500
    
    
    
    1,307
 
 *
    
    Includes accrued interest, specific reserves and net unearned deferred fees and costs.  2010
    
    
    2010Balance at beginning of year
    
    $
    305
    
    
    $
    390New loans
    
    
    4
    
    
    
    Repayment of principal
    
    
    (204
    )
    
    
    (22
    )Reduction of directors and officers
    
    
    
    
    
    
    (63
    )Balance at end of year
    
    $
    105
    
    
    $
    305
  Note 4. Banking Premises and Equipment
  Estimated2011
    
    
    2010
    
    
    Useful LivesLand
    
    $
    589
    
    
    $
    589Buildings and improvements
    
    
    2,657
    
    
    
    2,362
    
    
    50 yearsFurniture and fixtures
    
    
    3,592
    
    
    
    3,484
    
    
    3-5 yearsLeasehold improvements
    
    
    1,568
    
    
    
    1,561
    
    
    5-10 years8,406
    
    
    
    7,996Less accumulated depreciation and
amortization
    
    
    (5,701
    )
    
    
    (5,237
    )Total
    
    $
    2,705
    
    
    $
    2,759
 76




---



##### 



Note 5. Other Real Estate Owned
  2011
    
    
    2010Balance at beginning of year
    
    $
    60
    
    
    $
    2,986Additions
    
    
    132
    
    
    
    77Valuation adjustments
    
    
    0
    
    
    
    (17
    )Sales
    
    
    (60
    )
    
    
    (2,986
    )Balance at end of year
    
    $
    132
    
    
    $
    60
  Note 6. Deposits
  2011
    
    
    2010Demand deposit accounts
    
    $
    40,745
    
    
    $
    41,959NOW accounts
    
    
    28,989
    
    
    
    29,358Passbook and other savings accounts
    
    
    55,326
    
    
    
    53,544Money market deposit accounts
    
    
    76,201
    
    
    
    79,745Total non-certificate accounts
    
    
    201,261
    
    
    
    204,606Term deposit certificatesCertificates of $100,000 and above
    
    
    40,843
    
    
    
    51,695Certificates less than $100,000
    
    
    66,973
    
    
    
    82,868Total term deposit certificates
    
    
    107,816
    
    
    
    134,563Total deposits
    
    $
    309,077
    
    
    $
    339,169
  Weighted AverageAmount
    
    
    Interest RateWithin 1 year
    
    $
    87,297
    
    
    
    0.93
    %Over 1 to 3 years
    
    
    19,778
    
    
    
    1.64Over 3 years
    
    
    741
    
    
    
    1.60$
    107,816
 77




---



##### 



Note 7. Federal Home Loan Bank Advances
  2011
    
    
    2010Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageAmount
    
    
    Interest Rate
    
    
    Amount
    
    
    Interest RateWithin 1 year
    
    $
    
    
    
    
    
    %
    
    $
    26,000
    
    
    
    5.37
    %1-2 years
    
    
    29,351
    
    
    
    3.92
    
    
    
    
    
    
    
    2-3 years
    
    
    11,000
    
    
    
    2.98
    
    
    
    29,469
    
    
    
    3.923-4 years
    
    
    22,000
    
    
    
    2.93
    
    
    
    11,000
    
    
    
    2.984-5 years
    
    
    5,000
    
    
    
    2.89
    
    
    
    22,000
    
    
    
    2.93Over 5 to 10 years
    
    
    50,000
    
    
    
    4.10
    
    
    
    55,000
    
    
    
    3.99117,351
    
    
    
    3.68
    %
    
    
    143,469
    
    
    
    3.98
    %
   Note 8. Income Taxes
  Year Ended March 31,2011
    
    
    2010CurrentFederal
    
    $
    
    
    
    $
    (176
    )State
    
    
    5
    
    
    
    55Total current provision (benefit)
    
    
    5
    
    
    
    (121
    )DeferredFederal
    
    
    578
    
    
    
    962State
    
    
    363
    
    
    
    (157
    )Total deferred provision
    
    
    941
    
    
    
    806Provision for income taxes
    
    $
    946
    
    
    $
    685
 78




---



##### 



Year Ended March 31,2011
    
    
    2010Statutory federal tax rate
    
    
    34.0
    %
    
    
    34.0
    %Items affecting Federal Income tax rate:Dividends received deduction
    
    
    (2.6
    )
    
    
    (2.7
    )Net state impact of deferred rate change
    
    
    3.0
    
    
    
    (10.3
    )State income taxes  net of federal
tax benefit
    
    
    7.2
    
    
    
    6.3Bank-owned life insurance deduction
    
    
    (3.6
    )
    
    
    (5.4
    )Valuation allowance
    
    
    (4.8
    )
    
    
    1.0Stock-based compensation
    
    
    1.2
    
    
    
    3.10Other
    
    
    1.0
    
    
    
    (0.4
    )Effective tax rate
    
    
    35.4
    %
    
    
    25.6
    %
  2011
    
    
    2010Deferred tax assets:Allowance for loan losses
    
    $
    1,580
    
    
    $
    1,243Depreciation
    
    
    814
    
    
    
    966Post- retirement employee benefits
    
    
    425
    
    
    
    299Write-down of investments securities
    
    
    845
    
    
    
    2,778Net operating loss carryforward
    
    
    434
    
    
    
    74Other
    
    
    444
    
    
    
    259Gross deferred tax asset
    
    
    4,542
    
    
    
    5,619Less: Valuation allowance
    
    
    (292
    )
    
    
    (421
    )Net deferred tax assets
    
    
    4,250
    
    
    
    5,198Deferred tax liabilities:Unrealized gain on securities, net
    
    
    452
    
    
    
    380Other
    
    
    198
    
    
    
    137Gross deferred tax liability
    
    
    650
    
    
    
    517Net deferred tax assets
    
    $
    3,600
    
    
    $
    4,681
   79




---



##### 



AmountUnrecognized tax benefits at April 1, 2010
    
    $
    198Additions for tax positions related to the current year
    
    
    16Additions for tax positions of prior years
    
    
    61Reductions for tax positions of prior years
    
    
    (120
    )Unrecognized tax benefits at March 31, 2011
    
    $
    155
  Note 9. Financial Instruments with Off-Balance Sheet Risk
    At March 31,2011
    
    
    2010Unused lines of credit
    
    $
    15,940
    
    
    $
    16,495Unadvanced portions of construction loans
    
    
    
    
    
    
    126Unadvanced portions of commercial loans
    
    
    459
    
    
    
    1,135Commitments to originate residential mortgage loans
    
    
    11,232
    
    
    
    6,077Commitments to sell residential mortgage loans
    
    
    595
    
    
    
    4,024Total off-balance sheet commitments
    
    $
    28,226
    
    
    $
    27,857
  80




---



##### 



Years EndingMarch 31,2012
    
    $
    3712013
    
    
    3572014
    
    
    3332015
    
    
    3292016
    
    
    311Thereafter
    
    
    17Total
    
    $
    1,717
  Note 10. Stockholders Equity
   81




---



##### 



To Be WellFor Capital
    
    
    Capitalized UnderAdequacy
    
    
    Prompt CorrectiveActual
    
    
    Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioAs of March 31, 2011:Company (consolidated)Total risk-based capital
    
    $
    56,531
    
    
    
    18.53
    %
    
    $
    24,406
    
    
    
    38.00
    %
    
    
    N/A
    
    
    
    N/ATier 1 capital
    
    
    52,514
    
    
    
    17.22
    
    
    
    11,854
    
    
    
    34.00
    
    
    
    N/A
    
    
    
    N/ATier 1 leverage capital
    
    
    52,514
    
    
    
    10.66
    
    
    
    19,705
    
    
    
    34.00
    
    
    
    N/A
    
    
    
    N/ABankTotal risk-based capital
    
    $
    50,954
    
    
    
    16.72
    %
    
    $
    24,380
    
    
    
    38.00
    %
    
    $
    30,475
    
    
    
    310.00
    %Tier 1 capital
    
    
    46,938
    
    
    
    15.40
    
    
    
    12,192
    
    
    
    34.00
    
    
    
    18,288
    
    
    
    36.00Tier 1 leverage capital
    
    
    46,938
    
    
    
    9.58
    
    
    
    19,598
    
    
    
    34.00
    
    
    
    24,498
    
    
    
    35.00As of March 31, 2010:Company (consolidated)Total risk-based capital
    
    $
    53,569
    
    
    
    15.12
    %
    
    $
    29,769
    
    
    
    38.00
    %
    
    
    N/A
    
    
    
    N/ATier 1 capital
    
    
    50,432
    
    
    
    14.24
    
    
    
    14,166
    
    
    
    34.00
    
    
    
    N/A
    
    
    
    N/ATier 1 leverage capital
    
    
    50,432
    
    
    
    9.22
    
    
    
    21,879
    
    
    
    34.00
    
    
    
    N/A
    
    
    
    N/ABankTotal risk-based capital
    
    $
    47,374
    
    
    
    13.37
    %
    
    $
    28,346
    
    
    
    38.00
    %
    
    $
    35,433
    
    
    
    310.00
    %Tier 1 capital
    
    
    44,237
    
    
    
    12.49
    
    
    
    14,167
    
    
    
    34.00
    
    
    
    21,250
    
    
    
    36.00Tier 1 leverage capital
    
    
    44,237
    
    
    
    8.09
    
    
    
    21,872
    
    
    
    34.00
    
    
    
    27,340
    
    
    
    35.00
   Note 11. Employee Benefits
 Pension and Savings Plans
   82




---



##### 



Employee Stock Ownership Plan
     83




---



##### 



Other Post-Retirement Benefits
  Year Ended March 31,2011
    
    
    2010Life
    
    
    Medical
    
    
    Life
    
    
    MedicalActuarial present value of benefits obligation:Retirees
    
    $
    (165
    )
    
    $
    (146
    )
    
    $
    (126
    )
    
    $
    (145
    )Fully eligible participants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    (165
    )
    
    $
    (146
    )
    
    $
    (126
    )
    
    $
    (145
    )Change in projected benefit obligation:Accumulated benefit obligations at prior year-end
    
    $
    (126
    )
    
    $
    (144
    )
    
    $
    (165
    )
    
    $
    (168
    )Service cost less expense component
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest cost
    
    
    (8
    )
    
    
    (7
    )
    
    
    (7
    )
    
    
    (9
    )Actuarial (loss) gain
    
    
    (28
    )
    
    
    
    
    
    
    60
    
    
    
    27Amendment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Assumptions
    
    
    (4
    )
    
    
    (11
    )
    
    
    (15
    )
    
    
    (12
    )Benefits paid
    
    
    1
    
    
    
    16
    
    
    
    1
    
    
    
    17Accumulated benefit obligations at year-end
    
    $
    (165
    )
    
    $
    (146
    )
    
    $
    (126
    )
    
    $
    (145
    )Change in plan assets:Fair value of plan assets at prior year-end
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contribution
    
    
    1
    
    
    
    16
    
    
    
    1
    
    
    
    17Benefits paid and expenses
    
    
    (1
    )
    
    
    (16
    )
    
    
    (1
    )
    
    
    (17
    )Fair value of plan assets at current year-end
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Change in accumulated other comprehensive
income:Other accumulated comprehensive income at prior
fiscal year-end
    
    $
    (173
    )
    
    $
    (148
    )
    
    $
    (141
    )
    
    $
    (140
    )Gain (loss) on actuarial experience
    
    
    28
    
    
    
    
    
    
    
    (60
    )
    
    
    (27
    )Gain (loss) actuarial assumptions
    
    
    4
    
    
    
    11
    
    
    
    15
    
    
    
    12Amortization included in pension expense
    
    
    7
    
    
    
    2
    
    
    
    13
    
    
    
    6Other accumulated other comprehensive income
at current year-end
    
    $
    (134
    )
    
    $
    (135
    )
    
    $
    (173
    )
    
    $
    (149
    )Amounts with deferred recognitionReconciliation of accrued pension cost:Accrued pension cost at beginning of year
    
    $
    (299
    )
    
    $
    (294
    )
    
    $
    (305
    )
    
    $
    (309
    )Minus net periodic cost
    
    
    (1
    )
    
    
    (5
    )
    
    
    6
    
    
    
    (2
    )Plus employer contributions, net
    
    
    1
    
    
    
    16
    
    
    
    1
    
    
    
    17Accrued cost at end of year
    
    $
    (299
    )
    
    $
    (283
    )
    
    $
    (298
    )
    
    $
    (294
    )Benefit
obligation weighted average assumption as change in projected benefit obligation:Discount rate
    
    
    4.50
    %
    
    
    4.50
    %
    
    
    5.00
    %
    
    
    5.00
    %Expected return on plan assets
    
    
    4.50
    
    
    
    4.50
    
    
    
    5.00
    
    
    
    5.00Rate of compensation increase
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
 84




---



##### 



Years Ended March 31,2011
    
    
    2010Life
    
    
    Medical
    
    
    Life
    
    
    MedicalComponents of net periodic benefit cost:Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    8
    
    
    
    7
    
    
    
    7
    
    
    
    9Expected return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    8
    
    
    
    14
    
    
    
    9
    
    
    
    13Recognized actuarial gain
    
    
    (15
    )
    
    
    (16
    )
    
    
    (22
    )
    
    
    (20
    )Net periodic benefit gain (cost)
    
    $
    1
    
    
    $
    5
    
    
    $
    (6
    )
    
    $
    2Periodic benefit cost weighted average
assumptions:Discount rate
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    6.75
    %
    
    
    6.75
    %Rate of compensation increase
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aAmounts recognized in the consolidated balance
sheets consist of:Other liabilities
    
    $
    (165
    )
    
    $
    (146
    )
    
    $
    (125
    )
    
    $
    (144
    )Amounts recognized in accumulated other
comprehensive income consist of:Net gain
    
    $
    (150
    )
    
    $
    (133
    )
    
    $
    (198
    )
    
    $
    (160
    )Prior credit
    
    
    
    
    
    
    (52
    )
    
    
    
    
    
    
    (63
    )Transition liability
    
    
    16
    
    
    
    50
    
    
    
    25
    
    
    
    74$
    (134
    )
    
    $
    (135
    )
    
    $
    (173
    )
    
    $
    (149
    )
   Years EndingMarch 31,2012
    
    $
    312013
    
    
    322014
    
    
    322015
    
    
    322016
    
    
    322017 through 2021
    
    
    135
 Supplemental Executive Retirement Plans
  85




---



##### 



Employment Agreements
  Note 12. Legal Proceedings
  Note 13. Troubled Asset Relief Program Capital Purchase Program
    Derivatives and Hedging,
 86




---



##### 



Debt Equity
 Expected life in years
    
    
    10.00Expected volatility
    
    
    54.76
    %Dividend yield
    
    
    3.00
    %Risk-free interest rate
    
    
    2.67
    %
  Note 14. Fair Values of Financial Instruments
 Fair Value Measurements and Disclosures
 Level 1 
    
    Quoted prices for identical instruments in active marketsLevel 2 
    
    Quoted prices for similar instruments in active or non-active
markets and model-derived valuations in which all significant
inputs and value drivers are observable in active marketsLevel 3 
    
    Valuation derived from significant unobservable inputs
  87




---



##### 



At March 31, 2011
    
    Carrying Value (In Thousands)Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets recorded at fair value on a recurring basis:Securities available for saleGovernment agency and government sponsored
agency mortgage-backed securities
    
    $
    
    
    
    $
    18,823
    
    
    $
    
    
    
    $
    18,823Single issuer trust preferred securities issued
by financial institutions
    
    
    1,049
    
    
    
    
    
    
    
    
    
    
    
    1,049Perpetual preferred stock issued by financial
institutions
    
    
    2,063
    
    
    
    1,122
    
    
    
    
    
    
    
    3,185Common stock
    
    
    2,128
    
    
    
    
    
    
    
    
    
    
    
    2,128Assets recorded at fair value on a nonrecurring basis:Impaired loans carried at fair value:CRE
    
    
    
    
    
    
    
    
    
    
    4,566
    
    
    
    4,566Residential
    
    
    
    
    
    
    
    
    
    
    443
    
    
    
    443OREO
    
    
    
    
    
    
    
    
    
    
    132
    
    
    
    132
 At March 31, 2010
    
    
    
    
    
    Carrying Value (In Thousands)Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets recorded at fair value on a recurring basis:Securities available for saleCorporate bonds
    
    $
    
    
    
    $
    1,752
    
    
    $
    
    
    
    $
    1,752Government agency and government sponsored
agency mortgage-backed securities
    
    
    
    
    
    
    24,993
    
    
    
    
    
    
    
    24,993Single issuer trust preferred securities issued
by financial institutions
    
    
    
    
    
    
    1,045
    
    
    
    
    
    
    
    1,045Perpetual preferred stock issued by financial
institutions
    
    
    
    
    
    
    3,255
    
    
    
    
    
    
    
    3,255Common stock
    
    
    3,323
    
    
    
    
    
    
    
    
    
    
    
    3,323Assets recorded at fair value on a nonrecurring basis:Impaired loans carried at fair value:CRE
    
    
    
    
    
    
    
    
    
    
    6,604
    
    
    
    6,604Residential
    
    
    
    
    
    
    
    
    
    
    599
    
    
    
    599OREO
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    60
   88




---



##### 



Cash and Due from Banks 
 Short-Term Investments 
 Investment Securities Available for Sale 
 Loans and Loans Held for Sale 
 Accrued Interest Receivable 
 Stock in FHLBB 
 89




---



##### 



The Co-operative Central Bank Reserve Fund 
 Deposits 
 Advances from FHLBB 
 Subordinated Debentures 
 Short-Term Borrowings, Advance Payments by Borrowers for Taxes and Insurance and Accrued
Interest Payable 
 Off-Balance Sheet Instruments 
  March 31, 2011
    
    
    March 31, 2010Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueAssetsCash and due from banks
    
    $
    3,728
    
    
    $
    3,728
    
    
    $
    4,328
    
    
    $
    4,328Short-term investments
    
    
    37,190
    
    
    
    37,190
    
    
    
    12,208
    
    
    
    12,208Investment securities available for sale
    
    
    25,185
    
    
    
    25,185
    
    
    
    34,368
    
    
    
    34,368Loans held for sale
    
    
    
    
    
    
    
    
    
    
    392
    
    
    
    392Net loans
    
    
    390,325
    
    
    
    394,475
    
    
    
    458,472
    
    
    
    454,557Stock in Federal Home Loan Bank of Boston
    
    
    8,518
    
    
    
    8,518
    
    
    
    8,518
    
    
    
    8,518The Co-operative Central Bank Reserve Fund
    
    
    1,576
    
    
    
    1,576
    
    
    
    1,576
    
    
    
    1,576Accrued interest receivable
    
    
    1,496
    
    
    
    1,496
    
    
    
    1,896
    
    
    
    1,896LiabilitiesDeposits
    
    $
    309,077
    
    
    $
    300,875
    
    
    $
    339,169
    
    
    $
    329,749Advances from FHLB of Boston
    
    
    117,351
    
    
    
    125,314
    
    
    
    143,469
    
    
    
    150,949Subordinated debentures
    
    
    11,341
    
    
    
    8,651
    
    
    
    11,341
    
    
    
    8,226Advance payments by borrowers for taxes and insurance
    
    
    1,387
    
    
    
    1,387
    
    
    
    1,649
    
    
    
    1,649Accrued interest payable
    
    
    397
    
    
    
    397
    
    
    
    517
    
    
    
    517Off-Balance Sheet Instruments
    
    
    28,226
    
    
    
    28,226
    
    
    
    27,257
    
    
    
    27,257
 90




---



##### 



Note 15. Parent Company Only Condensed Financial Statements
 At March 31,Balance Sheets
    
    2011
    
    
    2010AssetsCash deposit in subsidiary bank
    
    $
    301
    
    
    $
    342Investment in subsidiary
    
    
    52,156
    
    
    
    49,467ESOP loan (Note 11)
    
    
    5,676
    
    
    
    6,254Investment in unconsolidated subsidiary
    
    
    341
    
    
    
    341Other assets
    
    
    325
    
    
    
    97Total assets
    
    $
    58,799
    
    
    $
    56,501Liabilities and Stockholders EquitySubordinated debentures (Note 1)
    
    $
    11,341
    
    
    $
    11,341Accrued taxes and other liabilities
    
    
    337
    
    
    
    47Total stockholders equity
    
    
    47,121
    
    
    
    45,113Total liabilities and stockholders equity
    
    $
    58,799
    
    
    $
    56,501
 Year Ended March 31,Statements of Operations
    
    2011
    
    
    2010Dividends from subsidiary
    
    $
    500
    
    
    $
    500Interest income
    
    
    468
    
    
    
    515Interest expense on subordinated debentures
    
    
    (575
    )
    
    
    (586
    )Noninterest expenses
    
    
    (460
    )
    
    
    (432
    )Loss before income tax benefit
    
    
    (67
    )
    
    
    (3
    )Income tax benefit
    
    
    
    
    
    
    206Income before equity in undistributed net income of subsidiary
    
    
    (67
    )
    
    
    203Equity in undistributed net income of subsidiary
    
    
    1,792
    
    
    
    1,790Net income
    
    $
    1,725
    
    
    $
    1,993
 Year Ended March 31Statements of Cash Flows
    
    2011
    
    
    2010Cash flows from operating activitiesNet income
    
    $
    1,725
    
    
    $
    1,993Adjustments to reconcile net income to net cash provided by
operating activitiesEquity in undistributed net income of subsidiary
    
    
    (1,792
    )
    
    
    (1,790
    )Changes in other assets and other liabilities
    
    
    246
    
    
    
    27Net cash provided by operating activities
    
    
    179
    
    
    
    230Cash flows from investing activities:ESOP loans, net of repayment
    
    
    578
    
    
    
    566Net cash provided by investing activities
    
    
    578
    
    
    
    566Cash flows from financing activities:Cash dividends paid
    
    
    (798
    )
    
    
    (791
    )Net cash (used in) provided by financing activities
    
    
    (798
    )
    
    
    (791
    )Net (decrease) increase in cash in subsidiary bank
    
    
    (41
    )
    
    
    5Cash in subsidiary bank at beginning of year
    
    
    342
    
    
    
    337Cash in subsidiary bank at end of year
    
    $
    301
    
    
    $
    342
 91




---



##### 



Report of Independent Registered Public Accounting Firm
 
    /s/ McGladrey & Pullen, LLPBoston, Massachusetts  92




---



##### 



Report of Independent Registered Public Accounting Firm
      /s/ Caturano and Company, P.C.Boston, Massachusetts  93




---



##### 



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
    94




---



##### 



Item 9A. Controls and Procedures
 (a)
    
    Disclosure Controls and ProceduresThe Companys management, including the Companys principal executive officer and
principal financial officer, have evaluated the effectiveness of the Companys
disclosure controls and procedures, as such term is defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended, (the Exchange
Act). Based upon their evaluation, the principal executive officer and principal
financial officer concluded that, as of the end of the period covered by this
report, the Companys disclosure controls and procedures were effective for the
purpose of ensuring that the information required to be disclosed in the reports
that the Company files or submits under the Exchange Act with the Securities and
Exchange Commission (the SEC) (1) is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms, and (2) is
accumulated and communicated to the Companys management, including its principal
executive and principal financial officers, as appropriate to allow timely decisions
regarding required disclosure.(b)
    
    Internal Controls Over Financial ReportingThe Companys management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934, and management has assessed the
effectiveness of the Companys internal control over financial reporting as of March
31, 2011 based upon the criteria set forth in a report entitled Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on its assessment, the Companys management has
concluded that the Company maintained effective internal control over financial
reporting as of March 31, 2011.This Annual Report does not include an attestation report of the Companys
registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to attestation by the Companys
independent registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
managements report in this Annual Report.(c)
    
    Changes to Internal Control Over Financial ReportingExcept as indicated herein, there were no changes in the Companys internal control
over financial reporting during the twelve months ended March 31, 2011 that have
materially affected, or are reasonable likely to materially affect, the Companys
internal control over financial reporting.
 Item 9B. Other Information
  95




---



##### 



PART III
 Item 10. Directors, Executive Officers and Corporate Governance
 Directors
 Proposal I  Election of Directors
 Executive Officers
 Proposal I  Election of Directors 
Executive Officers Who Are Not Directors
 Compliance with Section 16(a) of the Exchange Act
 Section 16(a) Beneficial Ownership
Reporting Compliance
 Code of Ethics
  Corporate Governance
 Meetings and Committees of the Board of Directors 
Audit Committee
 Item 11. Executive Compensation
 Executive Compensation
 Executive Compensation Director Compensation
 Corporate Governance
 Meetings and Committees of the Board of Directors  Compensation Committee
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
 (a)
    
    Security Ownership of Certain Beneficial OwnersThe information required by this item is incorporated herein by reference to the
section captioned Principal Holders of Voting Securitiesin the Proxy Statement.(b)
    
    Security Ownership of ManagementThe information required by this item is incorporated herein by reference to the
section captioned Security Ownership of Managementin the Proxy Statement.
 96




---



##### 



(c)
    
    Changes in ControlManagement of the Company knows of no arrangements, including any pledge by any
person of securities of the Company, the operation of which may at a subsequent date
result in a change in control of the Company.(d)
    
    Equity Compensation PlansThe Company has adopted the 1999 Stock Option and Incentive Plan and the 2006
Long-Term Incentive Plan, pursuant to which equity may be awarded to participants.
Both plans have been approved by stockholders.
  (c)(a)
    
    
    
    
    
    
    Number of securities remainingNumber of securities to be
    
    
    (b)
    
    available for future issuanceissued
    
    
    Weighted-average exercise
    
    under equity compensationupon exercise of outstanding
    
    
    price of outstanding
    
    plan (excluding securitiesPlan Category
    
    options, warrants and rights
    
    
    options, warrants and rights
    
    reflected in column (a))Equity compensation plans
approved by security holders
    
    
    34,458
    
    
    
    $     29.63
    
    
    
    49,880Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total (1)
    
    
    34,458
    
    
    
    $     29.63
    
    
    
    49,880
 
 (1)
    
    The 1999 Stock Option Plan and the 2006 Long-Term Incentive Plan provides for a proportionate
adjustment to the number of shares reserved thereunder in the event of a stock split, stock
dividend, reclassification or similar event. Item 13. Certain Relationships and Related Transactions, and Director Independence
 Certain Relationships and Related Transactions
 Transactions with Related Persons
 Director Independence
 Proposal 1  Election of Directors
 Item 14. Principal Accounting Fees and Services
 Independent Auditors
 97




---



##### 



PART IV
 Item 15. Exhibits and Financial Statement Schedules
 (a)
 (1)
    
    Financial StatementsFor the Financial Statements filed as part of this Annual Report on Form 10-K,
reference is made to Item 8  Financial Statements and Supplementary Data.(2)
    
    Financial Statement SchedulesAll financial statement schedules have been omitted as not applicable or not
required or because they are included in the financial statements appearing at Item
8.(3)
    
    ExhibitsThe exhibits required by Item 601 of Regulation S-K are either filed as part of this
Annual Report on Form 10-K or incorporated by reference herein.
  Exhibit No.
    
    Description3.11
    
    Articles of Organization of Central Bancorp, Inc.3.210
    
    Amended Bylaws of Central Bancorp, Inc.4.12
    
    Articles of Amendment to the Articles of Incorporation of Central Bancorp, Inc.
Establishing Fixed Rate Cumulative Perpetual Preferred Stock, Series A4.22
    
    Form of Stock Certificate for Fixed Rate Cumulative Perpetual Preferred Stock,
Series A, of Central Bancorp, Inc.4.32
    
    Warrant to Purchase 234,742 Shares of Common Stock of Central Bancorp, Inc.4.43
    
    Shareholder Rights Agreement, dated as of October 11, 2001, by and between Central Bancorp, Inc. and Registrar
and Transfer
Company, as Rights
Agent, as amended
and restated as of
January 29, 2003,
and as amended on
February 11, 2003,
May 22, 2003, July
24, 2003 and August 4, 200310.14
    
    Employment Agreement by and between Central Co-operative Bank and John D. Doherty10.24
    
    Employment Agreement by and between Central Co-operative Bank and William P. Morrissey 10.34
    
    Executive Salary Continuation Agreement by and between Central Co-operative Bank
and John D. Doherty, as amended 10.44
    
    Executive Salary Continuation Agreement by and between Central Co-operative Bank
and William P. Morrissey, as amended 10.54
    
    Executive Health Insurance Plan Agreement by and between Central Co-operative Bank
and John D. Doherty 10.64
    
    Executive Health Insurance Plan Agreement by and between Central Co-operative Bank
and John D. Doherty 10.74
    
    Executive Health Insurance Plan Agreement by and between Central Co-operative Bank
and William P. Morrissey 10.81
    
    Severance Agreement between the Bank and William P. Morrissey, dated December 14,
1994 10.91
    
    Severance Agreement between the Bank and Paul S. Feeley, dated May 14, 1998 10.101
    
    Amendments to Severance Agreements between the Bank and Messrs. Feeley and
Morrissey, dated January 8, 1999 10.115
    
    1999 Stock Option and Incentive Plan 10.126
    
    Amended and Restated Deferred Compensation Plan for Non-Employee Directors 10.1311
    
    Senior Management Compensation Incentive Plan, as amended 10.147
    
    Severance Agreement between the Bank and Bryan E. Greenbaum dated March 17, 200510.158
    
    Central Bancorp, Inc. 2006 Long-Term Incentive Plan 149
    
    Code of Ethics21
    
    Subsidiaries of Registrant
 98




---



##### 



Exhibit No.
    
    Description23.1
    
    Consent of McGladrey & Pullen, LLP23.2
    
    Consent of Caturano and Company, Inc.31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer32
    
    Section 1350 Certifications99.1
    
    31 C.F.R. §30.15 Certification of Chief Executive Officer99.2
    
    31 C.F.R. §30.15 Certification of Chief Financial Officer
 
 
    
    Management contract or compensatory plan.(1)
    
    Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended March 31,
1999 (File No. 0- 25251) filed with the SEC on June 28, 1999.(2)
    
    Incorporated by reference to the exhibits filed with the Companys Current Report on Form 8-K
(File No. 0-25251) filed with the SEC on December 9, 2010.(3)
    
    Incorporated by reference to the Form 10-K for the fiscal year ended March 31, 2004 (File No.
0-25251) filed with the SEC on June 28, 2004.(4)
    
    Incorporated by reference to the exhibits filed with the Companys Current Report on Form 8-K
(File No. 0-25251) filed with the SEC on December 21, 2007.(5)
    
    Incorporated by reference to the Registration Statement on Form S-8 (File No. 333-87005)
filed on September 13, 1999.(6)
    
    Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended December
31, 2009 (File No. 0- 25251) filed with the SEC on February 17, 2010.(7)
    
    Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended March 31,
2004 filed with the SEC on June 29, 2005 and to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2009 filed with the SEC on November 14, 2009 (File No. 0-25251).(8)
    
    Incorporated by reference to the Registration Statement on Form S-8 (File No. 333-136234) filed
with the SEC on August 2, 2006.(9)
    
    Incorporated by reference to the Current Report on Form 8-K (File No. 0-25251) filed with the
SEC on April 13, 2004.(10)
    
    Incorporated by reference to the exhibits filed with the Companys Current Report on Form 8-K
(File No. 0-25251)filed with the SEC on October 22, 2007.(11)
    
    Incorporated by reference to the exhibits filed with the Companys Quarterly Report on Form
10-Q for the quarter ended June 30, 2010 (File No. 0-25251) filed with the SEC on August 13,
2010. 99




---



##### 



SIGNATURES
  CENTRAL BANCORP, INC.Date:  June 17, 2011
    By:
    /s/ John D. DohertyJohn D. DohertyChairman and Chief Executive Officer

(Principal Executive Officer)

(Duly Authorized Representative)  /s/ John D. Doherty

John D. Doherty
    
    June 17, 2011Chairman and Chief Executive Officer(Principal Executive Officer)/s/ Paul S. Feeley

Paul S. Feeley
    
    June 17, 2011Senior Vice President,Chief Financial Officer and Treasurer(Principal Financial and Accounting Officer)/s/ William P. Morrissey

William P. Morrissey 

President and Director
    
    June 17, 2011/s/ Robert J. Hardiman

Robert J. Hardiman 

Director
    
    June 17, 2011/s/ Raymond Mannos

Raymond Mannos 
Director
    
    June 17, 2011/s/ James P. McDonough

James P. McDonough 

Director
    
    June 17, 2011/s/ Albert J. Mercuri, Jr.

Albert J. Mercuri, Jr. 

Director
    
    June 17, 2011/s/ John J. Morrissey

John J. Morrissey
    
    June 17, 2011Director




---



##### 



/s/ Kenneth K. Quigley, Jr.

Kenneth K. Quigley, Jr.
    
    June 17, 2011Director/s/ Edward F. Sweeney, Jr.

Edward F. Sweeney, Jr.
    
    June 17, 2011Director/s/ Gerald T. Mulligan

Gerald T. Mulligan
    
    June 17, 2011Director