SOMERVILLE, MA–(EMWNews – July 22, 2008) – Central Bancorp, Inc. (NASDAQ: CEBK) (the

“Company”) today reported that its net income for the quarter ended June

30, 2008 increased to $401,000, or $0.29 per diluted share, from net income

of $225,000, or $0.16 per diluted share, for the comparable prior year

quarter.

Contributing to the earnings improvement was a $585,000 increase in net

interest and dividend income, which was partially offset by a $200,000

increase in the provision for loan losses relating to one property, a

$97,000 decrease in non-interest income due primarily to the $121,000

write-down of one equity security determined to be other than temporarily

impaired, and by a $92,000 increase in operating expenses.

The net interest rate spread and the net interest margin increased from

1.99% and 2.45%, respectively, for the quarter ended June 30, 2007, to

2.51% and 2.88%, respectively, for the 2008 comparable period. These

increases were primarily the result of a decrease in the cost of funds,

which declined by 66 basis points, mostly due to decreases in the average

rates paid on deposits, as a result of aggressive liability management, and

Federal Home Loan Bank (“FHLB”) advances. During the quarter ended June

30, 2008, interest rates were reduced on many deposit products, and

therefore, many certificates of deposit that matured during the quarter

were renewed at lower rates. Additionally, lower-costing core deposits

increased by $6.3 million during the quarter ended June 30, 2008 as

compared to the quarter ended June 30, 2007. The yield on interest-earning

assets declined by 14 basis points, from 5.90% during the quarter ended

June 30, 2007 to 5.76% during the same period in 2008, primarily due to a

decrease in the average yield on mortgage loans, partially offset by an

increase in the average yield on investment securities. The yield on

mortgage loans declined primarily due to foregone interest income of

$160,000 related to non-accrual loans during the quarter ended June 30,

2008 compared to $66,000 in the corresponding 2007 quarter. Compared to

the prior year, the average yield on investment securities for the quarter

ended June 30, 2008 increased due to the purchase of higher-yielding

preferred stocks during fiscal 2008.

During the three months ended June 30, 2008, operating expenses totaled

$3.6 million compared to $3.5 million during the three months ended June

30, 2007. This increase is primarily attributable to increases in salaries

and benefits and marketing expenses, partially offset by decreases in data

processing expenses and professional services. Salaries and benefits

increased by $119,000 during the quarter ended June 30, 2008 compared to

the same period of 2007, primarily due to open positions being filled and

salary increases granted for the first time since April, 2006. Marketing

expenses increased by $26,000 during the quarter ended June 30, 2008

compared to the same period of 2007, as the Bank strategically decided to

increase marketing expenses on a limited basis. Data processing expenses

decreased by $22,000 during the quarter ended June 30, 2008 compared to the

same period of 2007, as the Bank incurred fewer costs for items such as

license fees and due to a contract renegotiated at a lower cost.

Professional expenses decreased by $24,000 during the quarter ended

June 30, 2008 compared to the same period of 2007, primarily due to the

reduction of contract labor services after certain open positions were

filled.

Total assets were $564.3 million at June 30, 2008, compared with $571.2

million at March 31, 2008. During the quarter ended June 30, 2008,

short-term investments decreased by $5.8 million, total investments

decreased by $3.0 million, and deposits increased by $852,000. The

proceeds from the short-term investments, investment securities, and the

increase in deposits were used to fund loan growth of $1.2 million and FHLB

maturities of $7.0 million. Deposits increased to $361.9 million at June

30, 2008 from $361.1 million at March 31, 2008, while FHLB advances

decreased to $149.7 million at June 30, 2008 from $156.8 million at March

31, 2008. Total loans, excluding loans held for sale, increased by $1.2

million from March 31, 2008, primarily due to increases in residential

loans of $3.0 million, commercial real estate loans of $7.9 million, and

home equity loans of $254,000, partially offset by decreases in

construction loans of $7.0 million, and commercial and industrial loans of

$3.0 million.

Senior management continued to give high priority to monitoring and

managing the Company’s asset quality. At June 30, 2008, non-performing

loans totaled $10.1 million, or 1.79% of total assets and 2.12% of total

loans as of June 30, 2008 compared to $9.6 million at March 31, 2008. The

eight loans constituting this category are all secured by real estate

collateral located almost exclusively in the Greater Boston area. Seven of

these loans have an active plan for resolution in place from either the

sale of the real estate directly by the borrower or through foreclosure.

The other non-performing loan is expected to enter into a bankruptcy court

approved resolution program with the ongoing net cash flow generated from

apartment rents from the

property collateral being paid to the Bank. While bankruptcy filings have

extended the time to resolve some non-performing assets, management

continues to work with borrowers and bankruptcy trustees to resolve these

situations as soon as possible.

The Company provides for loan losses in order to maintain the allowance for

loan losses at a level that management believes is adequate to absorb

probable losses based on an evaluation of known and inherent risks in the

portfolio. In determining the appropriate level of the allowance for loan

losses, the Company considers past and anticipated loss experience,

evaluations of underlying collateral, prevailing economic conditions, the

nature and volume of the loan portfolio and the levels of non-performing

and other classified loans. Management evaluates the level of the loan

loss reserve on a regular basis. During the first quarter of fiscal 2009,

the Company recorded a provision of $200,000, compared to a provision of $0

during the same quarter of fiscal 2008. Management believes there are

adequate reserves and collateral securing these loans to cover losses that

may result from non-performing loans.

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 nine full-service banking offices, a limited service high

school branch in suburban Boston and a standalone 24-hour automated teller

machine in Somerville.

(See accompanying tables.)

This press release 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.

                          Central Bancorp, Inc.

                        Consolidated Operating Data

                  (In Thousands, Except Per Share Data)





                                                          Quarter Ended

                                                            June 30,

                                                      --------------------

                                                        2008       2007

                                                      --------------------

                                                          (Unaudited)



Net interest and dividend income                      $   3,925  $   3,340



Provision for loan losses                                   200          0



Net gain (loss) from sales or write-downs

 of investment securities                                   (29)       116



Gains on sales of loans                                      13         52



Other non-interest income                                   444        357



Non-interest expenses                                     3,608      3,516

                                                      ---------  ---------



  Income before taxes                                       545        349



Provision for income taxes                                  144        124

                                                      ---------  ---------

  Net income                                          $     401  $     225

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

Earnings per share:

  Basic                                               $     .29  $     .16

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

  Diluted                                             $     .29  $     .16

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



Weighted average number of

 shares outstanding:

  Basic                                                   1,386      1,392

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

  Diluted                                                 1,386      1,401

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



Outstanding shares, end of period                         1,640      1,640

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



                    Consolidated Balance Sheet Data

                 (In Thousands, Except Per Share Data)

                                                       June 30,  March 31,

                                                         2008      2008

                                                      --------------------

                                                     (Unaudited)

Total assets                                          $ 564,279  $ 571,245

Short-term investments                                    6,125     11,888

Total investments                                        60,016     63,054

Total loans (1)                                         476,123    475,137

Allowance for loan losses                                 3,809      3,613

Deposits                                                361,941    361,089

Borrowings                                              149,665    156,832

Subordinated debenture                                   11,341     11,341

Stockholders' equity                                     38,130     38,816

Book value per share                                      23.25      23.67

Book equity to assets                                      6.76%      6.79%

Non-performing assets to total assets                      1.79       1.68



(1) Includes loans held for sale of $0 and $195

    at June 30, 2008 and March 31, 2008, respectively.



                                            Selected Financial Ratios

                                     (In Thousands, Except Per Share Data)

                                                             Quarter Ended

                                                               June 30,

                                                           ---------------

                                                           2008       2007

                                                           ---------------

                                                             (Unaudited)

Return on average assets                                   0.28%      0.16%

Return on average equity                                   4.14       2.39

Interest rate spread                                       2.51       1.99

Net interest margin                                        2.88       2.45