================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           --------------------------


                                FORM 10-K/A NO. 2


                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)

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

For the fiscal year ended March 31, 2002

                                       OR

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

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

                           Commission File No. 0-25251

                             CENTRAL BANCORP, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

              MASSACHUSETTS                                      04-3447594
------------------------------------------                   ------------------
 (State or Other Jurisdiction of                              (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)


399 HIGHLAND AVENUE, SOMERVILLE, MASSACHUSETTS                       02144
--------------------------------------------------                 ----------
(Address of Principal Executive Offices)                           (Zip Code)

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

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

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

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

                              STOCK PURCHASE RIGHTS
                              ---------------------
                                (Title of Class)

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

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

     The aggregate market value of the voting stock held by nonaffiliates of the
registrant was  approximately  $25.5 million based on the closing sales price of
the  registrant's  common stock as reported on the Nasdaq  National Market SM on
June 21,  2002  ($30.00  per share).  Solely for  purposes of this  calculation,
directors,  executive  officers and greater than 5% stockholders  are treated as
affiliates.

     As of June 21, 2002, there were issued and outstanding  1,632,789 shares of
the  registrant's  common  stock,  par value  $1.00 per share (of which  781,028
shares were deemed held by affiliates).

================================================================================
<PAGE>

EXPLANATION FOR AMENDMENT:



         The Annual Report on Form 10-K of Central Bancorp, Inc. (the "Company")
for the fiscal year ended March 31, 2002 filed with the Securities and Exchange
Commission (the "Commission") on June 28, 2002 and amended on July 25, 2002 (the
"2002 Form 10-K") is being amended hereby to reflect a change in Note 13 to the
Consolidated Financial Statements of the Company filed under Item 8 of the 2002
Form 10-K.

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

                                                                           Page

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

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

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

Consolidated Statement of Cash Flows.......................................   7

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

Independent Auditors' Report...............................................  26


                                        2
<PAGE>

                      CENTRAL BANCORP, INC. AND SUBSIDIARY
                           Consolidated Balance Sheets
                             (Dollars In Thousands)

<TABLE>
<CAPTION>

                                                                    MARCH 31,
                                                             ----------------------
                                                                2002         2001
                                                                ----         ----
ASSETS
<S>                                                          <C>          <C>
Cash and due from banks                                      $   5,109    $   5,351
Short-term investments                                           2,455       35,718
                                                             ---------    ---------
       Cash and cash equivalents                                 7,564       41,069
                                                             ---------    ---------
Investment securities available for sale
  (amortized cost of $74,935 in 2002 and
  $50,136 in 2001) (note 2)                                     73,884       49,388
Stock in Federal Home Loan Bank of Boston, at
  cost (notes  2 and 7)                                          8,300        6,150
The Co-operative Central Bank Reserve Fund (note 2)              1,576        1,576
                                                             ---------    ---------
       Total investments                                        83,760       57,114
                                                             ---------    ---------
Loans  (notes 3)                                               371,707      345,793
  Less allowance for loan losses (note 4)                        3,292        3,106
                                                             ---------    ---------
       Net loans                                               368,415      342,687
                                                             ---------    ---------
Accrued interest receivable                                      2,530        2,426
Banking premises and equipment, net (note 5)                     1,836        2,018
Deferred tax asset, net (note 8)                                 1,289          801
Goodwill, net (note 1)                                           2,232        2,520
Other assets                                                       593          702
                                                             ---------    ---------
       Total assets                                          $ 468,219    $ 449,337
                                                             =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Deposits  (note 6)                                      $ 261,907    $ 287,167
     Federal Home Loan Bank advances  (notes 2 and 7)          164,000      121,000
     Advance payments by borrowers for taxes and insurance       1,111        1,220
     Accrued expenses and other liabilities                      2,247        1,738
                                                             ---------    ---------
         Total liabilities                                     429,265      411,125
                                                             ---------    ---------

Commitments and contingencies (notes 8, 9 and 12)
  Stockholders' equity (note 10):
     Preferred stock $1.00 par value, authorized
        5,000,000 shares; none issued                               --           --
     Common stock $1.00 par value, authorized 15,000,000
        shares; 1,999,588 shares issued at March 31,
        2002 and 1,970,000 shares issued at March 31, 2001       2,000        1,970
     Additional paid-in capital                                 11,934       11,190
     Retained income                                            33,141       30,950
     Treasury stock (366,799 shares at March 31, 2002
        and 285,836 shares  at March 31, 2001), at cost         (7,189)      (5,230)
     Accumulated other comprehensive (loss) income                (626)        (431)
     Unearned compensation - ESOP (note 11)                       (306)        (237)
                                                             ---------    ---------
         Total stockholders' equity                             38,954       38,212
                                                             ---------    ---------
         Total liabilities and stockholders' equity          $ 468,219    $ 449,337
                                                             =========    =========
</TABLE>


See accompanying notes to consolidated financial statements.


                                        3
<PAGE>

                      CENTRAL BANCORP, INC. AND SUBSIDIARY
                        Consolidated Statements of Income
                      (In Thousands, Except Per Share Data)


<TABLE>
<CAPTION>
                                                                             YEARS ENDED MARCH 31,
                                                              ---------------------------------------------
                                                                 2002              2001             2000
                                                              ---------------------------------------------
Interest and dividend income:
<S>                                                           <C>               <C>              <C>
    Mortgage loans                                            $  23,799         $ 25,613         $  21,806
    Other loans                                                     438              716               599
    Short-term investments                                          866              487               421
    Investments                                                   4,170            4,101             3,598
                                                              --------------------------------------------
           Total interest and dividend income                    29,273           30,917            26,424
                                                              --------------------------------------------
Interest expense:
    Deposits                                                      8,119           10,087             8,553
    Federal Home Loan Bank advances                               6,741            6,916             4,496
                                                              --------------------------------------------
            Total interest expense                               14,860           17,003            13,049
                                                              --------------------------------------------
            Net interest and dividend income                     14,413           13,914            13,375
Provision for loan losses (note 4)                                   --               --                --
                                                              --------------------------------------------
            Net interest and dividend income after
                provision for loan losses                        14,413           13,914            13,375
                                                              --------------------------------------------
Non-interest income:
    Deposit service charges                                         482              428               414
    Net gain (loss) from sale and write-down
      of investment securities (note 2)                            (150)             680             1,013
    Brokerage income                                                100               --                --
    Other income                                                    256              180               242
                                                              --------------------------------------------
            Total non-interest income                               688            1,288             1,669
                                                              --------------------------------------------
Non-interest expenses:
    Salaries and employee benefits (note 11)                      5,652            5,571             5,017
    Occupancy and equipment (note 5)                              1,124            1,192             1,167
    Data processing service fees                                    966              847               534
    Professional fees                                             1,049              757               875
    Goodwill amortization                                           288              288               288
    Other expenses                                                1,385            1,675             1,464
                                                              --------------------------------------------
            Total non-interest expenses                          10,464           10,330             9,345
                                                              --------------------------------------------
            Income before income taxes                            4,637            4,872             5,699
Provision for income taxes  (note 8)                              1,777            1,763             2,132
                                                              --------------------------------------------
            Income before cumulative effect of change in
               accounting principle                               2,860            3,109             3,567
Cumulative effect of change in accounting principle,
    net of taxes (note 1)                                            --               --              (234)
                                                              ---------------------------------------------
            Net income                                        $   2,860         $  3,109         $   3,333
                                                              ============================================

Earnings per common share (note 1):
    Before cumulative effect of change in accounting
      principle-basic                                         $    1.73         $   1.81         $    1.90
                                                              ============================================
    Before cumulative effect of change in accounting
      principle - diluted                                     $    1.72         $   1.81         $    1.89
                                                              ============================================
    After cumulative effect of change in accounting
      principle-basic                                         $    1.73         $   1.81         $    1.77
                                                              ============================================
    After cumulative effect of change in accounting
      principle - diluted                                     $    1.72         $   1.81         $    1.77
                                                              ============================================
Weighted average common shares outstanding                        1,650            1,717             1,882
                                                              ============================================
Weighted average common shares outstanding-diluted                1,665            1,719             1,885
                                                              ============================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                        4
<PAGE>


                      CENTRAL BANCORP, INC. AND SUBSIDIARY
           Consolidated Statements of Changes in Stockholders' Equity
                      (In Thousands, Except Per Share Data)


<TABLE>
<CAPTION>
                                                                                       ACCUMULATED
                                                      ADDITIONAL                          OTHER       UNEARNED     TOTAL
                                              COMMON   PAID-IN    RETAINED  TREASURY COMPREHENSIVE COMPENSATION STOCKHOLDERS'
                                              STOCK    CAPITAL    INCOME     STOCK   (LOSS) INCOME       ESOP     EQUITY
                                              -----    -------    ------     -----   -------------       ----     ------
<S>               <C> <C>                    <C>       <C>       <C>        <C>        <C>             <C>        <C>
 Balance at March 31, 1999                   $1,967    $11,171   $25,894    $  --      $   327         $(617)     $38,742
 Net income                                      --         --     3,333       --           --            --        3,333
 Other comprehensive income, net of tax:
     Unrealized (loss) on securities, net of
      reclassification adjustment                --         --        --       --       (1,152)           --       (1,152)
                                                                                                                  -------
       Comprehensive income                                                                                         2,181
                                                                                                                  -------
 Proceeds from exercise of stock options          3         19        --       --           --            --           22
 Purchase of treasury stock                      --         --        --   (3,043)          --            --       (3,043)
 Dividends  paid ($0.36 per share)               --         --      (689)      --           --            --         (689)
 Amortization of unearned compensation -ESOP     --         --        --       --           --           184          184
                                             --------------------------------------------------------------------------------
 Balance at March 31, 2000                    1,970     11,190    28,538   (3,043)        (825)         (433)      37,397
 Net income                                      --         --     3,109       --           --            --        3,109
 Other comprehensive income, net of tax:
     Unrealized gain on securities, net of
       reclassification adjustment               --         --        --       --          394            --          394
                                                                                                                  -------
       Comprehensive income                                                                                         3,503
                                                                                                                  -------
 Purchase of treasury stock                      --         --        --   (2,187)          --            --       (2,187)
 Dividends paid ($0.40 per share)                --         --      (697)      --           --            --         (697)
 Amortization of unearned compensation -ESOP     --         --        --       --           --           196          196
                                             -------------------------------------------------------------------------------
 Balance at March 31, 2001                    1,970     11,190    30,950   (5,230)        (431)         (237)      38,212
 Net income                                      --         --     2,860       --           --            --        2,860
 Other comprehensive income, net of tax:
     Unrealized (loss) on securities, net of
      reclassification adjustment                --         --        --       --         (195)           --         (195)
                                                                                                                  -------
       Comprehensive income                                                                                         2,665
                                                                                                                  -------
 Purchase of  shares by ESOP (note 11)           --         --        --       --           --          (199)        (199)
 Purchase of treasury stock                      --         --        --   (1,924)          --            --       (1,924)
 Dividends  paid ($0.40 per share)               --         --      (669)      --           --            --         (669)
 Proceeds from exercise of stock options         30        462        --       --           --            --          492
 Amortization of unearned compensation -ESOP     --        175        --       --           --           130          305
 Other equity transactions                       --        107        --      (35)          --            --           72
                                             -------------------------------------------------------------------------------
 Balance at March 31, 2002                   $2,000    $11,934   $33,141  $(7,189)     $  (626)        $(306)     $38,954
                                             ===============================================================================
</TABLE>

                                        5
<PAGE>

The Bank's  other  comprehensive  income  (loss) and  related tax effect for the
years ended March 31 are as follows:

<TABLE>
<CAPTION>
                                                                                              2002
                                                                        ----------------------------------------------
                                                                           BEFORE-TAX     TAX (BENEFIT)     AFTER-TAX
 in thousands                                                                AMOUNT          EXPENSE          AMOUNT
----------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>              <C>               <C>
Unrealized gains (losses) on securities:
    Unrealized net holding losses during period                         $  (451)         $  (163)          $  (288)
    Less reclassification adjustment for net losses
       included in net income                                               150               57                93
                                                                        ----------------------------------------------
                 Other comprehensive loss                               $  (301)         $  (106)          $  (195)
                                                                        ==============================================

                                                                                               2001
                                                                        ----------------------------------------------
                                                                           BEFORE-TAX     TAX (BENEFIT)     AFTER-TAX
 In thousands                                                                AMOUNT          EXPENSE          AMOUNT
----------------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities:
    Unrealized net holding gains during period                          $ 1,188          $   360           $   828
    Less reclassification adjustment for net gains
        included in net income                                             (680)            (246)             (434)
                                                                        ----------------------------------------------
                 Other comprehensive income                             $   508          $   114           $   394
                                                                        ==============================================

                                                                                               2000
                                                                        ----------------------------------------------
                                                                           BEFORE-TAX     TAX (BENEFIT)     AFTER-TAX
 in thousands                                                                AMOUNT          EXPENSE          AMOUNT
----------------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities:
    Unrealized net holding losses during period                         $  (815)         $  (297)          $  (518)
    Less reclassification adjustment for net gains
        included in net income                                           (1,013)            (379)             (634)
                                                                        ----------------------------------------------
                 Other comprehensive loss                               $(1,828)         $  (679)          $(1,152)
                                                                        ===================================================

</TABLE>
See accompanying notes to consolidated financial statements.


                                        6
<PAGE>

                      CENTRAL BANCORP, INC. AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                                                             YEARS ENDED MARCH 31,
                                                                                   -----------------------------------
                                                                                     2002         2001          2000
                                                                                     ----         ----          ----
<S>                                                                              <C>          <C>          <C>
Cash flows from operating activities:
   Net income                                                                    $   2,860    $   3,109    $   3,333
   Adjustments to reconcile net income to net cash provided
    by operating activities -
     Depreciation and amortization                                                     372          438          462
     Amortization of premiums and discounts                                            176           86          132
     Amortization of goodwill                                                          288          288          288
     Decrease (increase) in deferred tax assets                                       (380)         270         (327)
     Amortization of unearned compensation - ESOP                                      305          196          184
     Net (gain) loss  from sale and write-down of investment securities                150         (680)      (1,013)
     Cumulative effect of change in accounting principle                                --           --          234
  (Increase) decrease in accrued interest receivable                                  (104)        (390)        (422)
  (Increase) decrease in other assets                                                  109         (507)          59
  Increase (decrease) in advance payments by borrowers for taxes and insurance        (109)         167         (336)
  Increase (decrease) in accrued interest payable
                                                                                       (23)          66          251
  Increase (decrease) in accrued expenses and other liabilities                        532          (96)         415
                                                                                 -----------------------------------
     Net cash provided by operating activities                                       4,176        2,947        3,260
                                                                                 -----------------------------------
Cash flows from investing activities:
  Principal collected on loans                                                     132,138       56,949       68,641
  Loan originations and purchases                                                 (157,866)     (82,616)    (108,363)
  Principal payments on mortgage-backed securities                                   7,246        4,069        9,420
  Purchase of investment securities                                                (61,256)      (6,170)     (21,716)
  Proceeds from sales of investment securities                                       2,885        3,955        6,159
  Maturities and redemptions of investment securities                               26,000        4,000        2,500
  Net (increase) decrease in short-term investments                                 33,263      (19,727)       2,137
  Purchase of stock in FHLB of Boston                                               (2,150)        (350)      (2,450)
  Purchase of banking premises and equipment, net                                     (190)        (238)        (130)
                                                                                 -----------------------------------
     Net cash used by investing activities                                         (19,930)     (40,128)     (43,802)
                                                                                 -----------------------------------
Cash flows from financing activities:
  Net increase (decrease) in deposits                                              (25,260)      28,828       (8,124)
  Proceeds from FHLB advances                                                       68,000      152,000      124,000
  Repayments of FHLB advances                                                      (25,000)    (142,000)     (70,000)
  Proceeds from exercise of stock options                                              492           --           22
  Purchase of treasury stock                                                        (1,924)      (2,187)      (3,043)
  Payments of dividends                                                               (669)        (697)        (689)
  Purchase of  stock by ESOP                                                          (199)          --           --
  Other equity transactions                                                             72           --           --
                                                                                 -----------------------------------
     Net cash provided by financing activities                                      15,512       35,944       42,166
                                                                                 -----------------------------------
     Net increase (decrease) in cash and due from banks                               (242)      (1,237)       1,624
  Cash and due from banks at beginning of year                                       5,351        6,588        4,964
                                                                                 -----------------------------------
  Cash and due from banks at end of year                                         $   5,109    $   5,351    $   6,588
                                                                                 ===================================
Supplemental disclosure of cash flow information:
  Cash paid during the year for:
         Interest                                                                $  14,883    $  16,937    $  12,798
         Income taxes                                                                1,715        1,850        2,094
</TABLE>

See accompanying notes to consolidated financial statements.


                                        7
<PAGE>

CENTRAL BANCORP, INC AND SUBSIDIARY

Notes to Consolidated Financial Statements

March 31, 2002



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying  consolidated financial statements include the accounts of
Central Bancorp,  Inc. (the  "Company"),  a Massachusetts  corporation,  and its
wholly-owned subsidiary, Central Co-operative Bank (the "Bank").

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

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

     The accompanying  consolidated  financial  statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America.  All  significant  intercompany  balances  and  transactions  have been
eliminated in consolidation. In preparing the consolidated financial statements,
management  is  required  to make  estimates  and  assumptions  that  affect the
reported  amounts of assets and  liabilities as of the date of the balance sheet
and income and expenses  for the year.  Actual  results  could differ from those
estimates. Material estimates that are particularly susceptible to change relate
to the determination of the allowance for loan losses.

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

     Cash and Due from Banks

     The Bank is required to maintain cash and reserve balances with the Federal
Reserve  Bank.  Such  reserves  are  calculated  based upon  deposit  levels and
amounted to approximately $2,735, 000 at March 31, 2002.

     Investments

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

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

     If a decline in fair value below the amortized  cost basis of an investment
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.

     Loans

     Loans  are  reported  at the  principal  amount  outstanding,  adjusted  by
unamortized  discounts,  premiums,  and net deferred loan origination  costs and
fees.  Loans  classified  as held for sale are stated at the lower of  aggregate
cost or market value.  Market value is estimated  based on outstanding  investor
commitments  or, in the  absence of cash  commitments,  current  investor  yield
requirements.  Net  unrealized  losses,  if any, are provided for in a valuation
allowance by charges to operations. No loans were classified as held for sale at
March 31, 2002 and 2001.

                                       8
<PAGE>

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

     Loan origination  fees, net of certain direct loan  origination  costs, are
considered  adjustments of  interest-rate  yield and are amortized into interest
income over the loan term using the level-yield method.

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

     Allowance for Loan Losses

     The allowance  for loan losses is  maintained  at a level  determined to be
adequate  by   management  to  absorb   future   charge-offs   of  loans  deemed
uncollectible.  This  allowance is increased by provisions  charged to operating
expense  and by  recoveries  on loans  previously  charged  off,  and reduced by
charge-offs on loans.

     Arriving at an appropriate  level of allowance for loan losses  necessarily
involves a high degree of judgment.  The  allowance for loan losses is evaluated
on a regular  basis by  management  and is based  upon  management's  systematic
periodic review of the  collectibility of the loans.  Primary  considerations in
this  evaluation are prior loan loss  experience,  the character and size of the
loan portfolio,  business and economic conditions and management's estimation of
future  losses.  The Bank  evaluates  specific  loan  status  reports on certain
commercial  and  commercial  real  estate  loans rated  "substandard"  or worse.
Estimated  reserves for each of these credits is determined by reviewing current
collateral value, financial  information,  cash flow, payment history and trends
and other  relevant  facts  surrounding  the  particular  credit.  The remaining
commercial and commercial real estate loans are provided for as part of pools of
similar  loans  based  on  a  combination  of  historical  loss  experience  and
qualitative   adjustments.   Smaller  balance,   homogeneous  loans,   including
residential  real estate loans and consumer  loans,  are evaluated as a group by
applying  estimated  charge off and recovery  percentages,  based on  historical
experience and certain  qualitative  factors, to the current outstanding balance
in each category.  Based on these  analyses,  the resulting  allowance is deemed
adequate to absorb all probable credit losses in the portfolio

     Although management uses available information to establish the appropriate
level of the allowance for loan losses, future additions to the allowance may be
necessary  based on estimates  that are  susceptible  to change as a result of a
changes  in  economic  conditions  and  other  factors.  In  addition,   various
regulatory  agencies,   as  an  integral  part  of  their  examination  process,
periodically  review the Bank's  allowance  for loan losses.  Such  agencies may
require  the  Bank to  recognize  adjustments  to the  allowance  based on their
judgments about information  available to them at the time of their examination.
Changes in estimates are provided currently in earnings.

     Income Taxes

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

                                       9
<PAGE>

     Banking Premises and Equipment

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

     Goodwill

     Through March 31, 2002, goodwill arising from acquisitions was amortized on
a  straight-line  basis over 15 years.  As  discussed  below  under the  caption
"Recent  Accounting  Pronouncements",  amortization  of goodwill is generally no
longer permitted in fiscal years beginning after December 15, 2001.

     Pension Benefits

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

     Stock-Based Compensation

     The Company follows the intrinsic value method set forth in APB Opinion No.
25 "Accounting  for Stock Issued to Employees" (APB No. 25) under which there is
generally no charge to earnings for stock option grants. Companies that elect to
use this method are  required to disclose the pro forma effect of using the fair
value method of accounting for  stock-based  compensation  that is encouraged by
SFAS No. 123. (See Note 11).

     Earnings Per Share

     Basic earnings per share ("EPS") is computed by dividing  income  available
to  common  stockholders  by  the  weighted-average   number  of  common  shares
outstanding  for  the  period.   Unallocated  ESOP  shares  are  not  considered
outstanding in computing basic EPS. Diluted EPS reflects the potential  dilution
that could occur if securities or other contracts to issue common stock, such as
stock options, were exercised or converted into common stock.

     Recent Accounting Pronouncements

     During 1998, the American  Institute of Certified Public Accountants issued
Statement of Position  ("SOP") 98-5,  Accounting for Costs of a Start-Up Entity.
SOP 98-5  requires  organizational  costs,  which  were being  amortized,  to be
expensed  and  accounted  for as a cumulative  effect of a change in  accounting
principle. On April 1, 1999, the Bank expensed unamortized  organizational costs
relating to the formation of the bank holding  company  resulting in a charge to
earnings, net of taxes, of $234,000 or $0.13 per share ($0.12 per share assuming
dilution).

     In June 2001, the Financial  Accounting Standard Board ("FASB") issued SFAS
No. 141, "Business  Combinations" which is effective for transactions  initiated
after June 30,  2001.  Under SFAS No. 141,  all  business  combinations  must be
accounted   for  using  the   purchase   method  of   accounting;   use  of  the
pooling-of-interests  method is no longer permitted. In addition, this Statement
requires that certain  intangible  assets acquired in a business  combination be
recognized apart from goodwill.

     In June  2001,  the FASB also  issued  SFAS No.  142,  "Goodwill  and Other
Intangible  Assets" which is effective for fiscal years beginning after December
15, 2001. Under prior accounting  standards,  goodwill resulting from a business
combination  was amortized  against  income over its estimated  life.  After the
effective  date of SFAS No. 142,  goodwill will generally no longer be amortized
as an expense but instead  will be reviewed  and tested for  impairment  using a
fair value methodology prescribed in this Statement. Goodwill will be tested for
impairment  at least  annually  or more  frequently  as a result  of an event or
change in circumstances (e.g. recurring operating losses by the acquired entity)
that would  indicate an impairment  adjustment  may be  necessary.  Based on its
assessment of the current economic  environment,  management does not anticipate
an  impairment   adjustment  to  the  goodwill  reflected  in  the  accompanying
consolidated balance sheet upon adoption of SFAS No. 142. The effect of adopting
SFAS No. 141 and No. 142 will be that the  Company  will  cease  amortizing  the
goodwill  balance of $2.2  million  which  will have the  effect of  eliminating
goodwill amortization of $288,000 in fiscal 2003.

                                       10
<PAGE>

NOTE 2. INVESTMENTS (Dollars in Thousands)

     The amortized cost and fair value of investments  securities  available for
sale are summarized as follows:

<TABLE>
<CAPTION>
                                                        MARCH 31, 2002
                                        ----------------------------------------------
                                         AMORTIZED     GROSS UNREALIZED        FAIR
                                             COST      GAINS      LOSSES      VALUE
                                          --------   --------    --------    --------

<S>                                       <C>        <C>         <C>         <C>
U.S. Government and  agency obligations   $ 13,995   $     73    $    (72)   $ 13,996
Corporate bonds                             39,012        231        (675)     38,568
Mortgage-backed securities                  18,377        168        (205)     18,340
                                          --------   --------    --------    --------
               Total  debt securities       71,384        472        (952)     70,904
Marketable equity securities                 3,551         17        (588)      2,980
                                          --------   --------    --------    --------

                Total                     $ 74,935   $    489    $ (1,540)   $ 73,884
                                          ========   ========    ========    ========
</TABLE>



<TABLE>
<CAPTION>
                                                             MARCH 31, 2001
                                        ----------------------------------------------
                                         AMORTIZED     GROSS UNREALIZED        FAIR
                                             COST      GAINS      LOSSES      VALUE
                                          --------   --------    --------    --------

<S>                                       <C>        <C>         <C>         <C>
U.S. Government and  agency obligations   $18,970   $    88   $    (7)   $19,051
Corporate bonds                             4,984       261        --      5,245
Mortgage-backed securities                 19,623       152      (461)    19,314
                                          -------   -------   -------    -------
               Total  debt securities      43,577       501      (468)    43,610
Marketable equity securities                6,559       605    (1,386)     5,778
                                          -------   -------   -------    -------

               Total                      $50,136   $ 1,106   $(1,854)   $49,388
                                          =======   =======   =======    =======
</TABLE>


     The maturity  distribution  (based on  contractual  maturities)  and annual
yields of debt securities at March 31, 2002 are as follows:

<TABLE>
<CAPTION>
                                           AMORTIZED     FAIR       ANNUAL
                                              COST      VALUE       YIELD
                                           ---------- ---------  ----------
<S>                                         <C>       <C>          <C>
Due within one year                         $   259   $    262     6.62 %
Due after one year but within five years     42,532     42,196     6.54
Due after five years but within ten years    13,277     13,287     7.50
Due after ten years                          15,316     15,159     6.99
                                            -------    -------
                                            $71,384    $70,904     6.99
                                            =======    =======
</TABLE>


     Mortgage-backed  securities are shown at their  contractual  maturity dates
but  actual  maturities  may  differ  as  borrowers  have the  right  to  prepay
obligations without incurring prepayment penalties.

                                       11
<PAGE>

     Proceeds from sales of investment  securities  and related gains and losses
for the years ended March 31, 2002,  2001, and 2000 (all classified as available
for sale) were as follows:

                               2002              2001             2000
                               ----              ----             ----

     Proceeds from sales    $ 2,885           $ 3,955          $ 6,159

     Gross gains                546               694            1,013

     Gross losses                54                14               --

     During the year ended March 31, 2002,  the Bank  recognized  write-downs in
certain  equity  securities  totaling  $642 as a result of  declines in the fair
value of such securities  judged to be other than temporary.  These  write-downs
are not included in the preceding table.

     A  mortgage-backed  security pool with an amortized cost of $3,747 and fair
value of $3,686  at March 31,  2002,  was  pledged  to  provide  collateral  for
customers and for the Bank's employee tax  withholdings  that are to be remitted
to the federal  government in excess of the $100 of withholdings  insured by the
FDIC. In addition,  investment securities carried at $5,783 were pledged under a
blanket lien to partially  secure the Bank's advances from the Federal Home Loan
Bank of Boston ("FHLB of Boston").

     As a member of the FHLB of Boston,  the Bank is required to invest in stock
of the FHLB of Boston in an amount equal to 1% of its outstanding  home loans or
1/20th of its outstanding advances from the FHLB of Boston, whichever is higher.
If such  stock is  redeemed,  the Bank will  receive  from the FHLB of Boston an
amount equal to the par value of the stock.

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

NOTE 3. LOANS (In Thousands)

     Loans as of March 31, 2002 and 2001 are summarized below:


                                                        2002        2001
                                                     ---------    ---------
Real estate loans:
   Residential real estate                           $ 246,045    $ 248,459
   Commercial real estate                               87,013       69,949
   Construction                                         20,998        9,152
   Second mortgage and home equity lines of credit       9,154       10,977
                                                     ---------    ---------
       Total real estate loans                         363,210      338,537
                                                     ---------    ---------
 Commercial loans                                        6,901        4,979
 Consumer loans                                          1,596        2,277
                                                     ---------    ---------
        Total  loans                                   371,707      345,793
Less: allowance for loan losses                         (3,292)      (3,106)
                                                     ---------    ---------
       Total loans, net                              $ 368,415    $ 342,687
                                                     =========    =========


     At March 31, 2002 and 2001,  net  deferred  loan (fees) and costs of ($692)
and $160, respectively,  were reflected as an adjustment to the appropriate loan
categories.

     The Bank has no  non-accrual  loans at March 31, 2002 and 2001.  During the
years ended March 31, 2002 2001 and 2000, there were no impaired loans. The Bank
follows the same policy for  recognition  of income on impaired loans as it does
for all other loans.

     Mortgage  loans  serviced  by the Bank for  others  amounted  to $2,616 and
$4,288 at March 31, 2002 and 2001, respectively.

     The Bank's lending  activities are conducted  principally in communities in
the  suburban  Boston  area.  The Bank  grants  mortgage  loans  on  residential
property,  commercial  real estate,  construction of residential  homes,  second
mortgages,  home equity and other loans.  Substantially all loans granted by the
Bank are secured by real estate  collateral.  The  ability  and  willingness  of
residential  mortgage  borrowers  to  honor  their  repayment

                                       12
<PAGE>

commitments  are generally  impacted by the level of overall  economic  activity
within the borrowers'  geographic areas and real estate values.  The ability and
willingness of commercial real estate and  construction  loan borrowers to honor
their  repayment  commitments  are generally  impacted by the health of the real
estate market in the borrowers' geographic area and the general economy.

     The  following  summarizes  the  activity  with  respect  to loans  made to
directors and officers and their related interests for the years ended March 31:

                                               2002      2001
                                               -----    -----
Balance at beginning of year                   $ 580    $ 243
         New loans                               434      444
         New officers with loans outstanding      66      158
         Repayment of principal                 (215)    (265)
                                               -----    -----
Balance at end of year                         $ 865    $ 580
                                               =====    =====

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

NOTE 4. ALLOWANCE FOR LOAN LOSSES (In Thousands)

     A summary of changes in the allowance for loan losses follows:

<TABLE>
<CAPTION>
                                                         YEARS ENDED MARCH 31,
                                                    -----------------------------
                                                      2002       2001     2000
                                                    -------    -------    -------
<S>                                                 <C>        <C>        <C>
Balance at beginning of year                        $ 3,106    $ 2,993    $ 2,913
    Provision charged to expense                         --         --         --
    Amounts charged-off                                  (4)        (4)        (9)
    Recoveries on accounts previously charged-off       190        117         89
                                                    -------    -------    -------
Balance at end of year                              $ 3,292    $ 3,106    $ 2,993
                                                    =======    =======    =======
</TABLE>


NOTE 5. BANKING PREMISES AND EQUIPMENT (In Thousands)

     A summary of cost,  accumulated  depreciation  and  amortization of banking
premises and equipment at March 31 follows:

<TABLE>
<CAPTION>
                                                                        ESTIMATED
                                                  2002        2001     USEFUL LIVES
                                                 -------    -------    ------------
<S>                                              <C>        <C>         <C>
Land                                             $   589    $   589
Buildings and improvements                         2,339      2,304     15.50 years
Furniture and fixtures                             5,744      5,596      5.00 years
Leasehold improvements                               482        475      7.75 years
                                                 -------    -------
                                                   9,154      8,964
Less accumulated depreciation and amortization    (7,318)    (6,946)
                                                 -------    -------
    Total                                        $ 1,836    $ 2,018
                                                 =======    =======
</TABLE>


     Depreciation  and amortization for the years ended March 31, 2002, 2001 and
2000 amounted to $372, $438 and $462, respectively, and is included in occupancy
and equipment expense in the accompanying consolidated statements of income.

                                       13
<PAGE>

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

                YEARS ENDING MARCH 31,

                  2003                                   $ 118
                  2004                                     118
                  2005                                      73
                  2006                                      65
                  2007                                      49
                  Thereafter                                18


     Certain leases contain renewal options the potential impact of which is not
included above. Rental expense for the years ended March 31, 2002, 2001 and 2000
was  $133,  $125 and  $123,  respectively,  and is  included  in  occupancy  and
equipment expense in the accompanying consolidated statements of income.

NOTE 6. DEPOSITS (Dollars in Thousands)

     Deposits at March 31 are summarized as follows:

                                                 2002       2001
                                               --------   --------
Demand deposit accounts                        $ 25,370   $ 22,438
NOW accounts                                     36,277     33,373
Regular, Club and 90 day notice accounts         72,944     64,011
Money market deposit accounts                    17,997     15,327
                                               --------   --------
            Total non certificate accounts      152,588    135,149
                                               --------   --------
Term deposit certificates
       Certificates of  $100 and above           27,233     34,644
       Certificates less than $100               82,086    117,374
                                               --------   --------
             Total term deposit certificates    109,319    152,018
                                               --------   --------
                                               $261,907   $287,167
                                               ========   ========



          Contractual  maturities  of term deposit  certificates  with  weighted
     average interest rates at March 31, 2002 are as follows:

                             AMOUNT       RATE
                             ------       ----
        Within 1 year       $ 92,381      4.21%
        Over 1 to 3 years     15,016      4.24
        Over 3 years           1,922      4.62
                            --------
                            $109,319      4.37
                            ========

                                       14
<PAGE>

NOTE 7. ADVANCES FROM FEDERAL HOME LOAN BANK OF BOSTON (Dollars in Thousands)

     A summary of the maturity distribution of FHLB of Boston advances (based on
final maturity dates) with weighted average interest rates at March 31 follows:


                            2002                 2001
                     -------------------  -------------------
                      AMOUNT      RATE      AMOUNT      RATE
                     ---------  --------  ---------  --------
Within 1 year        $ 58,600      2.61%  $ 25,000      6.46%
Over 1 to 5 years      21,400      4.83     12,000      6.48
Over 5 to 10 years     82,000      5.52     82,000      5.52
Over 10 years           2,000      5.49      2,000      4.49
                     --------             --------
                     $164,000      4.39   $121,000      5.84
                     ========             ========


     At March 31, 2002,  advances  totaling  $84,000 were callable  prior to the
scheduled maturity of the advances. The Bank is subject to a substantial penalty
upon prepayment of FHLB of Boston advances.

     The FHLB of Boston is authorized to make advances to its members subject to
such  regulations  and  limitations  as the  Federal  Home Loan  Bank  Board may
prescribe.  The  advances are secured by FHLB of Boston stock and a blanket lien
on certain qualified collateral, defined principally as 90% of the fair value of
U.S.  Government and federal agency obligations and 75% of the carrying value of
first mortgage loans on owner-occupied  residential property.  The Bank's unused
borrowing capacity with the FHLB of Boston was approximately $21,000 and $80,200
at March 31, 2002 and 2001, respectively.



NOTE 8. INCOME TAXES (Dollars in Thousands)

     The components of the provision for income taxes for the years indicted are
as follows:

                                   YEARS ENDED MARCH 31,
                                ----------------------------
                                 2002        2001      2000
                                -------    -------   -------
Current
      Federal                   $ 1,930    $ 1,555   $ 1,745
      State                         229         52        44
                                -------    -------   -------
      Total current provision     2,159      1,607     1,789
Deferred (prepaid)                 (382)       156       343
                                -------    -------   -------
                                $ 1,777    $ 1,763   $ 2,132
                                =======    =======   =======


     The provision for income taxes for the periods  presented is different from
the amounts computed by applying the statutory Federal income tax rate to income
before income taxes.  The differences  between  expected tax rates and effective
tax rates are as follows:

                                                         YEARS ENDED MARCH 31,
                                                      -------------------------
                                                       2002    2001      2000
                                                      ------  -------   -------
Statutory Federal tax rate                             34.0%    34.0%    34.0%
Items affecting Federal income tax rate:
       Dividends received deduction                    (0.4)    (0.6)    (0.4)
       Goodwill amortization                            2.1      2.0      1.8
       State income taxes, net of Federal benefit       2.6      1.2      1.6
       Other                                             --     (0.4)     0.4
                                                      -----     ----     ----
Effective tax rate                                     38.3%    36.2%    37.4%
                                                      =====     ====     ====

                                       15
<PAGE>

     The  components  of gross  deferred  tax  assets  and  gross  deferred  tax
liabilities that have been recognized as of March 31 are as follows:

                                                2002     2001
                                               ------   ------
Deferred tax assets:
    Allowance for loan losses                  $  549   $  548
    Deferred loan origination fees                 53       74
    Depreciation                                  298      265
    Post-employee retirement benefit accrual      241      227
    Unrealized loss on securities                 425      319
    Write-down of investment securities           218       --
    Other                                          59       74
                                               ------   ------
         Gross deferred tax asset               1,843    1,507
                                               ------   ------
Deferred tax liabilities:
    Accrued dividend receivable                    30       47
    Deferred loan origination fees                285      437
    Deferred income                               239      222
                                               ------   ------
          Gross deferred tax liability            554      706
                                               ------   ------
          Net deferred tax asset               $1,289   $  801
                                               ======   ======

     Based on the Bank's  historical  and current  pretax  earnings,  management
believes it is more likely than not that the Bank will  realize the net deferred
tax asset existing at March 31, 2002. Further,  management believes the existing
net deductible  temporary  differences  will reverse during periods in which the
Bank generates net taxable income. At March 31, 2002,  recoverable income taxes,
plus estimated taxes for fiscal 2003,  exceed the amount of the net deferred tax
asset.  There can be no  assurance,  however,  that the Bank will  generate  any
earnings or any specific level of continuing earnings.

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

     In June 2002,  the Bank received  from the  Commonwealth  of  Massachusetts
Department  of  Revenue  ("DOR") a Notice of Intent to Assess  additional  state
excise taxes of $535 plus interest and  penalties  with respect to its tax years
ended March 31, 2000 and 2001.  The Bank is aware that the DOR has sent  similar
notices to numerous other financial  institutions in Massachusetts that reported
a deduction  for  dividends  received  from a REIT during this period.  Assessed
amounts ultimately paid, if any, would be deductible expenses for federal income
tax purposes.

     The DOR contends that dividend distributions by the Bank's REIT to the Bank
are fully taxable in  Massachusetts.  The Bank  believes that the  Massachusetts
statute that provides for a dividends received deduction equal to 95% of certain
dividend  distributions  applies to the  distributions  made by the Bank's REIT.
Accordingly,  no provision has been made in the Company's consolidated financial
statements for the amounts assessed or additional amounts that might be assessed
in the future.  The Bank  intends to  vigorously  appeal the  assessment  and to
pursue all available means to defend its position.

NOTE 9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (In Thousands)

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

                                       16
<PAGE>

The amounts of those instruments reflect the extent of the Bank's involvement in
particular classes of financial instruments.

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

     Financial instruments with off-balance sheet risks as of March 31, included
the following:

                                                       2002      2001
                                                      -------   -------
Unused lines of credit                                $11,035   $11,012
Unadvanced portions of construction loans               4,574     4,427

Unadvanced portions of commercial loans                 1,574     5,651
Commitments to originate commercial mortgage loans     13,674    14,189
Commitments to originate residential mortgage loans    11,468     2,900


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

NOTE 10. STOCKHOLDERS' EQUITY (Dollars in Thousands, except per share amount)

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

     In October  1991,  the Bank adopted a  Shareholder  Rights  Plan.  The plan
entitles each shareholder to purchase the Company's stock at a discount price in
the  event  any  person  or group of  persons  exceeds  predetermined  ownership
limitations  of  the  Company's   outstanding   common  stock  and,  in  certain
circumstances, engages in specific activities deemed adverse to the interests of
the Company's shareholders.  This plan was due to expire in October 2001 but was
renewed by the Board of  Directors  during  fiscal 2002 and is now  scheduled to
expire in October 2011. .

     Beginning in April 1999, the Board of Directors authorized a series of four
separate 5% stock  repurchase  programs  under  which the  Company has  acquired
365,294  shares of its stock at an average cost of $19.56 per share.  The fourth
repurchase program was completed in March 2002.

     The Bank is subject to various regulatory capital requirements administered
by the federal banking  agencies.  Failure to meet minimum capital  requirements
can initiate certain mandatory and possibly additional  discretionary actions by
regulations  that, if  undertaken,  could have a direct  material  effect on the
Bank's  financial   statements.   Under  capital  adequacy  guidelines  and  the
regulatory  framework for prompt corrective  action, the Bank must meet specific
capital  guidelines  that involve  quantitative  measures of the Bank's  assets,
liabilities,  and certain off-balance sheet items as calculated under regulatory
accounting  practices.  The Bank's capital amounts and  classification  are also
subject to  qualitative  judgments  by the  regulators  about  components,  risk
weightings,  and other  factors.  The  minimum  core  (leverage)  capital  ratio
required for banks with the highest overall rating from bank regulatory agencies
is 3.00% and is  4.00%-5.00%  for all others.  The Bank must also have a minimum
total risk-based  capital ratio of 8.00% (of which 4.00% must be Tier I capital,
consisting of common  stockholders'  equity). As of March 31, 2002, the Bank met
all capital adequacy requirements to which it is subject.


                                       17
<PAGE>

     The most recent  notification  from the FDIC  categorized the Bank as "well
capitalized" under the regulatory  framework for prompt corrective action. To be
categorized as "well capitalized," the Bank must maintain minimum  risk-weighted
capital,  Tier 1 capital and tangible  capital ratios as set forth in the table.
There are no  conditions or events,  since that  notification,  that  management
believes  would cause a change in the Bank's  categorization.  No deduction  was
taken from capital for  interest-rate  risk.  The  Company's and the Bank's Tier
1/leverage,  Tier 1 risk-based and total risk-based capital ratios together with
related regulatory minimum requirements are summarized below:

<TABLE>
<CAPTION>
                                                                                                           TO BE WELL
                                                                          FOR CAPITAL                  CAPITALIZED UNDER
                                                                            ADEQUACY                   PROMPT CORRECTIVE
                                              ACTUAL                        PURPOSES                   ACTION PROVISIONS
                                     -------------------------     ---------------------------     ---------------------------
                                        AMOUNT         RATIO          AMOUNT          RATIO           AMOUNT          RATIO
                                     -------------    ---------    -------------     ---------     -------------     ---------
<S>                                        <C>        <C>               <C>            <C>           <C>             <C>
As of March 31, 2002:
  COMPANY (CONSOLIDATED)
   Total capital                        $  40,303     13.06%         $  24,694       =>8.00%            N/A           N/A
   Tier 1 capital                          37,011     11.99             12,347       =>4.00             N/A           N/A
   Tier 1 leverage capital                 37,011      8.09             18,304       =>4.00             N/A           N/A
   BANK
   Total capital                           38,134     12.35             24,700       =>8.00%         $  30,875     =>10.00%
   Tier 1 capital                          34,842     11.28             12,350       =>4.00             18,525      =>6.00
   Tier 1 leverage capital                 34,842      7.61             18,304       =>4.00             22,880      =>5.00


As of March 31, 2001:
  COMPANY (CONSOLIDATED)
  Total capital                            38,448     13.60              22,612        =>8.00%            N/A         N/A
  Tier 1 capital                           35,342     12.50              11,306        =>4.00             N/A         N/A
  Tier 1 leverage capital                  35,342      8.06              17,539        =>4.00             N/A         N/A
  BANK
  Total capital                            36,362     12.83              22,665        =>8.00%          28,331     =>10.00%
  Tier 1 capital                           33,256     11.74              11,332        =>4.00           16,999      =>6.00
  Tier 1 leverage capital                  33,256      7.75              17,156        =>4.00           21,445      =>5.00

</TABLE>


NOTE 11. EMPLOYEE BENEFITS (Dollars in Thousands, Except Per Share Data)

PENSION AND SAVINGS PLANS

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

     Benefits  under the Pension Plan are determined at the rate of 1% and 1.5%,
respectively,  of certain  elements of final average pay times years of credited
service and are  generally  provided at age 65 based on years of service and the
average of the  participants'  three highest  consecutive  years of compensation
from the Bank. Employee contributions are made to a Savings Plan which qualifies
under section 401(k) of the Internal Revenue Code of 1986, as amended.  The Bank
matches 50% of an eligible deferral contribution on the first 5% of the deferral
amount  subject to the maximum  allowable  under  federal  regulations.  Pension
benefits and employer  contributions  to the Savings Plan become vested over six
years.

     Expenses for the Pension Plan and the Savings Plan were $289, $269 and $237
for the years ended March 31, 2002, 2001 and 2000, respectively. Forfeitures are
used to reduce expenses of the plans.

                                       18
<PAGE>

EMPLOYEE STOCK OWNERSHIP PLAN

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

     During fiscal 2002, the Company's Board of Directors authorized the ESOP to
acquire up to an  additional 5% of  outstanding  shares of Company  stock.  Such
purchases are to be funded by loans from the Company.  During fiscal 2002, 7,222
shares were purchased under such authorization at a purchase price of $199.

     The ESOP is repaying  its loans to the Bank and the Company with funds from
the  Bank's  contributions  to the plan and  earnings  from the  ESOP's  assets.
Repayments of $129,  $196 and $184 were made during fiscal 2002,  2001 and 2000,
respectively.

     Prior to fiscal 2002,  compensation  expense was  recognized  as the shares
were  allocated  to ESOP  participants  based upon the cost of the shares to the
ESOP.  Beginning  in fiscal 2002,  compensation  expense was  recognized  as the
shares were allocated to participants based upon the fair value of the shares at
the time they  were  allocated.  Consequently,  changes  in market  value of the
Company's  stock have an effect on the Company's  results of operations but have
no effect on stockholders'  equity.  ESOP expense for fiscal 2002, 2001 and 2000
amounted to $305, $130 and $130, respectively.

STOCK OPTION PLAN

     The Company has adopted two qualified Stock Option Plans for the benefit of
officers and other employees under which an aggregate of 281,500 shares had been
reserved for issuance. One of these plans terminated in 1997.

     Stock option activity is as follows for the years indicated:

                      NUMBER OF      WEIGHTED AVERAGE
                        SHARES        EXERCISE PRICE
                       ----------     -------------

Balance  March 31, 1999   28,000     $   16.250
  Granted                 32,499         20.250
  Exercised               (3,000)        16.250
                         -------
Balance  March 31, 2000   57,499         18.511
  Granted                 32,501         16.625
                         -------
Balance  March 31, 2001   90,000         17.830
  Forfeited                 (799)        16.625
  Exercised              (29,588)        16.617
                         -------
Balance March 31, 2002    59,613         18.448
                         =======

     The exercise price of an option will not be less than the fair market value
of the  common  stock on the date of grant of the  option.  At March  31,  2002,
33,299 shares were reserved for issuance under the remaining plan.

     All stock  options are fully vested and  exercisable  at the time of grant.
The range of exercise prices and weighted average remaining  contractual life of
outstanding stock options at March 31, 2002 are as follows:

        EXERCISE          NUMBER             REMAINING
        PRICE           OUTSTANDING             LIFE
        -----           -----------             ----

        $16.625          29,638               8.7 years
         20.250          29,975               7.7 years
                         ------
                         59,613
                         ======

                                       19
<PAGE>

     The Company  follows the  intrinsic  value method in  accounting  for stock
options and,  accordingly,  no  compensation  expense has been recognized in the
financial statements.  Had the Company determined  compensation expense based on
the fair value at the grant date for its stock  options  under SFAS No. 123, the
Company's  net income and EPS would have been  reduced to the pro forma  amounts
indicated  below.  No options were granted  during  fiscal 2002 and  forfeitures
during the year were insignificant.  Consequently, no material difference in net
income occurred in fiscal 2002 as a result of the Company's use of the intrinsic
value method  rather than the fair value method of  accounting  for  stock-based
compensation.


<TABLE>
<CAPTION>
                                                                                      2001      2000
                                                                                      ----      ----
NET INCOME:
<S>                                                                                 <C>       <C>
Income before cumulative effect of change in accounting principle, as reported      $ 3,109   $ 3,567
Cumulative effect of change in accounting principle, as reported                         --      (234)
Net income after cumulative effect of change in accounting principle, as reported     3,109     3,333

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

EARNINGS PER COMMON SHARE:
Before cumulative effect of change in accounting principle, as reported                 1.81      1.90
Before cumulative effect of change in accounting principle, pro forma                   1.71      1.76

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

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

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

</TABLE>

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


                                              2001            2000
                                            ----------     -----------

          Expected dividend yield              2.00 %         2.00 %
          Risk-free interest rate              5.20           6.00
          Expected volatility                 31.00          39.00
          Expected life in years               6.00           6.00

                                       20
<PAGE>

OTHER POST-RETIREMENT BENEFITS

     The  Bank  maintains  a  post-retirement  medical  insurance  plan and life
insurance  plan for certain  individuals.  The  following  tables  summarize the
funded status and the actuarial  benefit  obligations  of these plans for fiscal
2002 and 2001.

<TABLE>
<CAPTION>
                                                             2002            2001
                                                        ----------------------------------
                                                        LIFE    MEDICAL   LIFE     MEDICAL
                                                        ----    -------   ----     -------
<S>                                                      <C>      <C>      <C>      <C>
Actuarial present value of benefits obligation:
   Retirees                                              $(220)   $(614)   $(222)   $(413)
   Fully eligible participants                             (12)    (132)     (44)    (307)
   Other plan participants                                  --       --       --       --
                                                         -----    -----    -----    -----
          Total                                          $(232)   $(746)   $(266)   $(720)
                                                         =====    =====    =====    =====

Change in projected benefit obligation:
   Accumulated benefit obligations at prior
    year-end                                             $(266)   $(720)   $(233)   $(680)
   Service cost less expense component                      --       --       --
   Interest cost                                           (16)     (51)     (19)     (51)
   Actuarial gain (loss)                                    45      (12)      (7)       2
   Assumptions                                              (5)     (13)      (8)     (29)
   Benefits paid                                            10       50        1       38
                                                         -----    -----    -----    -----
          Accumulated benefit obligations at
           year-end                                      $(232)   $(746)   $(266)   $(720)
                                                         =====    =====    =====    =====
Change in plan assets:
   Fair value of plan assets at prior year-end           $  --    $  --    $  --    $  --
   Actual return on plan assets                             --       --       --       --
   Employer contribution                                    10       50        1       38
   Benefits paid end expenses                              (10)     (50)      (1)     (38)
                                                         -----    -----    -----    -----
          Fair value of plan assets at current
           year-end                                      $  --    $  --    $  --    $  --
                                                         =====    =====    =====    =====

Funded                                                   $(232)   $(746)   $(266)   $(720)
Unrecognized net obligation                                 95      273      103      297
Unrecognized prior year service                             --       --       --       --
Unrecognized net (loss) gain                               (82)     102      (48)      80
                                                         -----    -----    -----    -----
                                                         $(219)   $(371)   $(211)   $(343)
                                                         =====    =====    =====    =====

Reconciliation of (accrual) prepaid:
   (Accrued) prepaid pension cost at beginning of year   $(211)   $(343)   $(186)   $(305)
   Minus net periodic cost                                 (18)     (78)     (26)     (76)
   Plus employee contributions                              10       50        1       38
                                                         -----    -----    -----    -----
   (Accrued) prepaid cost at end of year                 $(219)   $(371)   $(211)   $(343)
                                                         =====    =====    =====    =====

 Benefit obligation weighted average assumption as
  of fiscal year-end:
     Discount rate                                       7.00%     7.00%    7.25%    7.25%
     Expected return on plan assets                      7.00%     7.00%    7.25%    7.25%
     Rate of compensation increase                         --        --       --       --
</TABLE>

<TABLE>
<CAPTION>
                                                              1 PERCENTAGE POINT INCREASE
                                                        -----------------------------------------
                                                                  2002         2001
                                                                  ----         ----
Impact of 1% change in health care trend rates:
<S>                                                        <C>         <C>           <C>    <C>
   Effect on total service and interest cost components  N/A      $    (4)         N/A  $   (5)
   Effect on the post retirement benefit obligations     N/A           55          N/A      63
Components of net periodic benefit obligations:
   Service cost                                      $    --      $    --      $    --  $   --
   Interest cost                                          16           51           19      51
   Expected return on plan assets                         --           --           --      --
   Amortization of prior service cost                      9           25            9      25
   Recognized actuarial (gain) loss                       (6)           2           (1)     --
                                                     -------      -------      -------  ------
           Net periodic benefit cost for fiscal year
                ending                               $    19      $    78      $    27  $   76
                                                     =======      =======      =======  ======
Periodic benefit cost weighted average assumptions:
   Discount rate                                       7.25%        7.25%        7.75%   7.25%
   Expected return on plan assets                      7.25%        7.25%        7.75%   7.25%
   Rate of compensation increase                        --           --           --      --

</TABLE>

                                       21
<PAGE>

     For measurement  purposes, a 6.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for the fiscal year ended March
31,  2001.  The rate was  assumed to decrease to 5.5% for the fiscal year ending
March 31, 2002 and remain at that level thereafter.

NOTE 12. LEGAL PROCEEDINGS

     The Bank from time to time is involved as plaintiff or defendant in various
legal actions  incident to its  business.  Except as described  herein,  none of
these actions are believed to be material,  either individually or collectively,
to the  results of  operations  and  financial  condition  of the Company or any
subsidiary.

     The Bank has been named as  defendant  in a civil suit filed March 28, 2002
in Middlesex  Superior Court under the caption Yi v. Central Bank in which it is
alleged,  inter  alia,  that the Bank  committed  an unfair or  deceptive  trade
practice by failing to pay surplus foreclosure  proceeds to a junior lien holder
in 1994.  Plaintiff  seeks damages of $160,000  plus  interest of  approximately
$150,000 and has applied for a multiple  damage  award under  Chapter 93A of the
Massachusetts  General  Laws  which  provides  for  up to  treble  damages  if a
violation  is found to be  willful or  knowing.  The Bank  believes  that it has
meritorious defenses to all such claims and intends to vigorously defend against
them.


NOTE 13. FAIR VALUES OF FINANCIAL INSTRUMENTS (In Thousands)

     Fair  value  estimates  are based on  existing  on- and  off-balance  sheet
financial  instruments  without  attempting to estimate the value of anticipated
future business and the value of assets and liabilities  that are not considered
financial   instruments.   Significant  assets  and  liabilities  that  are  not
considered financial assets or liabilities include the intangible value inherent
in  deposit   relationships  (i.e.  core  deposits)  and  banking  premises  and
equipment.  In addition, the tax ramifications related to the realization of the
unrealized  gains and losses can have a  significant  effect on fair  values and
have not been  considered in any of the  estimates.  Accordingly,  the aggregate
fair value amounts presented do not represent the underlying value of the Bank.

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

     CASH AND DUE FROM BANKS

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

     SHORT-TERM INVESTMENTS

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

     INVESTMENT AND MORTGAGE-BACKED SECURITIES

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

     LOANS

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

     ACCRUED INTEREST RECEIVABLE

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

     STOCK IN FHLB OF BOSTON

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


                                       22
<PAGE>

     THE CO-OPERATIVE CENTRAL BANK RESERVE FUND

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

     DEPOSITS

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



     ADVANCES FROM FHLB OF BOSTON

     Fair values of non-callable  advances from the FHLB of Boston are estimated
using a discounted  cash flow  technique that applies  interest rates  currently
being offered on advances to a schedule of aggregated monthly maturities on FHLB
advances. Fair values of callable advances from the FHLB of Boston are estimated
using  the  prepayment  fee  payable  to the FHLB of  Boston  assuming  all such
advances were prepaid on the reporting date.


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

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

     OFF-BALANCE SHEET INSTRUMENTS

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

     The  estimated  carrying  amounts and fair  values of the Bank's  financial
instruments are as follows:

<TABLE>

<CAPTION>
                                                                 MARCH 31, 2002         MARCH 31, 2001
                                                             ---------------------   ---------------------
                                                             CARRYING   ESTIMATED    CARRYING   ESTIMATED
                                                             AMOUNT    FAIR VALUE    AMOUNT   FAIR VALUE
                                                             ------    ----------    ------   ----------
<S>                                                          <C>        <C>        <C>        <C>
ASSETS
     Cash and due from banks                                 $  5,109   $  5,109   $  5,351   $  5,351
     Short-term investments                                     2,455      2,455     35,718     35,718
     Investment securities                                     73,884     73,884     49,388     49,388
     Net loans                                                368,415    367,893    342,687    350,028
     Accrued interest receivable                                2,530      2,530      2,426      2,426
     Stock in Federal Home Loan Bank of Boston, at cost         8,300      8,300      6,150      6,150
     The Co-operative Central Bank Reserve Fund                 1,576      1,576      1,576      1,576

LIABILITIES
     Deposits                                                $261,907   $262,810   $287,167   $288,297
     Advances from Federal Home Loan Bank of Boston           164,000    169,896    121,000    119,965
     Advance payments by borrowers for taxes and insurance      1,111      1,111      1,220      1,220
     Accrued interest payable                                     618        618        608        608
</TABLE>



                                       23
<PAGE>

NOTE 14. PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS (In Thousands)

     The following are the condensed  financial  statements for Central Bancorp,
Inc. (the "Parent Company") only:


                                                    MARCH 31,
                                               -----------------
BALANCE SHEETS                                  2002      2001
----------------------------------------------------------------
ASSETS
Cash deposit in subsidiary bank                $ 1,970   $ 2,153
Investment in subsidiary                        36,785    36,129
ESOP loan                                          199        --
                                               -------   -------
  Total assets                                 $38,954   $38,282
                                               =======   =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued taxes and other liabilities            $    --   $    70
Total stockholders' equity                      38,954    38,212
                                               -------   -------
  Total liabilities and stockholders' equity   $38,954   $38,282
                                               =======   =======




<TABLE>
<CAPTION>
                                                               YEARS ENDED MARCH 31,
                                                        -------------------------------
STATEMENTS OF INCOME                                       2002        2001        2000
---------------------------------------------------------------------------------------
<S>                                                       <C>        <C>        <C>
Dividend from subsidiary                                  $ 2,500    $ 4,000    $ 3,012
Non-interest expenses                                         466        266        331
                                                          -------    -------    -------
       Income before income taxes                           2,034      3,734      2,681
Income tax benefit                                           (154)       (87)      (109)
                                                          -------    -------    -------
       Income before cumulative effect of change in
         accounting principle                               2,188      3,821      2,790
Cumulative effect of change in accounting principle            --         --       (234)
                                                          -------    -------    -------
       Income before equity in undistributed net income
         of subsidiary                                      2,188      3,821      2,556
Equity in undistributed net income of subsidiary              672       (712)       777
                                                          -------    -------    -------
        Net income                                        $ 2,860    $ 3,109    $ 3,333
                                                          =======    =======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                                      YEARS ENDED MARCH 31,
                                                                  -------------------------------
STATEMENTS OF CASH FLOWS                                             2002      2001       2000
-------------------------------------------------------------------------------------------------
Cash flows from operating activities
<S>                                                                <C>        <C>        <C>
   Net income                                                      $ 2,860    $ 3,109    $ 3,333
   Adjustment to reconcile net income to net cash
    provided by operating activities
     Equity in undistributed net income of subsidiary                 (672)       712       (777)
     Decrease (increase) in other assets                                --        100       (100)
     Increase (decrease) in accrued taxes and other  liabilities       (71)        70        (15)
     Cumulative effect of change in accounting principle                --         --        234
                                                                   -------    -------    -------
          Net cash provided by operating activities                  2,117      3,991      2,675
                                                                   -------    -------    -------
Cash flows from investing activities:
   ESOP loan                                                          (199)        --         --
                                                                   -------    -------    -------
Cash flows from financing activities:

   Proceeds from exercise of stock options                             492         --         22
   Purchase of treasury stock                                       (1,924)    (2,187)    (3,043)
   Cash dividends paid                                                (669)      (697)      (689)
                                                                   -------    -------    -------
          Net cash used by financing activities                     (2,101)    (2,884)    (3,710)
                                                                   -------    -------    -------
Net increase (decrease) in cash in subsidiary bank                    (183)     1,107     (1,035)
Cash in subsidiary bank at beginning of year                         2,153      1,046      2,081
                                                                   -------    -------    -------
Cash in subsidiary bank at end of year                             $ 1,970    $ 2,153    $ 1,046
                                                                   =======    =======    =======
</TABLE>

                                       24
<PAGE>

NOTE 15. QUARTERLY RESULTS OF OPERATIONS  (Unaudited) (In Thousands,  Except Per
Share Data)

     The following tables  summarize the operating  results on a quarterly basis
for the years ended March 31, 2002 and 2001.

<TABLE>
<CAPTION>
                                                                             2002
                                                     -----------------------------------------------------
                                                          FIRST      SECOND         THIRD         FOURTH
                                                          -----      ------         -----         ------
<S>                                                  <C>          <C>             <C>            <C>
Interest and dividend income.......................  $   7,599    $   7,180       $  7,052       $   7,442
Interest expense...................................      4,364        3,820          3,344           3,332
                                                     -----------------------------------------------------
     Net interest and dividend income..............      3,235        3,360          3,708           4,110
Non-interest income................................        409          337            244            (302)
Non-interest expenses..............................      2,811        2,806          2,467           2,380
                                                     -----------------------------------------------------
     Income before income taxes....................        833          891          1,485           1,428
Income tax.........................................        303          327            536             611
                                                     -----------------------------------------------------
     Net income....................................  $     530    $     564       $    949       $     817
                                                     =====================================================
Earnings per common share-- basic..................  $    0.32    $    0.34       $   0.57       $    0.50
                                                     =====================================================
Earnings per common share-- diluted................  $    0.32    $    0.34       $   0.57       $    0.50
                                                     =====================================================
<CAPTION>
                                                                             2001
                                                     -----------------------------------------------------
                                                          FIRST      SECOND         THIRD         FOURTH
                                                          -----      ------         -----         ------
<S>                                                  <C>          <C>             <C>            <C>
Interest and dividend income.......................  $   7,230    $   7,759       $  8,122       $   7,805
Interest expense...................................      3,793        4,297          4,472           4,440
                                                     -----------------------------------------------------
     Net interest and dividend income..............      3,437        3,462          3,650           3,365
Non-interest income................................        338          354            444             152
Non-interest expenses..............................      2,576        2,440          2,685           2,629
                                                     -----------------------------------------------------
     Income before income taxes....................      1,199        1,376          1,409             888
Income tax.........................................        434          499            509             321
                                                     -----------------------------------------------------
     Net income....................................  $     765    $     877       $    900       $     567
                                                     =====================================================
Earnings per common share-- basic..................  $    0.43    $    0.51       $   0.53       $    0.34
                                                     =====================================================
Earnings per common share-- diluted................  $    0.43    $    0.51       $   0.53       $    0.34
                                                     =====================================================
</TABLE>

     During the quarter ended March 31, 2002, the Bank recognized write-downs of
$457 for certain marketable equity securities which had experienced a decline in
fair value which was judged to be other than temporary.


                                       25
<PAGE>

Independent Auditors' Report



The Board of Directors and Stockholders
Central Bancorp, Inc.:



We have audited the  consolidated  balance sheets of Central  Bancorp,  Inc. and
subsidiary  as of  March  31,  2002  and  2001,  and  the  related  consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the years in the  three-year  period  ended March 31, 2002.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Central Bancorp,
Inc.  and  subsidiary  as of March 31,  2002 and 2001,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  March 31,  2002,  in  conformity  with  accounting  principles  generally
accepted in the United States of America.


                                                /s/ KPMG LLP

Boston, Massachusetts
April 25, 2002

                                       26
<PAGE>
                                    * * * * *

                                     PART IV

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

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

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

          For the  Financial  Statements  filed as part of this Annual Report on
          Form 10-K,  reference is made to "Item 8 -- Financial  Statements  and
          Supplementary Data"

     (2)  FINANCIAL STATEMENT SCHEDULES
          -----------------------------

          All financial  statement schedules have been omitted as not applicable
          or not  required  or  because  they  are  included  in  the  financial
          statements appearing at Item 8.

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

          See "Item 14(c) -- Exhibits"

(b)  REPORTS ON FORM 8-K -- The Registrant  did not file any Current  Reports on
     -------------------
     Form 8-K during the fourth quarter of the fiscal year ended March 31, 2002.

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

     The following exhibits are filed as exhibits to this report.



<TABLE>
<CAPTION>
EXHIBIT NO.          DESCRIPTION
-----------          -----------

<S>                <C>
  3.1*             Articles of Organization of Central Bancorp, Inc.
  3.2*             Bylaws of Central Bancorp, Inc.
  4.1**            Shareholder Rights Agreement, dated as of October 11, 2001, by and between
                   the Central Bancorp, Inc. and EquiServe Trust Company, as
                   Rights Agent
  10.1*            Employment Agreement between the Bank and John D. Doherty, dated October 24, 1986 +
  10.2*            First  Amendment to Employment  Agreement  between the Bank and John D. Doherty,  dated March
                   31, 1992 +
  10.3*            Second  Amendment to Employment  Agreement  between the Bank and John D. Doherty,  dated June
                   8, 1995 +
  10.4*            Third Amendment to the Employment Agreement between the Bank and
                   John D. Doherty, dated January 8, 1999 +
  10.5*            Severance Agreement between the Bank and William P. Morrissey, dated December 14, 1994 +
  10.6*            Severance Agreement between the Bank and David W. Kearn, dated December 14, 1994 +
  10.7*            Severance Agreement between the Bank and Paul S. Feeley, dated May 14, 1998 +
  10.8*            Amendments to Severance  Agreements  between the Bank and Messrs.  Feeley,  Kearn
                   and Morrissey,  dated January 8, 1999. +

                                       27
<PAGE>
  10.9***          1999 Stock Option and Incentive Plan +
  10.10****        Deferred Compensation Plan for Non-Employee Directors  +
  10.11*****       Management Incentive Plan +
  10.12*****       Severance Agreement between the Bank and Michael K. Devlin, dated February 25, 2002. +
  21*****          Subsidiaries of Registrant
  23               Consent of KPMG LLP
  99               Certification under Section 906 of Sarbanes-Oxley Act of 2002

____________
+    Management  contract or compensatory  plan required to be filed pursuant to
     Item 14(c).
*    Incorporated herein by reference to the Form 10-K for the fiscal year ended
     March 31, 1999, filed with the SEC on June 28, 1999.
**   Incorporated by reference to the Form 8-A filed with the SEC on October 12,
     2001.
***  Incorporated by reference to the  Registration  Statement on Form S-8 (File
     No. 333-49264) filed on November 3, 2000.
**** Incorporated by reference to the  Registration  Statement on Form S-8 (File
     No. 333-87005) filed on September 13, 1999.
*****Previously filed.

</TABLE>


                                       28


<PAGE>

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of
1934,  the  registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                            CENTRAL BANCORP, INC.






Date: March 20, 2003       By:/s/ John D. Doherty
                               ----------------------------------------------
                               John D. Doherty
                               President and Chief Executive Officer
                               Duly Authorized Representative

<PAGE>

                                  CERTIFICATION


I, John D. Doherty,  President and Chief Executive  Officer of Central  Bancorp,
Inc., certify that:

1. I have reviewed this annual report on Form 10-K/A of Central Bancorp, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;


Date: March 20, 2003


                                 /s/ John D. Doherty
                                 ----------------------------------------------
                                 John D. Doherty
                                 President and Chief Executive Officer

<PAGE>

                                  CERTIFICATION


I, Michael K.  Devlin,  Senior Vice  President,  Treasurer  and Chief  Financial
Officer of Central Bancorp, Inc., certify that:

1. I have reviewed this annual report on Form 10-K/A of Central Bancorp, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

Date: March 20, 2003

                                      /s/ Michael K. Devlin
                                      ------------------------------------------
                                      Michael K. Devlin
                                      Senior Vice President, Treasurer and Chief
                                      Financial Officer