Central Bancorp Reports Earnings for Its September 30, 2001 Quarter and Status of Its Common Stock Buyback Program.

Business Editors

SOMERVILLE, Mass.--(BUSINESS WIRE)--Oct. 19, 2001

Central Bancorp, Inc., (NASDAQ National Market: CEBK) today reported net income of $564,000 or 34 cents per diluted share, for the three months ended September 30, 2001, compared to net income of $877,000, or 51 cents per diluted share, for the corresponding 2000 quarter. For the six months ended September 30, 2001 and 2000, the Company's net income was $1,094,000, or 65 cents per diluted share, and $1,642,000, or 93 cents per diluted share, respectively.

The earnings decline for the quarter and six-month periods ended September 30, 2001 from the comparable periods of 2000 primarily included increases of $366,000 and $602,000, respectively, in operating expenses and decreases of $102,000 and $303,000, respectively, in net interest and dividend income. The higher operating expenses mainly reflected additional personnel to market the Company's new non-deposit investment products (including mutual funds, annuities and insurance products) and to monitor its commercial lending activities. The lower net interest and dividend income was attributable in part to a continued high level of pay-offs as borrowers refinanced their loans at lower rates and a decision by the Company to slow its lending activities during the first half of the current calendar year because of the slowdown in the national economy, especially in local real estate markets. The increased liquidity maintained following the decision to slow lending activities and the continued drop in short-term rates as a result of Federal Reserve actions led to a compression in the Company's interest rate spread and margin as compared to the same period last year.

John D. Doherty, President & Chief Executive Officer of Central Bancorp noted that "As anticipated, net interest income improved from the first quarter of fiscal 2002 as the impact of interest rate declines has begun to reduce the cost of deposits. As noted in prior quarters, we have continued to maintain the high quality of our loan portfolio, which has been a principal objective of our Board of Directors and management. In these uncertain economic times, we firmly believe that the quality of our loan portfolio is a priority of the Company and we will not sacrifice quality for quantity. During our last fiscal year that ended March 31, 2001 and during the first half of the current fiscal year, there were no foreclosures and the Company had no non-performing mortgage or commercial loans at September 30, 2001."

The Company is continuing its fourth common stock buyback program. An additional 15,126 shares were purchased during the September 30, 2001 quarter at an average price of $22.01. At September 30, 2001, 45,332 shares remain authorized by the buyback program. The shares repurchased since the first program was adopted in April 1999 total 319,962 at an average cost of $18.59 per share, representing 16.24% of the common stock issued and outstanding prior to the adoption of the first buyback program.

Central Bancorp, Inc., is the holding company for Central Bank, whose legal name is Central Co-operative Bank, a Massachusetts-chartered co-operative bank operating eight full-service banking offices in suburban Boston.

                         Central Bancorp, Inc.
                      Consolidated Operating Data
                 (In Thousands, Except Per-Share Data)

                              Quarter Ended       Six Months Ended
                              September 30,        September 30,
                              2001      2000       2001      2000
                                          (Unaudited)
Net interest and dividend
 income                      $3,360    $3,462     $6,596    $6,899

Non-interest income             337       354        746       692

Operating expenses            2,806     2,440      5,618     5,016

  Income before income taxes    891     1,376      1,724     2,575

Income tax expense              327       499        630       933

  Net income                 $  564    $  877     $1,094    $1,642

Earnings per common share:

  Basic                      $ 0.34    $ 0.51     $ 0.66    $ 0.93

  Assuming dilution          $ 0.34    $ 0.51     $ 0.65    $ 0.93


                         Central Bancorp, Inc.
                    Consolidated Balance Sheet Data
                            (In Thousands)

                                September 30,         March 31,
                                    2001                2001
                                 (Unaudited)

Total assets                      $ 427,476           $ 449,337
Total loans                         318,260             345,793
Allowance for loan losses             3,210               3,106
Deposits                            270,868             287,167
Borrowings                          108,000             121,000
Stockholders' equity                 38,751              38,212

This earnings report may contain certain forward-looking statements, which are based on management's current expectations regarding economic, legislative and regulatory issues that may impact the Company's earnings in future periods. Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, real estate values and competition; changes in accounting principles, policies or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing, products and services.